N-CSRS 1 dncsrs.txt VARIABLE SERIES TRUST I UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-04490 JOHN HANCOCK VARIABLE SERIES TRUST I (Exact name of Registrant as specified in charter) JOHN HANCOCK PLACE INSURANCE AND SEPARATE ACCOUNTS DEPT. - LAW SECTOR P.O. BOX 111 BOSTON, MASSACHUSETTS 02117-0111 (Address of principal executive offices) RONALD J. BOCAGE, ESQ. JOHN HANCOCK PLACE INSURANCE AND SEPARATE ACCOUNTS DEPT. - LAW SECTOR P.O. BOX 111 BOSTON, MASSACHUSETTS 02117-0111 (Name and Address of Agent for Service) COPIES TO: THOMAS C. LAUERMAN, ESQ. FOLEY & LARDNER 3000 K STREET WASHINGTON, D.C. 20007 Registrant's telephone number, including area code: (617) 572-6000 Date of fiscal year end: 12/31/2004 Date of reporting period: 6/30/2004 ITEM 1. REPORTS TO STOCKHOLDERS. Semi Annual Report for John Hancock Variable Series Trust I June 30, 2004 [LOGO] John Hancock (c) Inception: March 29, 1986 -------------------------------------------------------------------------------- Active Bond Fund John Hancock Advisers, LLC Greene/Matthews Declaration Management & Research, LLC James Shallcross Pacific Investment Management Company LLC William H. Gross -------------------------------------------------------------------------------- . The Fund employs a multi-manager approach with three sub-advisers independently managing a portion of the Fund and each using distinct investment strategies. . At quarter-end, John Hancock Advisers managed 37%, Declaration Management & Research managed 25% and PIMCO managed 38% of the Fund's assets. Fund Commentary . Year-to-date, the Fund returned 0.20%, outperforming its benchmark, the Lehman Brothers Aggregate Bond Index. Relative to Morningstar peers, the Fund has an average rating of 3 with a below average risk profile. John Hancock Advisers, LLC - Active Sector Rotation . Year-to-date, this sleeve outperformed its benchmark primarily due to security selection and sector allocation decisions. . The manager uses proprietary research to identify undervalued sectors and securities with an emphasis on U.S. credit sectors including high yield. Declaration Management & Research, LLC - Active Core . Year-to-date, this sleeve outperformed its benchmark primarily due to duration / yield curve and security selection decisions. . The manager uses proprietary research and quantitative tools in a risk controlled, benchmark-relative approach with an emphasis on higher quality U.S. investment grade sectors. Pacific Investment Management Company (PIMCO) - Active Core Plus . Year-to-date, this sleeve outperformed its benchmark primarily due to sector allocation decisions. . The manager uses proprietary research, economic analysis and quantitative tools seeking to add value across all key decisions (duration, sector, security and derivatives) and opportunistically invests broadly across key fixed income sectors including high yield and non-U.S. sectors. Inception: March 29, 1986 -------------------------------------------------------------------------------- Active Bond Fund John Hancock Advisers, LLC Greene/Matthews Declaration Management & Research, LLC James Shallcross Pacific Investment Management Company LLC William H. Gross -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Federal National Mortgage Assoc. 21.1% U.S. Treasury 10.9% Federal Republic of Germany 6.3% Government National Mortgage Assoc 6.0% Federal Home Loan Mortgage Corp. 4.7% CWMBS, Inc. 2.4% Federal Home Loan Bank 1.4% Morgan Stanley Dean Witter 1.4% NAAC Reperforming Loan Remic Trus 1.1% Ford Motor Co. 1.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Lehman Brothers Active Bond Aggregate Bond Fund Index ----------- --------------- YTD/3/ 0.20% 0.15% 1 Year 1.22 0.33 3 Years 5.88 6.36 5 Years 6.43 6.95 10 Years 7.27 7.39 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Intermediate-Term Bond MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004) % of Credit Quality Assets ------ AAA/Government/Agency 63.91% AA 2.30% A 4.97% BBB 19.84% BB & lower 8.79% Not rated 0.19% Weighted Average Yield 5.49% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 295 VL/VUL subaccounts and 488 VA subaccounts in the Morningstar Intermediate-Term Bond category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $96,093 of securities loaned (Note B)) .............................................. $ 905,202 Net unrealized depreciation of investments ....................... (1,184) Short-term investments at value .................................. 306,635 ---------- Total investments .......................................... 1,210,653 Cash ............................................................. 1,587 Receivable for: Investments sold .............................................. 7,065 Interest ...................................................... 9,087 Dividends ..................................................... 20 Unrealized appreciation in forward currency contracts ......... 97 Other receivables ............................................. 57 ---------- Total assets ..................................................... 1,228,566 ---------- LIABILITIES Payables for: Investments purchased ......................................... 118,031 Net payable for swap contracts ................................ 1,410 Written options at value (premium received $684) .............. 173 Accrued operating expenses .................................... 278 Collateral for securities on loan ............................. 97,538 Other payables ................................................ 4 ---------- Total liabilities ................................................ 217,434 ---------- Net assets ....................................................... $1,011,132 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ................................................... 106,569 ---------- Net asset value per share ........................................ $ 9.49 ========== Composition of net assets: Capital paid-in ............................................... $1,015,468 Accumulated net realized loss on investments, futures and foreign currency transactions .............................. (2,083) Undistributed net investment income ........................... 20 Net unrealized appreciation (depreciation) of: Investments ................................................ (1,184) Written Options ............................................ 511 Swap contracts ............................................. (1,410) Translation of assets and liabilities in foreign currencies .............................................. (190) ---------- Net assets ....................................................... $1,011,132 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 21,750 Dividends .................................................... 403 Securities lending ........................................... 41 -------- Total investment income ............................................ 22,194 -------- EXPENSES Investment advisory fee ...................................... 3,145 Auditors fees ................................................ 66 Custodian fees ............................................... 183 Fidelity Bond fees ........................................... 1 Legal fees ................................................... 67 Printing & mailing fees ...................................... 60 Trustees' fees ............................................... 16 Other fees ................................................... 16 -------- Total expenses ..................................................... 3,554 -------- Net investment income .............................................. 18,640 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments .................................................. 6,110 Foreign currency transactions ................................ 705 Change in unrealized appreciation (depreciation) on: Investments .................................................. (23,128) Written options .............................................. 482 Swap contracts ............................................... (863) Translation of assets and liabilities in foreign currencies .. 547 -------- Net realized and unrealized loss ................................... (16,147) -------- Net increase in net assets resulting from operations ............... $ 2,493 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income............................................... $ 18,640 $ 46,509 Net realized gain................................................... 6,815 25,335 Change in net unrealized appreciation (depreciation)................ (22,962) (4,192) ---------- ---------- Net increase in net assets resulting from operations............. 2,493 67,652 Distributions to shareholders from: Net investment income............................................... (18,620) (46,318) Realized gains...................................................... (25,718) ---------- ---------- Decrease in net assets resulting from distributions.............. (18,620) (72,036) From fund share transactions: Proceeds from shares sold........................................... 43,333 111,060 Shares issued in reorganization..................................... 83,358 Distributions reinvested............................................ 18,620 72,036 Payment for shares redeemed......................................... (90,303) (193,915) ---------- ---------- Increase (decrease) in net assets from fund share transactions... (28,350) 72,539 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS.................................. (44,477) 68,155 NET ASSETS Beginning of Period................................................. 1,055,609 987,454 ---------- ---------- End of Period (including undistributed net investment income of $20 and $0, respectively)..................................... $1,011,132 $1,055,609 ========== ========== Analysis of fund share transactions: Sold................................................................ 4,473 11,585 Issued in reorganization............................................ 8,433 Reinvested.......................................................... 1,934 7,389 Redeemed............................................................ (9,339) (19,743) ---------- ---------- Net increase in fund shares outstanding................................ (2,932) 7,664 ========== ==========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Active Bond Fund -------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, ------------------------------------------------- 2004 2003(f) 2002 2001 2000 ---------------- ---------- -------- -------- -------- Net Assets Value at Beginning of Period ....... $ 9.64 $ 9.70 $ 9.55 $ 9.44 $ 9.12 Income from Investment Operations: Net Investment Income ...................... 0.17 0.43 0.50 0.58 0.64 Net Realized and Unrealized Gain (Loss) on Investment(a) ........................... (0.15) 0.18 0.18 0.11 0.28 ---------- ---------- -------- -------- -------- Total From Investment Operations ........... 0.02 0.61 0.68 0.69 0.92 Less Distributions: Distribution from Net Investment Income .... (0.17) (0.43) (0.53) (0.58) (0.60) Distribution from Net Realized Gains on Investments ............................. (0.24) ---------- ---------- -------- -------- -------- Total Distributions ........................ (0.17) (0.67) (0.53) (0.58) (0.60) Capital Contributions ...................... ---------- ---------- -------- -------- -------- Net Assets Value at End of Period ............. $ 9.49 $ 9.64 $ 9.70 $ 9.55 $ 9.44 ========== ========== ======== ======== ======== Total Investment Return(b) .................... 0.20%(g) 6.48% 7.25% 7.48% 10.45% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .................................. 0.69%(h) 0.70% 0.69% 0.67% 0.41%(d) Ratio of Net Investment Income to Average Net Assets .............................. 3.62%(h) 4.42% 5.24% 5.97%(e) 6.98% Portfolio Turnover Rate .................... 215.86%(g) 465.90%(c) 290.73% 206.80%(c) 224.24% Net Assets End of Period (000's Omitted) ...... $1,011,132 $1,055,609 $987,454 $947,514 $842,299
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Excludes merger activity. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the expense ratio would have been .44% for the year ended December 31, 2000. (e) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 6.28% for the years ended December 31, 2001. (f) The Fund entered into a new sub-advisory agreements with PIMCO and Declaration Management & Research, LLC during the period shown. (g) Not annualized. (h) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.0% Jet Equipment Trust - Notes 10.91% due 08/15/14 *................................. $2,100 $ 0 Air Freight & Couriers - 0.1% CNF, Inc. - Sr. Debs 144A (a) 6.7% due 05/01/34..................................... 555 540 Airlines - 0.2% American Airlines, Inc. - Ser. 2001-2 Cl. A2 7.858% due 10/01/11................................... 820 816 Continental Airlines - CTF Ser. 1999-1 Cl. A 6.545% due 02/02/19................................... 1,072 1,003 Northwest Airlines Corp. - Ser. 1996-1 8.97% due 01/02/15.................................... 168 108 ------- 1,927 Auto Components - 0.1% Delphi Corp. - Notes 6.5% due 08/15/13..................................... 640 651 Motor Gaming Group, Inc. - Sr. Notes 9.75% due 04/01/10.................................... 315 339 ------- 990 Auto Loan - 1.1% Chase Manhattan Auto Owner Trust - Ser. 2000-A Notes Cl. A4 6.26% due 06/15/07.................................... 310 311 Ford Credit Auto Owner Trust - Notes Ser. 2004 Cl. A3 2.93% due 03/15/08.................................... 1,675 1,668 Ford Motor Credit Co. - Bonds 7.75% due 03/15/05.................................... 1,330 1,374 Ford Motor Credit Co. - Notes 6.875% due 02/01/06................................... 2,480 2,601 7.0% due 10/01/13..................................... 827 835 7.375% due 10/28/09................................... 1,691 1,805 General Motors Acceptance Corp. 6.875% due 08/28/12................................... 590 600 General Motors Acceptance Corp. - Bonds 7.25% due 03/02/11.................................... 1,125 1,181 General Motors Acceptance Corp. - Sr. Notes 5.625% due 05/15/09................................... 365 364 ------- 10,739 Automobiles - 0.6% Auburn Hills Trust - CTF Exchangeable 12.375% due 05/01/20.................................. 535 771 Daimler Chrysler NA Holding Corp. - Sr. Notes 6.5% due 11/15/13..................................... 500 512 DaimlerChrysler NA 1.87% due 05/24/06................................... $2,020 $ 2,026 DaimlerChrysler NA Holding Co. - Notes 8.5% due 01/18/31..................................... 340 391 Ford Motor Co. - Debs. 9.98% due 02/15/47................................... 895 1,057 General Motors Corp. - Sr. Debs. 8.375% due 07/15/33................................... 769 814 Hertz Corp. - Notes 7.625% due 06/01/12................................... 775 818 ------- 6,389 Banks - 2.9% Abbey National First Capital - Sr. Sub. Notes 8.2% due 10/15/04..................................... 2,100 2,137 Banc America Commercial Mortgage, Inc. - CTF 144A (a) 5.276% due 03/11/41................................... 1,000 952 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. F 144A (a) 5.279% due 11/10/39................................... 650 617 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. G 144A (a) 5.377% due 11/10/39................................... 650 617 Banc America Mortgage Securities, Inc. - Ser. 2004-2 Cl. 5A1 6.5% due 10/25/19..................................... 2,506 2,555 Banc America Mortgage Securities, Inc. - Ser. 2004-D Cl. 2A1 3.649% due 05/25/34................................... 1,891 1,856 Bank of New York Institution Capital - Notes 144A (a) 7.78% due 12/01/26.................................... 2,550 2,724 Bank One Corp. - Notes 6.5% due 02/01/06..................................... 700 739 Barclays Bank plc - Notes 144A (a) 6.86% due 06/15/32.................................... 1,800 1,861 Capital One Bank 6.5% due 06/13/13..................................... 445 459 Capital One Bank - Notes 6.875% due 02/01/06................................... 820 865 Central American Bank - 144A (a) 6.75% due 04/15/13.................................... 650 680 Colonial Bank Montgomery - Sub. Notes 9.375% due 06/01/11................................... 1,120 1,310 Credit Suisse First Boston - Ser. 2003- C3 Cl. F 144A (a) 4.518% due 05/15/38................................... 1,190 1,086 Credit Suisse First Boston - Sr. Notes 4.625% due 01/15/08................................... 451 459 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Banks - Continued CS First Boston Mortgage Securities Corp. - Notes 6.26% due 04/11/30.................................... $1,164 $ 1,195 JP Morgan Chase & Co. - Notes 6.625% due 03/15/12................................... 940 1,016 Popular North America, Inc. 4.7% due 06/30/09..................................... 610 611 6.125% due 10/15/06................................... 730 770 Royal Bank of Scotland plc - Notes 7.648% due 08/31/49................................... 2,220 2,492 Wachovia Bank Commercial Mortgage Trust - Ser. 2004 C10 Cl A3 4.39% due 02/15/36.................................... 2,000 1,924 Wachovia Bank Commercial Trust - Ser. 2003-C8 Cl. F 144A (a) 5.031% due 11/15/35................................... 600 578 Westpac Capital Trust III - 144A (a) 5.819% due 12/29/49................................... 760 755 Zions Financial Corp. - Notes 6.95% due 05/15/11.................................... 656 692 ------- 28,950 Beverages - 0.1% Commonwealth Brands, Inc. - 144A (a) 10.625% due 09/01/08.................................. 365 390 PanAmerican Beverages, Inc. - Sr. Notes Ser. A 7.25% due 07/01/09.................................... 430 460 ------- 850 Chemicals - 0.0% Braskem SA - 144A (a) 11.75% due 01/22/14................................... 295 266 Commercial Services & Supplies - 1.1% Allied Waste North America - Notes 10.0% due 08/01/09.................................... 1,665 1,761 Cendant Corp. - Notes 6.25% due 01/15/08.................................... 1,260 1,344 6.875% due 08/15/06................................... 4,130 4,413 Cendant Corp. - Sr. Notes 6.25% due 03/15/10.................................... 500 532 7.125% due 03/15/15................................... 268 293 Mantis Reef, Ltd. - 144A (a) 4.692% due 11/14/08................................... 815 805 RPM International, Inc. - Sr. Notes 144A (a) 6.25% due 12/15/13.................................... 905 908 Teppco Partners - GTD. Sr. Notes 7.625% due 02/15/12................................... 615 687 Trinity Indiana Leasing Co. - 144A (a) 7.755% due 02/15/09................................... 570 597 ------- 11,340 Communications Equipment - 0.2% Corning, Inc. - Notes 6.3% due 03/01/09..................................... $ 460 $ 467 8.3% due 04/04/25..................................... 675 709 Motorola, Inc. - Notes 6.75% due 02/01/06.................................... 772 812 ------- 1,988 Computers & Peripherals - 0.1% NCR Corp. - Sr. Notes 144A (a) 7.125% due 06/15/09................................... 515 563 Construction & Engineering - 0.1% KB Home - Sr. Notes 5.75% due 02/01/14.................................... 605 557 Containers & Packaging - 0.3% BWAY Corp. - Sr. Sub. Notes 10.0% due 10/15/10.................................... 355 370 Owens Brockway Glass Container - Sr. Notes 144A (a) 8.75% due 11/15/12.................................... 380 414 Sealed Air Corp. - Sr. Notes 144A (a) 5.375% due 04/15/08................................... 930 962 Stone Container Corp. - Sr. Notes 8.375% due 07/01/12................................... 790 828 9.75% due 02/01/11.................................... 625 687 ------- 3,261 Credit Card - 1.1% Citibank Credit Card Issuance Trust - Notes 4.45% due 04/07/10.................................... 2,400 2,408 MBNA Asset Backed Note Trust - Notes 144A (a) 6.65% due 08/15/11.................................... 600 645 MBNA Asset Backed Note Trust - Notes Ser. 1998-E 144A (a) 6.6% due 09/15/10..................................... 1,115 1,192 Midland Funding Corp. II - Bonds Ser. A 11.75% due 07/23/05................................... 5,865 6,041 Midland Funding Corp. II - Notes 13.25% due 07/23/06................................... 825 924 ------- 11,210 Diversified Financials - 3.3% AXA Financial, Inc. - Sr. Notes 7.75% due 08/01/10.................................... 543 623 Bunge Ltd. Financial Corp. - Sr. Notes 144A (a) 5.35% due 04/15/14.................................... 630 602 Capital One Financial Corp. - Notes 7.25% due 05/01/06.................................... 515 544 CIT Group, Inc. 1.48% due 05/18/07.................................... 445 444 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Financials - Continued Citigroup, Inc. - Sub. Notes 5.625% due 08/27/12 .................................. $1,000 $ 1,028 6.0% due 10/31/33 .................................... 2,325 2,223 Deutsche Mortgage & Asset Receiving Corp. - Notes 6.861% due 03/15/08 .................................. 1,855 1,991 Doral Financial Corp. - Sr. Notes 1.952% due 12/07/05 .................................. 900 900 ERAC USA Finance Co. - Notes 144A (a) 7.95% due 12/15/09 ................................... 1,270 1,461 Hyatt Equities LC - Notes 144A (a) 6.875% due 06/15/07 .................................. 2,035 2,164 Morgan Stanley - Sub. Notes 4.75% due 04/01/14 ................................... 555 512 Morgan Stanley & Co., Inc. - Notes 4.25% due 05/15/10 ................................... 1,665 1,634 Morgan Stanley Dean Witter Capital - Ser. 2001 Cl. A1 4.57% due 12/18/32 ................................... 2,948 3,001 Morgan Stanley Group 1.59% due 07/06/05 ................................... 7,200 7,200 Newcourt Credit Group, Inc. - Notes Ser. B 6.875% due 02/16/05 .................................. 1,455 1,496 Pemex Project Funding Trust - Notes 9.125% due 10/13/10 .................................. 3,085 3,540 Qwest Captial Funding, Inc. - Notes 7.75% due 08/15/06 ................................... 955 945 TFM SA de CV - Sr. Disc. Debs. 11.75% due 06/15/09 .................................. 340 333 The MONY Group, Inc. - Sr. Notes 7.45% due 12/15/05 ................................... 660 698 URC Holdings Corp. - Sr. Notes 144A (a) 7.875% due 06/30/06 .................................. 1,600 1,747 ------- 33,086 Diversified Telecommunication Services - 3.4% AT&T Broadband Corp. - Notes 8.375% due 03/15/13 .................................. 1,199 1,408 AT&T Corp. - Sr. Notes 7.8% due 11/15/11 .................................... 1,450 1,489 Citizens Communications Co. - Notes 8.5% due 05/15/06 .................................... 2,000 2,131 Cox Communications, Inc. - Notes 7.5% due 08/15/04 .................................... 3,685 3,707 Deutsche Telekom International - Notes 8.5% due 06/15/10 .................................... 1,120 1,309 France Telecom 8.25% due 03/14/08 ................................... 1,700 2,296 France Telecom SA - Notes 8.7% due 03/01/06 .................................... 450 482 9.25% due 03/01/11 ................................... 2,540 2,943 10.0% due 03/01/31 ................................... $ 319 $ 400 Innova S DE R.L. 9.375% due 09/19/13 ................................. 485 509 Innova S DE R.L. - Notes 12.875% due 04/01/07 ................................. 285 287 Qwest Corp. - Notes 144A (a) 8.875% due 03/15/12 .................................. 625 683 Sprint Capital Corp. 6.9% due 05/01/19 .................................... 1,220 1,227 Sprint Capital Corp. - Notes 6.125% due 11/15/08 .................................. 1,985 2,086 7.125% due 01/30/06 .................................. 2,380 2,519 8.75% due 03/15/32 ................................... 346 403 Tele-Communications, Inc. 9.8% due 02/01/12 .................................... 465 583 Telecom De Puerto Rico, Inc. - Sr. Notes 6.65% due 05/15/06 ................................... 1,445 1,527 Telecom Italia Capital Corp. - Sr. Notes Ser. A 144A (a) 4.0% due 11/15/08 .................................... 450 442 Telefonosde Mexico - Sr. Notes 8.25% due 01/26/06 ................................... 4,090 4,373 Tellus Corp. - Notes 8.0% due 06/01/11 .................................... 1,810 2,057 Verizon Pennsylvania, Inc. - Debs. Ser. A 5.65% due 11/15/11 ................................... 1,530 1,552 ------- 34,413 Electric Utilities - 1.0% CalEnergy Co., Inc. - Bonds 8.48% due 09/15/28 ................................... 686 825 Centerpoint Energy Resources Corp. - Sr. Notes 7.875% due 04/01/13 .................................. 700 785 Empresa Electrica Guacolda SA - Notes 144A (a) 8.625% due 04/30/13 .................................. 1,616 1,676 Enersis SA - Notes 144A (a) 7.375% due 01/15/14 .................................. 970 936 FirstEnergy Corp. - Notes Ser. B 6.45% due 11/15/11 ................................... 490 508 FirstEnergy Corp. - Notes Ser. C 7.375% due 11/15/31 .................................. 1,000 1,042 Progress Energy, Inc. - Sr. Notes 6.75% due 03/01/06 ................................... 787 830 7.0% due 10/30/31 .................................... 325 335 Public Service Co. New Mexico - Sr. Unsec. Notes 4.4% due 09/15/08 .................................... 680 678 TXU Australia Holdings, Ltd. - GTD Sr. Notes 144A (a) 6.15% due 11/15/13 ................................... 814 848 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- -------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electric Utilities - Continued TXU Australia Holdings, Ltd. - Sr. Notes 6.75% due 12/01/06 .................................. $ 455 $ 486 TXU Energy Co. LLC - Sr. Notes 7.0% due 03/15/13 ................................... 887 966 ------- 9,915 Electric/Gas - 2.2% AES Eastern Energy - Notes 9.0% due 01/02/17 ................................... 893 962 Dominion Resources, Inc. - Notes 6.3% due 03/15/33 ................................... 518 492 EL Paso Electric Co. - Bonds Ser. E 9.4% due 05/01/11 ................................... 1,225 1,391 Empresa Nacional De Electricid - Notes 8.35% due 08/01/13 .................................. 1,015 1,084 Ipalco Enterprises, Inc. - Notes 8.625% due 11/14/11 ................................. 705 765 Kansas City Power & Light Co. - Sr. Notes Ser. A 6.0% due 03/15/07 ................................... 585 617 Monterrey Power SA de CV - Sr. Sec. Bonds 144A (a) 9.625% due 11/15/09 ................................. 1,326 1,511 Noram Energy Corp. - Debs 6.5% due 02/01/08 ................................... 2,275 2,407 Oklahoma Gas & Electric Co. - Notes 6.65% due 07/15/27 .................................. 914 1,009 Pacific Gas & Electric Co. 6.05% due 03/01/34 .................................. 750 705 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 .................................. 2,000 2,001 PNPP II Funding Corp. - Bonds 9.12% due 05/30/16 .................................. 934 1,064 PSEG Energy LLC - Sr. Notes 7.75% due 04/16/07 .................................. 1,605 1,681 PSEG Power LLC - Sr. Notes 6.875% due 04/15/06 ................................. 857 909 8.625% due 04/15/31 ................................. 445 544 Sempra Energy - Notes 4.75% due 05/15/09 .................................. 445 448 Southern California Edison Co. - Ser. 2004B 6.0% due 01/15/34 ................................... 477 457 Waterford 3 Funding - Entergy - Bonds 8.09% due 01/02/17 .................................. 3,270 3,605 Western Resources, Inc. 7.65% due 04/15/23 .................................. 400 413 ------- 22,065 Electrical Equipment - 0.2% HQI Transelec Chile SA - Notes 7.875% due 04/15/11 ................................. 2,235 2,523 Electrical Equipment & Instruments - 0.1% Ametek, Inc. - Sr. Notes 7.2% due 07/15/08 ................................... $ 910 $ 972 Energy Equipment & Services - 0.2% Salton Sea Funding Corp. - Sr. Notes Ser. E 8.3% due 05/30/11 ................................... 488 528 Salton Sea Funding Corp. - Sr. Sec. Bonds. Ser. C 7.84% due 05/30/10 .................................. 1,050 1,118 ------- 1,646 Finance - 4.2% AIG SunAmerica Institutional Funding 1.2% due 01/26/05 ................................... 346,000 3,182 Arch Capital Group, Ltd. - Sr. Notes 7.35% due 05/01/34 .................................. 355 357 Beaver Valley Funding Corp. 8.625% due 06/01/07 ................................. 210 221 9.0% due 06/01/17 ................................... 1,630 1,843 BVPS II Funding Corp. - Bonds 8.89% due 06/01/17 .................................. 969 1,108 Deutsche Telekom International Finance 6.375% due 07/11/06 ................................. 3,200 4,133 8.75% due 06/15/30 .................................. 2,005 2,440 Duke Capital LLC. - Sr. Notes 6.75% due 02/15/32 .................................. 600 576 8.0% due 10/01/19 ................................... 965 1,078 Equus Cayman Finance, Ltd. - Sr. Notes 144A (a) 5.5% due 09/12/08 ................................... 575 572 ERAC USA Finance Co. - Gtd. Notes 144A (a) 6.7% due 06/01/34 ................................... 300 300 Financing Corp. - Notes 9.4% due 02/08/18 ................................... 420 579 10.35% due 08/03/18 ................................. 3,025 4,469 Fund American Cos, Inc. - GTD Sr. Notes 5.875% due 05/15/13 ................................. 723 721 GCIC Funding Corp. - Bonds 144A (a) 5.129% due 01/15/14 ................................. 1,065 1,047 General Electric Capital Corp. - Notes 6.75% due 03/15/32 .................................. 1,240 1,333 General Motors Acceptance Corp. 1.995% due 05/18/06 ................................. 1,900 1,904 Glencore Funding LLC - Notes 144A (a) 6.0% due 04/15/14 ................................... 1,350 1,252 Household Financial Corp. - Global Notes 4.625% due 01/15/08 ................................. 700 713 Household Financial Corp. - Notes 6.75% due 05/15/11 .................................. 1,970 2,153 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued MDP Acquisitions plc - Sr. Notes 9.625% due 10/01/12 .................................. $ 360 $ 400 Meditrust Medium - Notes 7.3% due 01/16/06 .................................... 520 536 Mizuho Financial Group Cayman, Ltd. - Sub. Notes 144A (a) 5.79% due 04/15/14 ................................... 1,065 1,047 NiSource Finance Corp. - Sr. Notes 6.15% due 03/01/13 ................................... 596 617 Odyssey Re Holdings Corp. - Sr. Notes 7.65% due 11/01/13 ................................... 2,000 2,150 Prologis Trust - Sr. Notes 7.05% due 07/15/06 ................................... 490 529 PTC International Finance II SA - Sr. Sub. Notes 11.25% due 12/01/09 .................................. 540 576 Rabobank Capital Fund II - Sr. Notes 144A (a) 5.26% due 12/31/49 ................................... 325 314 Saint George Funding Co. LLC - 144A (a) 8.485% due 12/31/49 .................................. 1,205 1,365 Tobacco Settlement Financing Corp. 6.0% due 06/01/37 .................................... 1,000 812 Tobacco Settlement Financing Corp. - Ser. B 5.875% due 05/15/39 .................................. 315 253 Tobacco Settlement Revenue Management - Ser. B 6.375% due 05/15/30 .................................. 1,480 1,251 Trinet Corporate Realty Trust, Inc. - Notes 7.7% due 07/15/17 .................................... 330 343 UFJ Finance Aruba - GTD Notes 6.75% due 07/15/13 ................................... 1,853 1,916 WPP Finance UK - Notes 144A (a) 5.875% due 06/15/14 .................................. 740 743 ------- 42,833 Food & Drug Retailing - 0.1% Delhaize America, Inc. - Notes 8.125% due 04/15/11 .................................. 385 420 Food Lion, Inc. - Notes 7.55% due 04/15/07 ................................... 375 401 ------- 821 Food Products - 0.4% Corn Products International, Inc. - Sr. Notes 8.45% due 08/15/09 ................................... 3,205 3,550 Kraft Foods, Inc. - Global Notes 5.625% due 11/01/11 .................................. 985 1,002 ------- 4,552 Foreign Govermental - 6.9% Federal Republic of Brazil 2.063% due 04/15/12 .................................. $ 188 $ 157 Federal Republic of Brazil - Bonds 11.0% due 08/17/40 ................................... 2,250 2,094 Federal Republic of Germany 4.5% due 07/04/09 .................................... 31,300 39,650 5.0% due 07/04/12 .................................... 13,500 17,400 Republic of Brazil 2.063% due 04/15/09 .................................. 147 133 Republic of Brazil - Ser. L 2.125% due 04/15/06 .................................. 1,003 988 Republic of Chile - Notes 1.5% due 01/28/08 .................................... 1,200 1,212 Republic of Columbia - Notes 9.75% due 04/09/11 ................................... 578 638 Republic of Panama 9.625% due 02/08/11 .................................. 500 549 Republic of Panama - Bonds 9.375% due 01/16/23 .................................. 1,250 1,275 Republic of Peru - Bonds 9.125% due 01/15/08 .................................. 1,250 1,350 9.125% due 02/21/12 .................................. 490 501 Russian Federation 8.75% due 07/24/05 ................................... 1,800 1,901 United Mexican States 6.375% due 01/16/13 .................................. 800 798 8.375% due 01/14/11 .................................. 500 565 United Mexican States - Notes Ser. A 8.3% due 08/15/31 .................................... 500 524 ------ 69,735 Gas Utilities - 0.7% Kinder Morgan Energy Partners - Sr. Notes 6.5% due 09/01/12 .................................... 575 609 7.3% due 08/15/33 .................................... 885 934 Korea Gascorp - Sr. Notes 144A (a) 4.75% due 11/26/10 ................................... 720 694 Louis Dreyfus Natural Gas Corp. - Notes 6.875% due 12/01/07 .................................. 1,730 1,858 Southern California Edison Co. - Ser. 2003-B 8.0% due 02/15/07 .................................... 2,300 2,544 Texas New Mexico Power Co. - Sr. Notes 6.125% due 06/01/08 .................................. 870 900 ------- 7,539 Health Care Providers & Services - 0.4% Columbia/HCA Healthcare Corp. - Notes 9.0% due 12/15/14 .................................... 755 880 Global Health Sciences, Inc. - Sr. Notes 11.0% due 05/01/08 * ................................. 75 2 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Health Care Providers & Services - Continued HCA-The Healthcare Corp. - Notes 8.75% due 09/01/10 ................................... $3,055 $3,479 ------ 4,361 Home Equity Loan - 0.5% Centex Home Equity Loan Trust - Ser. 2004A CTF Cl. AF 4 4.51% due 09/27/32 ................................... 1,255 1,212 Contimortgage Home Equity Loan - CTF Cl. A5 8.1% due 08/15/25 .................................... 94 94 EQCC Home Equity Loan Trust - Notes 6.57% due 02/15/29 ................................... 1,210 1,212 Residential Asset Mortgage Products, Inc. - Ser. 2003-R Cl. A12 2.904% due 10/25/23 .................................. 1,395 1,388 Residential Asset Mortgage Products, Inc. - Ser. 2003-RS10 Cl. AI5 4.91% due 01/25/31 ................................... 1,260 1,242 ------ 5,148 Hotels Restaurants & Leisure - 0.7% Harrah's Operating Co., Inc. - Notes 7.875% due 12/15/05 .................................. 2,300 2,432 Mandalay Resort Group - Sr. Notes 6.375% due 12/15/11 .................................. 640 650 Meditrust - Notes 7.0% due 08/15/07 .................................... 375 386 MGM Mirage, Inc. - Ser. B 6.0% due 10/01/09 .................................... 832 815 Mohegan Tribal Gaming Authority - Sr. Sub Notes 8.0% due 04/01/12 .................................... 400 427 Starwood Hotels & Resorts - Sr. Notes 7.375% due 05/01/07 .................................. 590 627 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes 7.875% due 05/01/12 .................................. 1,000 1,067 Waterford Gaming LLC - Sr. Notes 144A (a) 8.625% due 09/15/12 .................................. 259 272 ------ 6,676 Industrial Conglomerates - 0.4% British Brunswick Holdings, Inc. - Sr. Notes 13.0% due 05/01/08 ................................... 120 7 General Electric Co. - Notes 5.0% due 02/01/13 .................................... 2,472 2,433 Pacific & Atlantic Holdings, Inc. 1.0% due 05/31/09 .................................... 1 0 Pacific & Atlantic Holdings, Inc. - Sr. Notes 144A (a) 10.5% due 12/31/07 ................................... 29 9 Tyco International Group SA - Notes 6.0% due 11/15/13 .................................... $ 400 $ 411 6.75% due 02/15/11 ................................... 900 976 ------ 3,836 Insurance - 0.8% Equitable Life Assurance Society USA - Notes 144A (a) 6.95% due 12/01/05 ................................... 920 973 Liberty Mutual Group, Inc. - Gtd Sr. Notes 5.75% due 03/15/14 ................................... 665 642 Mass. Mutual Life Insurance Co. - Notes 144A (a) 7.625% due 11/15/23 .................................. 2,645 3,113 New York Life Insurance Co. - Notes 144A (a) 5.875% due 05/15/33 .................................. 755 718 Ohio Casualty Corp. - Notes 7.3% due 06/15/14 ......................................... 520 523 QBE Insurance Group, Ltd. - Sub. Notes 144A (a) 5.647% due 07/01/23 .................................. 1,120 1,065 Travelers Property Casualty Corp. - Sr. Notes 5.0% due 03/15/13 .................................... 970 940 ------ 7,974 Leisure Equipment & Products - 0.1% Eastman Kodak Co. - Sr. Notes 7.25% due 11/15/13 ................................... 360 366 Hockey Co. - Sr. Sec. Notes 11.25% due 04/15/09 .................................. 410 488 ------ 854 Media - 2.2% British Sky Broadcasting - Notes 8.2% due 07/15/09 .................................... 1,690 1,952 Continental Cablevision - Notes 8.3% due 05/15/06 .................................... 900 977 Continental Cablevision, Inc. - Sr. Notes 9.5% due 08/01/13 .................................... 1,372 1,523 Cox Communications, Inc. - Notes 4.625% due 06/01/13 .................................. 590 545 Garden State Newspapers, Inc. - Sr. Sub. Notes Ser. B 8.625% due 07/01/11 .................................. 335 349 Grupo Televisa SA De CV - Notes 8.0% due 09/13/11 .................................... 2,080 2,236 Lenfest Communications, Inc. - Notes 8.375% due 11/01/05 .................................. 2,065 2,206 Liberty Media Corp. - Sr. Debs 8.25% due 02/01/30 ................................... 325 370 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Media - Continued Liberty Media Corp. - Sr. Notes 2.64% due 09/17/06 ................................... $2,140 $ 2,180 5.7% due 05/15/13 .................................... 1,345 1,325 News America Holdings, Inc. 8.25% due 08/10/18 ................................... 1,050 1,249 Rogers Cablesystems - Sr. Notes Ser. B 10.0% due 03/15/05 ................................... 1,205 1,253 Shaw Communications, Inc. - Sr. Notes 8.25% due 04/11/10 ................................... 485 527 Time Warner, Inc. 6.15% due 05/01/07 ................................... 700 741 Time Warner, Inc. - Debs. 7.7% due 05/01/32 .................................... 800 874 Time Warner, Inc. - Sr. Notes 9.125% due 01/15/13 .................................. 2,501 3,049 XM Satellite Radio, Inc. - Sr. Sec. Notes 12.0% due 06/15/10 ................................... 394 451 ------- 21,807 Metals & Mining - 0.3% Codelco, Inc. - Notes 144A (a) 5.5% due 10/15/13 .................................... 490 487 Freeport McMoran Copper & Gold - Sr. Notes 10.125% due 02/01/10 ................................. 460 492 Golden Northwest Aluminum 12.0% due 12/15/06 * ................................. 25 4 Kennametal, Inc. - Sr. Notes 7.2% due 06/15/12 .................................... 770 817 Metallurgy Holdings, Inc. - Notes 1.0% due 07/15/08 .................................... 50 15 Noranda, Inc. - Notes 8.375% due 02/15/11 .................................. 675 726 ------- 2,541 Multi-Utilities - 0.3% Centerpoint Energy Houston - Bonds Ser. K 6.95% due 03/15/33 ................................... 545 583 Centerpoint Energy, Inc. - Sr. Notes 6.85% due 06/01/15 ................................... 565 572 7.25% due 09/01/10 ................................... 1,220 1,298 Transalta Corp. 5.75% due 12/15/13 ................................... 900 891 ------- 3,344 Multiline Retail - 0.1% J.C. Penney Co., Inc. - Notes 8.0% due 03/01/10 .................................... 690 769 J.C. Penney, Inc. 7.65% due 08/15/16 ................................... 445 484 ------- 1,253 Municipal - 1.4% De Kalb County Georgia Water & Sewage - Ser. A 5.0% due 10/01/35 .................................... $2,200 $ 2,169 Golden State Securitization 6.75% due 06/01/39 ................................... 3,980 3,576 Harris County Texas 5.0% due 08/15/33 .................................... 600 584 Massachusetts Saint - Ser. C 5.5% due 11/01/10 .................................... 3,800 4,229 University of Texas Permanent University Fund - Ser. B 4.75% due 07/01/30 ................................... 4,000 3,767 ------- 14,325 Oil & Gas - 0.8% Alberta Energy, Ltd. - Notes 7.375% due 11/01/31 .................................. 585 651 Amerada Hess Corp. - Notes 7.3% due 08/15/31 .................................... 975 990 Duke Capital LLC - Sr. Notes 6.25% due 02/15/13 ................................... 1,302 1,320 Enterprise Products Operating LP - Sr. Notes 6.875% due 03/01/33 .................................. 480 444 Humpuss Funding Corp. - 144A (a) 7.72% due 12/15/09 ................................... 1,260 1,121 Magellan Midstream Partners LP - Sr. Notes 6.45% due 06/01/14 ................................... 790 798 Occidental Petroleum Corp. 10.125% due 09/15/09 ................................. 538 668 Ocean RigNorway AS - Sr. Sec. Notes 10.25% due 06/01/08 .................................. 255 252 Pemex Project Funding Master Trust - Notes 6.125% due 08/15/08 .................................. 700 716 7.375% due 12/15/14 .................................. 700 714 Valero Energy Corp. - Notes 8.375% due 06/15/05 .................................. 700 732 ------- 8,406 Other Asset Backed - 2.8% Ameriquest Mortgage Securities, Inc. - Ser. 2003-10 Cl. AF3 3.23% due 05/25/28 ................................... 2,080 2,065 Ameriquest Mortgage Securities, Inc. - Ser. 2003-IA1 4.965% due 11/25/33 .................................. 1,125 1,117 Argent Securities, Inc. - Ser. 2004 W1 M3 1.0% due 02/25/34 .................................... 1,600 1,617 Bass Trust - Ser. 2004 CB4 Cl. A3 4.632% due 07/25/08 .................................. 815 815 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Other Asset Backed - Continued CWABS, Inc. Ser. 2003-5 Cl. AF 2 3.042% due 04/25/25 .................................. $1,300 $ 1,294 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 3.531% due 12/25/33 .................................. 900 894 Equity One ABS, Inc. - Ser. 2004-1 Cl. M2 5.115% due 04/25/34 .................................. 750 699 Equity One ABS, Inc. - Ser. 2004-1 Cl. M3 5.26% due 04/25/34 ................................... 750 699 Equity One ABS, Inc. - Ser. 2004-2 Cl. AV2 1.55% due 07/25/34 ................................... 1,244 1,245 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 1.0% due 03/25/35 .................................... 1,200 1,200 Long Beach Mortgage Loan Trust - Ser. 2004-1 CTF Cl. M6 1.0% due 03/25/34 .................................... 1,700 1,703 NAAC Reperforming Loan Remic Trust - Ser. 2004-R1 Cl. A2 144A (a) 7.5% due 03/25/34 .................................... 9,058 9,890 Option One Loan Trust - Ser. 2004-1 CTF Cl. M 1 1.7% due 01/25/34 .................................... 800 800 Residential Asset Funding and Mortgage Securities - Ser. 2004 Cl. AII B2 1.32% due 09/25/33 ................................... 1,685 1,685 Residential Asset Funding and Mortgage Securities Corp. - Ser. 2001 KS3 Cl. A II 1.33% due 09/25/31 ................................... 851 852 Residential Asset Securities Corp. - Ser. 2004 KS6 Cl. AII B1 1.22% due 04/25/13 ................................... 1,900 1,900 ------- 28,475 Other Mortgage - 0.4% Capital One Secured Note Trust - Notes 2000-3 Cl. C 144A (a) 7.9% due 10/15/10 .................................... 640 706 Commercial Mortgage Acceptance Corp. - Ser. 1991-C1. A1 6.79% due 06/15/31 ................................... 1,058 1,123 LB UBS Commercial Mortgage Trust - CTF A4 4.166% due 04/17/13 .................................. 1,630 1,513 LB UBS Commercial Mortgage Trust - Ser. 2003-C5 Cl. K 144A (a) 5.25% due 04/15/37 ................................... 1,000 929 ------- 4,271 Paper & Forest Products - 0.5% Boise Cascade Corp. - Sr. Notes 6.5% due 11/01/10 .................................... $ 570 $ 580 Corporacion Durango SA de CV - Sr. Notes 13.125% due 08/01/06 * ............................... 631 315 13.75% due 07/15/09 * ................................ 2,905 1,452 Donohue Forest Products, Inc. - Sr. Notes 7.625% due 05/15/07 .................................. 885 917 Fort James Corp. - Sr. Notes 6.625% due 09/15/04 .................................. 910 917 Longview Fibre Co. - Notes 10.0% due 01/15/09 ................................... 250 270 Weyerhaeuser Co. 7.125% due 07/15/23 .................................. 1,060 1,120 ------- 5,571 Pharmaceuticals - 0.2% Medco Health Solutions, Inc. - Sr. Notes 7.25% due 08/15/13 ................................... 730 779 Schering Plough Corp. - Sr. Notes 6.5% due 12/01/33 .................................... 890 885 Wyeth - Notes 5.25% due 03/15/13 ................................... 765 738 ------- 2,402 Real Estate Investment Trust - 1.1% American Health Properties, Inc. - Notes 7.5% due 01/15/07 .................................... 1,405 1,514 Amresco Residential Securities - Notes 6.51% due 08/25/27 ................................... 2,144 2,194 Carramerica Realty Corp. - Notes 5.25% due 11/30/07 ................................... 275 287 Health Care Reit, Inc. - Notes 6.0% due 11/15/13 .................................... 330 325 Healthcare Realty Trust IN - Sr. Notes 8.125% due 05/01/11 .................................. 1,250 1,437 iStar Financial, Inc. - Sr. Notes 6.5% due 12/15/13 .................................... 1,000 984 7.0% due 03/15/08 .................................... 410 435 Socgen Real Estate Co. LLC - Ser. A 144A (a) 7.64% due 12/29/49 ................................... 2,270 2,506 Spieker Properties, L.P. - Notes 7.125% due 12/01/06 .................................. 1,490 1,619 ------- 11,301 Specialty Retail - 0.2% Gap, Inc. - Notes 10.55% due 12/15/08 .................................. 970 1,174 Office Depot, Inc. - Sr. Notes 6.25% due 08/15/13 ................................... 695 716 ------- 1,890 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Telephone - 0.1% Citizens Communications Co. - Sr. Notes 9.0% due 08/15/31 .................................... $ 702 $ 677 Tobacco - 0.3% Altria Group, Inc. - Notes 7.0% due 11/04/13 .................................... 1,278 1,301 Philip Morris Cos., Inc. - Notes 6.95% due 06/01/06 ................................... 1,530 1,606 ------- 2,907 U.S. Government Agencies - 29.7% Federal Home Loan Bank - Bonds 5.0% due 11/01/17 .................................... 653 655 5.0% due 12/01/17 .................................... 553 555 5.0% due 03/01/18 .................................... 815 818 5.0% due 04/01/18 .................................... 11,222 11,259 Federal Home Loan Mortgage Corp. - Bonds 4.25% due 03/15/31 ................................... 3,861 3,738 5.0% due 12/15/28 .................................... 2,880 2,856 5.0% due 08/01/33 ............................ ....... 4,395 4,256 5.0% due 07/25/34 .................................... 2,000 1,930 5.5% due 06/01/24 .................................... 17,002 17,208 5.5% due 07/15/31 .................................... 1,117 1,082 6.0% due 10/15/32 .................................... 3,779 3,911 6.5% due 04/01/31 .................................... 3,032 3,165 Federal Home Loan Mortgage Corp. - Debs. 4.25% due 07/15/09 ................................... 1,785 1,781 4.5% due 07/15/13 .................................... 2,000 1,913 Federal Home Loan Mortgage Corp. - Ser. 2640 Cl. WA 3.5% due 03/15/33 .................................... 780 768 Federal National Mortgage Assoc. - Bonds 1.0% due 10/01/33 .................................... 1,774 1,785 4.25% due 03/25/33 ................................... 716 702 4.5% due 07/01/18 .................................... 11,986 11,745 4.5% due 07/25/18 .................................... 7,845 7,664 5.0% due 10/25/16 .................................... 5,098 5,062 5.0% due 05/01/18 .................................... 5,098 4,232 5.0% due 06/01/18 .................................... 5,098 3,241 5.0% due 07/01/18 .................................... 3,072 3,083 5.0% due 07/25/18 .................................... 4,500 4,504 5.0% due 02/01/19 .................................... 574 576 5.0% due 02/01/19 .................................... 2,577 2,586 5.0% due 08/25/27 .................................... 6,373 6,266 5.0% due 07/25/33 .................................... 6,955 6,716 5.0% due 08/01/33 .................................... 4,587 4,446 5.0% due 04/01/34 .................................... 7,141 6,906 5.0% due 04/01/34 .................................... 948 917 5.0% due 05/01/34 .................................... 7,047 6,815 5.0% due 05/01/34 .................................... 823 796 5.5% due 02/01/18 .................................... $ 9,240 $ 9,474 5.5% due 11/25/32 .................................... 2,665 2,615 5.5% due 11/01/33 .................................... 7,712 7,697 5.5% due 01/01/34 .................................... 14,096 14,069 5.5% due 03/01/34 .................................... 2,476 2,467 5.5% due 05/01/34 .................................... 2,397 2,389 6.0% due 09/01/14 .................................... 1,093 1,142 6.0% due 03/01/33 .................................... 8,177 8,362 6.0% due 07/25/33 .................................... 4,830 4,930 6.0% due 09/01/33 .................................... 568 580 6.0% due 11/01/33 .................................... 2,525 2,580 6.0% due 11/01/33 .................................... 1,984 2,028 6.0% due 02/01/34 .................................... 2,901 2,965 6.5% due 06/01/32 .................................... 1,187 1,236 6.5% due 11/01/32 .................................... 1,035 1,078 6.5% due 02/01/33 .................................... 4,351 4,533 6.5% due 07/25/33 .................................... 8,275 8,614 6.5% due 11/01/33 .................................... 1,324 1,380 6.5% due 12/01/33 .................................... 1,716 1,788 7.0% due 09/01/10 .................................... 662 703 7.0% due 01/01/12 .................................... 220 234 7.0% due 02/01/16 .................................... 700 744 7.0% due 04/01/17 .................................... 706 750 7.0% due 04/01/17 .................................... 362 385 7.0% due 05/01/17 .................................... 149 158 7.0% due 07/25/33 .................................... 2,200 2,320 Federal National Mortgage Assoc. - Bonds Cl. 2 5.0% due 06/01/33 .................................... 62 17 5.5% due 11/01/33 .................................... 3,089 878 Federal National Mortgage Assoc. - Bonds Cl. PE 3.5% due 07/25/33 .................................... 1,444 1,327 Federal National Mortgage Assoc. - Bonds Ser. 2002-82 Cl. QL 5.0% due 05/25/27 .................................... 1,770 1,807 Federal National Mortgage Assoc. - Bonds Ser. 2003-49 Cl. JE 3.0% due 04/25/33 .................................... 1,810 1,652 Federal National Mortgage Assoc. - Bonds Ser. 2003-58 AD 3.25% due 07/25/33 ................................... 2,023 1,889 Federal National Mortgage Assoc. - Bonds Ser. 2004-11 Cl. 1A 1.22% due 03/25/34 ................................... 3,883 3,860 Federal National Mortgage Assoc. - Debs. 6.625% due 11/15/30 .................................. 1,000 1,101 Federal National Mortgage Assoc. - Notes 2.5% due 06/15/08 .................................... 2,000 1,900 3.25% due 08/15/08 ................................... 2,000 1,947 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 4.375% due 03/15/13 ................................. $ 3,550 $ 3,386 Federal National Mortgage Assoc. - Ser. 2004-W2 Cl. 1A2F 1.44% due 02/25/44 .................................. 7,261 7,234 Government National Mortgage Assoc. - Bonds 5.0% due 05/15/33 ................................... 36,500 35,444 5.5% due 10/15/33 ................................... 3,071 3,074 6.0% due 02/15/33 ................................... 79 81 6.0% due 03/15/33 ................................... 5,360 5,502 6.0% due 05/15/33 ................................... 5,736 5,888 6.0% due 12/20/33 ................................... 825 846 6.5% due 09/15/28 ................................... 406 425 6.5% due 09/15/29 ................................... 257 270 6.5% due 08/15/31 ................................... 577 604 Government National Mortgage Assoc. - Bonds Ser. 2003 Cl. XA 3.75% due 05/16/33 .................................. 595 561 Government National Mortgage Assoc. - Ser. 2002-30 Cl. Z 6.5% due 05/20/32 ................................... 1,611 1,670 -------- 300,521 U.S. Governmental - 9.7% U.S. Treasury - Bonds 5.375% due 02/15/31 ................................. 9,908 9,993 U.S. Treasury - Notes 1.5% due 07/31/05 ................................... 11,000 10,926 1.625% due 02/28/06 ................................. 6,263 6,171 2.0% due 01/15/14 ................................... 6,104 6,068 3.0% due 02/15/09 ................................... 8,796 8,523 3.0% due 07/15/12 ................................... 2,196 2,374 3.5% due 01/15/11 ................................... 2,792 3,100 3.875% due 01/15/09 ................................. 1,719 1,917 4.0% due 06/15/09 ................................... 3,536 3,566 4.75% due 05/15/14 .................................. 24,910 25,170 6.0% due 08/15/09 ................................... 725 797 6.875% due 05/15/06 ................................. 18,465 19,877 -------- 98,482 Whole Loan CMOs - 4.8% Ameriquest Mortgage Securities, Inc. - Ser. 2004-X2 Cl. A 144A (a) 1.851% due 06/25/34 ................................. 1,900 1,898 Bank One Issuance Trust - Notes 4.54% due 09/15/10 .................................. 1,300 1,311 Bear Stearns ARM Trust - Ser. 2004-6 Cl. 1A1 4.707% due 07/30/34 ................................. 7,000 7,035 Bear Stearns Trust - Ser. 2004-2 Cl. 1A1 5.316% due 02/19/05 ................................. 800 809 CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1 6.25% due 12/25/33 .................................. 5,666 5,758 CWMBS, Inc. - Ser. 2003-R4 Cl. 2A 144A (a) 6.5% due 01/25/34 ................................... $8,107 $ 8,326 CWMBS, Inc. - Ser. 2004 12 Cl. 11A2 4.431% due 08/25/34 ................................. 7,700 7,740 Global Signal Trust - Ser. 2004-1 Cl D144A (a) 5.098% due 01/15/34 ................................. 900 866 Greenwich Capital - Ser. 2003-C1 Cl. A4 4.111% due 07/05/12 ................................. 770 710 Greenwich Capital Commercial Funding Corp. - Ser. 2003-C2 Cl. A2 4.022% due 07/05/10 ................................. 3,165 3,100 GS Mortgage Securities Corp. - Ser. 2003-1 Cl. A2 1.79% due 01/25/32 .................................. 1,100 1,119 GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C 1.58% due 05/25/34 .................................. 1,000 1,000 GS Mortgage Securities Corp. - Ser. 2004-7 Cl. 2A1 4.191% due 06/01/34 ................................. 1,785 1,755 IMPAC Secured Assets Corp. - Ser. 2004 1 Cl. A3 3.71% due 03/25/34 .................................. 1,015 990 Mellon Residential Funding Corp. - Ser. 2000 TBC2 Cl. A1 1.34% due 06/15/30 .................................. 1,090 1,082 Specialty Underwriting - Ser. 2003-BC4 Cl. A3B 1.0% due 11/25/34 ................................... 1,825 1,779 Structured Asset Securities Corp. - Ser. 2003 NP3 Cl. A1 144A (a) 1.6% due 11/25/33 ................................... 1,608 1,608 Structured Asset Securities Corp. - Ser. 2003-S1 Cl. A1 1.25% due 08/25/33 .................................. 648 648 Structured Asset Securities Corp. - Ser. 2004-6XS Cl. M1 4.92% due 03/25/34 .................................. 1,100 1,072 -------- 48,606 Wireless Telecommunications Services - 0.3% AT&T Wireless, Inc. - Notes 7.875% due 03/01/11 ................................. 584 664 AT&T Wireless, Inc. - Sr. Notes 8.75% due 03/01/31 .................................. 340 415 Mobile Telesystems Finance - Notes 10.95% due 12/21/04 ................................. 245 252 Mobile Telesystems Finance - Notes 144A (a) 8.375% due 10/14/10 ................................. 400 379 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Wireless Telecommunications Services - Continued 9.75% due 01/30/08 ..................................... $ 765 $ 784 10.95% due 12/21/04 .................................... 405 418 -------- 2,912 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $899,184) 88.8% 898,210 Shares ------- PREFERRED STOCK Commercial Services & Supplies - 0.0% Glass Tech., Inc. - Ser. A ............................. 1 1 Diversified Financials - 0.1% J.P. Morgan Chase Capital XII .......................... 31,083 719 Electric/Gas - 0.3% Dominion Resources, Inc. ............................... 47,000 2,557 Real Estate Investment Trust - 0.2% Delphi Properties, Inc. ................................ 39,300 1,006 Health Care Property Investments, Inc. - Ser. F ....................................... 31,000 752 Prologis - Ser. F ...................................... 33,400 773 -------- 2,531 -------- TOTAL PREFERRED STOCK- Cost $6,018) 0.6% 5,808 WARRANTS Commercial Services & Supplies - 0.0% Sunterra Corp. expires 07/26/07 .................................... 152 0 -------- TOTAL WARRANTS- (Cost $0) 0.0% 0 -------- TOTAL LONG-TERM INVESTMENTS- (Cost $905,202) 89.4% 904,018 Par Value ------- (000's) COMMERCIAL PAPER Auto Loan - 0.2% Ford Motor Credit Co. 1.77% due 09/03/04 .................................. $ 1,900 1,894 Banks - 4.0% Danske Corp. 1.24% due 09/17/04 .................................. 9,300 9,275 1.27% due 09/20/04 .................................. 100 100 European Investment Bank 1.03% due 07/02/04 .................................. 8,200 8,200 Royal Bank of Scotland 1.05% due 07/14/04 .................................. 3,800 3,799 1.135% due 09/01/04 ................................. 7,900 7,885 Svenska Handelsbanken 1.09% due 08/03/04 .................................. $ 700 $ 699 1.39% due 09/13/04 .................................. 7,600 7,578 Stadshypotek Delaware, Inc. 1.49% due 09/23/04 .................................. 3,100 3,089 -------- 40,625 Finance - 3.8% Barclays United Funding LLC 1.21% due 08/23/04 .................................. 4,600 4,592 1.28% due 09/21/04 .................................. 5,000 4,985 CDC Commercial 1.085% due 08/04/04 ................................. 10,700 10,689 1.26% due 09/22/04 .................................. 700 698 General Electric Capital Corp. 1.06% due 07/09/04 .................................. 500 500 1.06% due 07/12/07 .................................. 3,900 3,899 1.11% due 08/13/04 .................................. 500 499 1.14% due 09/03/04 .................................. 4,600 4,591 1.30% due 09/08/04 .................................. 2,000 1,995 HBOS Treasury Services plc 1.13% due 09/01/04 .................................. 600 599 Nestle Capital Corp. 1.24% due 09/14/04 .................................. 3,800 3,790 Total Fina Elf Capital 1.42% due 07/01/04 .................................. 600 600 UBS Finance Delaware LLC 1.07% due 07/15/04 .................................. 1,100 1,100 -------- 38,537 U.S. Government Agencies - 7.3% Federal Home Loan Bank - Disc. Notes 1.17% due 07/16/04 .................................. 400 400 1.25% due 09/01/04 .................................. 1,700 1,696 1.41% due 09/15/04 .................................. 1,600 1,595 Federal Home Loan Mortgage Corp. - Disc. Notes 1.01% due 07/15/04 .................................. 1,500 1,499 1.055% due 08/03/04 ................................. 2,800 2,797 1.175% due 08/24/04 ................................. 5,900 5,890 1.12% due 08/10/04 .................................. 3,900 3,895 1.20% due 08/09/04 .................................. 500 499 1.20% due 09/08/04 .................................. 3,000 2,993 1.56% due 10/20/04 .................................. 3,800 3,782 Federal National Mortgage Assoc. - Disc. Notes 1.01% due 07/20/04 .................................. 4,000 3,998 1.055% due 08/04/04 ................................. 3,900 3,896 1.06% due 07/21/04 .................................. 4,300 4,298 1.105% due 09/01/04 ................................. 18,200 18,162 1.185% due 08/25/04 ................................. 3,100 3,094 1.20% due 09/08/04 .................................. 10,300 10,272 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ---------- (000's) (000's) COMMERCIAL PAPER - Continued U.S. Governement Agencies - Continued 1.435% due 09/22/04.................................. $ 2,200 $ 2,193 1.53% due 10/18/04................................... 3,200 3,185 ---------- 74,144 ---------- TOTAL COMMERCIAL PAPER- (Cost $155,200) 15.3% 155,200 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 9.7% State Street Navigator Securities Lending Portfolio................................. 97,538 97,538 SHORT-TERM INVESTMENTS - 5.3% Investment in joint trading account 1.344% due 07/01/04 (Cost $53,897)....................................... 53,897 53,897 ------- ---------- TOTAL INVESTMENTS- (Cost $1,211,837) 119.7% 1,210,653 Payables, less cash and receivables- (19.7)% (199,521) ------- ---------- NET ASSETS- 100.0% $1,011,132 ======= ========== (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $69,401 or 6.9% of net assets of the Portfolio. * Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Active Bond Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint repurchase agreements: The Fund, along with other registered investment companies having a management contract with John Hancock Advisers, Inc. ("Adviser"), an indirect wholly-owned subsidiary of John Hancock, may participate in a joint repurchase agreement pursuant to an exemptive order issued by the Securities and Exchange Commission. Aggregate cash balances are invested in one or more repurchase agreements, whose underlying securities are obligations of the U.S. Government and/or its agencies. The Fund's custodian bank receives delivery of the underlying securities for the joint repurchase agreement on the Fund's behalf. The Adviser is responsible for ensuring that the agreement is fully collateralized at all times. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For the period ended June 30, 2004, the Fund had no bank borrowings. Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $96,093 $97,538 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. As of June 30, 2004, the Fund had open forward currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Principal Amount Unrealized Covered by Contract Expiration Month Gain (Loss) Currency Purchased ------------------- ---------------- ----------- ------------------ Brazilian Real 49 July 04 $(1) Brazilian Real 27 August 04 1 Brazilian Real 92 September 04 2 Chilean Peso 143 August 04 -- Chilean Peso 94 September 04 1 Hong Kong Dollar 80 July 04 -- Hong Kong Dollar 80 August 04 -- Hong Kong Dollar 100 September 04 -- Indian Rupee 150 September 04 (3) Japanese Yen 4,686 July 04 17 South Korean Won 79 July 04 1 South Korean Won 78 August 04 2 South Korean Won 101 September 04 1 Mexican Peso 66 August 04 1 Mexican Peso 570 September 04 1 Mexican Peso 29 August 04 -- Mexican Peso 97 August 04 (2) Peruvian Nouveau 30 August 04 -- Peruvian Nouveau 100 September 04 -- New Russian Ruble 58 July 04 1 New Russian Ruble 29 August 04 -- New Russian Ruble 97 September 04 -- Singapore Dollar 80 July 04 (1) Singapore Dollar 79 August 04 -- Singapore Dollar 99 September 04 -- New Taiwan Dollar 30 August 04 -- New Taiwan Dollar 98 September 04 -- South African Rand 30 August 04 3 South African Rand 104 September 04 4 --- $28 === Currency Sold ------------- Euro 6,804 July 04 $69 South African Rand 19 August 04 -- South African Rand 63 September 04 -- --- $69 === Options: The Fund may use option contracts to manage its exposure to the bond market and to fluctuations in interest rates and currency values. Option contracts tend to increase or decrease the Fund's exposure to the underlying instrument or hedge other fund investments. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued When the Fund purchases an option, the premium paid by the Fund is included in the Fund's Statement of Assets and Liabilities as an investment and subsequently "marked to market" to reflect the option's current market value. Purchased options are valued at the last sale price on the market on which they are principally traded. If the purchased option expires, the Fund realizes a loss in the amount of the premium. If the Fund enters into a closing sale transaction, it realizes a gain or loss, depending on whether the proceeds from the sale are greater or less than the cost of the option. If the Fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium originally paid. The risk associated with purchasing options is limited to the premium originally paid. When the Fund writes an option, the premium received by the Fund is presented in the Fund's Statment of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently "marked to market" to reflect the current market value of the option written. Written options are valued at the last sale price or, in the absence of a sale, the last offering price on the market on which they are principally traded. If an option expires on its stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security which the Fund purchases upon exercise of the option. The risk in writing a call option is that the Fund relinquishes the opportunity to profit if the market price of the underlying security increases and the option is exercised. In writing a put option, the Fund assumes the risk of incurring a loss if the market price of the underlying security decreases and the option is exercised. In addition, there is a risk the Fund may not be able to enter into a closing transaction because of an illiquid secondary market, or if the counterparties do not preform under the contracts' terms. As of June 30, 2004, the Fund had open written options as follows:
Open Contracts Strike Price Expiration Month Market Value --------- ------------ ---------------- ------------ OTC EWPO 3ML 6.0 (Put) 19,000 6.0 October 04 $ (13) OTC EWPO 3ML 3.8 (Call) 19,000 3.8 October 04 (3) OTC EWPO 3ML 5.5 (Put) 17,500 5.5 October 04 (157) OTC EWCO 3ML 3.75 (Call) 32,200 3.75 October 04 (--) ----- $(173) =====
Swap Agreements: The Fund may invest in swap agreements which involve the exchange of cash payments based on the specified terms and conditions of such agreements. A swap is an agreement to exchange the return generated by one investment for the return generated by another instrument. The value of each swap is determined by the counterparty to the swap agreement using a methodology which discounts the expected future cash receipts or disbursements related to the swap. The Fund may also enter into interest rate swap agreements which involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, (e.g., an exchange of floating rate payments with respect to a notional amount of principal). Interest rate swaps are "marked-to-market" daily. Net market value is reported as an asset or a liability in the Statement of Assets and Liabilities. The cash paid or received on a swap is recognized as income or expense when such a payment is paid or received. Entering into swap agreements involves, to varying degrees, elements of credit risk, market risk and interest rate risk in excess of the amount recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued there is not a liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in market conditions or interest rates. Swap agreements which were open for the period ended June 30, 2004 are summarized as follows: Net Unrealized Appreciation Par Value Interest Rate Swaps Counter Party (Depreciation) --------- ------------------- ------------- -------------- 2,800 To make or receive monthly Morgan Stanley $ (6) payments through 9/30/2004 based on floating rate of 1 Month LIBOR minus 0.65%, adjusted every month. 71,100 To make or receive semi-annual Morgan Stanley (2,101) payments through 12/15/2009 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 16,000 To make or receive semi-annual Bank of (473) payments through 12/15/2009 America based on the difference between (A) the fixed rate of 4.0% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 23,500 To make or receive semi-annual Barclays (303) (EURO) payments through 6/17/2010 based on the difference between (A) the fixed rate of 4.0% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months. 17,300 To make or receive semi-annual JP Morgan 448 payments through 12/15/2014 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 31,200 To make or receive semi-annual UBS 450 (GBP) payments through 3/20/2018 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 6 Month LIBOR, adjusted every 6 months. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Net Unrealized Appreciation Par Value Interest Rate Swaps Counter Party (Depreciation) --------- ------------------- ------------- -------------- 38,800 To make or receive semi-annual UBS $ 575 (EURO) payments through 3/20/2018 based on the difference between (A) the fixed rate of 6.00% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months. ------- $(1,410) ======= Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $693, $96, $3,265 and $2,190 which expire in 2007, 2008, 2009 and 2010, respectively. Certain of the above losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred approximately $1,579 in net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending on December 31, 2004. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued
Between Between Between $100 Million and $250 Million and $500 Million and Excess Over First $100 Million $250 Million $500 Million $1 Billion $1 Billion ------------------ ---------------- ---------------- ---------------- ----------- 0.70% 0.65% 0.61% 0.58% 0.55%
In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements to the Fund. John Hancock has entered into Sub-Advisory Agreements with Declaration Management & Research LLC, and John Hancock Advisors with respect to the Fund. Each is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. John Hancock has also entered into a Sub-Advisory Agreement with Pacific Investment Management Company LLC, and under its supervision, is also responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $2,038,786 $1,956,696 As of June 30, 2004, transactions for written options were as follows: Contracts Premium ($) --------- ----------- Beginning of period 38,000 329 Options opened 49,700 355 Options closed/expired -- -- ------ --- End of period 87,700 684 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $1,107,455 $172,839 $(151,784) $21,055 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and premium amortization and market discount accretion on debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of 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 ------------- ------------- ------------- -------------- $-- $-- $6,244 $21,055 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $66,299 $5,737 $-- 2002 52,675 -- -- Included in the Fund's 2003 distributions from ordinary income is $21,924 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. NOTE E--COMBINATION On April 25, 2003, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION--Continued Acquiring Fund Target Fund --------------- ------------------- VST Active Bond VA Strategic Income This combination provided for the transfer of substantially all of the assets and liabilities of the target fund to the acquiring fund in exchange solely for the fund shares of the acquiring fund. The acquisition was accounted for as tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets Appreciation to Combination After Combination ------------------- -------------- ----------- ------------ ---------------- -------------------- VST Active Bond vs. VA Strategic Income 8,433 $83,358 $2,176 $1,016,994 $1,100,351
Inception: May 1, 1998 -------------------------------------------------------------------------------- Bond Index Fund Standish Mellon Asset Management Company LLC Gregory Curran -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.0% (amount less than 0.01%), underperforming its benchmark, the Lehman Brothers Aggregate Bond Index. Relative to Morningstar peers, the Fund has an average rating of 3 with an average risk profile. . The Fund continues to meet its long-term investment objective to closely track the performance of the Lehman Brothers Aggregate Index, which covers the U.S. investment grade fixed-rate bond market. . The manager seeks to track the performance of the Fund's benchmark by investing in a representative sample of securities selected through proprietary quantitative techniques. Issues are selected to best match the risk characteristics of the 6,976 plus securities in the benchmark, including price sensitivity, industry, and quality exposure. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ U.S. Treasury 21.3% Federal National Mortgage Assoc. 20.1% Federal Home Loan Mortgage Corp. 18.9% Government National Mortgage Assoc. 4.5% Federal Home Loan Bank 2.2% General Electric Corp. 1.2% General Motors Corp. 1.2% Morgan Stanley Group, Inc. 1.1% JP Morgan Chase & Co. 1.1% Wachovia Corp. 0.8% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Bond Index Bond Index Fund Benchmark/4/ ---------- ------------ YTD/3/ 0.0% 0.15% 1 Year 0.0 0.33 3 Years 5.97 6.36 5 Years 6.53 6.91 Since Inception (5/1/98) 6.01 6.38 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Intermediate Term-Bond MORNINGSTAR RISK/1/: . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004)/2/ % of Credit Quality Assets -------------- ------ AAA/Government/Agency 74.36% AA 1.85% A 12.16% BBB 11.48% BB & lower 0.15% Not Rated/Other NA Weighted Average Yield 4.77% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 295 VL/VUL subaccounts and 488 VA subaccounts in the Morningstar Intermediate Term Bond category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ The benchmark is the Lehman Brothers Government/Credit Bond Index from May 1998 to January 2001, and the Lehman Brothers Aggregate Bond Index from February 2001 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted) ASSETS Long term investments at cost (including $50,439 of securities loaned (Note B)) ............................................... $192,378 Net unrealized appreciation of investments ......................... 1,102 Short-term investments at value .................................... 54,539 -------- Total investments ............................................ 248,019 Receivable for: Interest ........................................................ 2,317 -------- Total assets ....................................................... 250,336 -------- LIABILITIES Payables for: Investments purchased ........................................... 396 Collateral for securities on loan ............................... 51,182 Accrued operating expenses ...................................... 28 -------- Total liabilities .................................................. 51,606 -------- Net assets ......................................................... $198,730 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 20,088 -------- Net asset value per share .......................................... $ 9.89 ======== Composition of net assets: Capital paid-in ................................................. $197,771 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (166) Undistributed net investment income ............................. 23 Net unrealized appreciation of Investments ...................... 1,102 -------- Net assets ......................................................... $198,730 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 5,182 Securities lending .............................................. 17 -------- Total investment income ............................................ 5,199 -------- EXPENSES Investment advisory fee ......................................... 144 Auditors fees ................................................... 13 Custodian fees .................................................. 72 Legal fees ...................................................... 14 Printing & mailing fees ......................................... 18 Trustees'fees ................................................... 3 Other fees ...................................................... 3 -------- Total expenses ..................................................... 267 Less expenses reimbursed ........................................ (21) -------- Net expenses ....................................................... 246 -------- Net investment income .............................................. 4,953 -------- REALIZED AND UNREALIZED LOSS Net realized loss on investments ................................ (90) Change in unrealized depreciation on investments ................ (4,706) -------- Net realized and unrealized loss ................................... (4,796) -------- Net increase in net assets resulting from operations ............... $ 157 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 4,953 $ 10,717 Net realized gain (loss) ............................................ (90) 207 Change in net unrealized depreciation ............................... (4,706) (3,166) -------- --------- Net increase in net assets resulting from operations ............. 157 7,758 Distributions to shareholders from: Net investment income ............................................... (4,930) (10,677) Realized gains ...................................................... (947) -------- --------- Decrease in net assets resulting from distributions .............. (4,930) (11,624) From fund share transactions: Proceeds from shares sold ........................................... 21,182 108,981 Distributions reinvested ............................................ 4,930 11,624 Payment for shares redeemed ......................................... (38,270) (109,173) -------- --------- Increase (decrease) in net assets from fund share transactions ... (12,158) 11,432 -------- --------- NET INCREASE (DECREASE) IN NET ASSETS .................................. (16,931) 7,566 NET ASSETS Beginning of Period ................................................. 215,661 208,095 -------- --------- End of Period (including undistributed net investment income of $23 and $0, respectively) ........................................ $198,730 $ 215,661 ======== ========= Analysis of fund share transactions: Sold ................................................................ 2,097 10,603 Reinvested .......................................................... 490 1,136 Redeemed ............................................................ (3,782) (10,661) -------- --------- Net increase (decrease) in fund shares outstanding ..................... (1,195) 1,078 ======== =========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Bond Index Fund ------------------------------------------------------------------ Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------- 2004 2003 2002 2001 2000 ------------ -------- -------- -------- ------- Net Assets Value at Beginning of Period ............. $ 10.13 $ 10.30 $ 9.89 $ 9.74 $ 9.32 Income from Investment Operations: Net Investment Income ............................ 0.24 0.48 0.54 0.57 0.62 Net Realized and Unrealized Gain (Loss) on Investment(a) ................................. (0.24) (0.12) 0.42 0.17 0.43 -------- -------- -------- -------- ------- Total From Investment Operations ................. 0.00 0.36 0.96 0.74 1.05 Less Distributions: Distribution from Net Investment Income .......... (0.24) (0.48) (0.51) (0.58) (0.63) Distribution from Net Realized Gains on Investments ................................... (0.05) (0.04) (0.01) -------- -------- -------- -------- ------- Total Distributions .............................. (0.24) (0.53) (0.55) (0.59) (0.63) -------- -------- -------- -------- ------- Net Assets Value at End of Period ................... $ 9.89 $ 10.13 $ 10.30 $ 9.89 $ 9.74 ======== ======== ======== ======== ======= Total Investment Return(b) .......................... (g)(e) 3.60% 9.95% 7.76% 11.81% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........................................ 0.24%(c)(f) 0.24%(c) 0.22%(c) 0.24% 0.25%(c) Ratio of Net Investment Income to Average Net Assets ........................................ 4.84%(f) 4.73% 5.30% 5.77%(d) 6.80% Portfolio Turnover Rate .......................... 9.97%(e) 40.22% 57.31% 68.70% 40.46% Net Assets End of Period (000's Omitted) ............ $198,730 $215,661 $208,095 $129,358 $64,768
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the expense ratio would have been .26% for the period ending June 30, 2004, and .24%, .25%, and .27%, for the years ended December 31, 2003, 2002, and 2000, respectively. (d) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 6.37% for the years ended December 31, 2001. (e) Not annualized. (f) Annualized. (g) Less than 0.01%. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.4% Boeing Corp. 8.75% due 09/15/31 ...................................... $ 90 $ 116 Lockheed Martin Corp. 8.2% due 12/01/09 ....................................... 200 234 Northrop-Grumman Corp. - Debs. 7.75% due 03/01/16 ...................................... 75 88 Raytheon Co. - Notes 6.75% due 08/15/07 ...................................... 200 217 United Technologies Corp. - Debs. 8.875% due 11/15/19 ..................................... 50 65 ------- 720 Airlines - 0.2% Delta Air Lines, Inc. - Ser. 00-1 7.57% due 11/18/10 ...................................... 320 297 Auto Loan - 1.2% Ford Motor Credit Co. 6.125% due 01/09/06 ..................................... 800 828 Ford Motor Credit Co. - Bonds 7.375% due 02/01/11 ..................................... 250 264 General Motors Acceptance Corp. - Notes 6.125% due 09/15/06 ..................................... 400 416 7.75% due 01/19/10 ...................................... 400 434 8.0% due 11/01/31 ....................................... 430 441 Toyota Motor Credit Corp. - Notes 5.5% due 12/15/08 ....................................... 60 63 ------- 2,446 Automobiles - 0.6% DaimlerChrysler NA Holding Co. 7.2% due 09/01/09 ....................................... 650 707 Delphi Automotive Systems Corp. - Debs. 7.125% due 05/01/29 ..................................... 50 50 Delphi Automotive Systems Corp. - Notes 6.5% due 05/01/09 ....................................... 200 210 Ford Motor Co. - Bonds 6.625% due 02/15/28 ..................................... 350 307 ------- 1,274 Banks - 5.2% African Development Bank - Sub. Notes 6.875% due 10/15/15 ..................................... 35 39 Bank of America Corp. - Sub. Notes 7.8% due 02/15/10 ....................................... 350 402 Bank One Corp. 7.875% due 08/01/10 ..................................... 300 347 Bank One Corp. - Notes 6.875% due 08/01/06 ..................................... 1,000 1,070 BankAmerica Corp. - Sub. Notes 6.5% due 03/15/06 ....................................... 150 159 Chase Manhattan Corp. - Sub. Notes 7.125% due 02/01/07 ..................................... 225 245 Credit Suisse First Boston 6.5% due 01/15/12 ....................................... $ 400 $ 430 Credit Suisse First Boston, Inc. - Notes 5.875% due 08/01/06 ..................................... 500 526 European Investment Bank - Global Notes 4.625% due 03/01/07 ..................................... 800 827 Fleet Boston Corp. - Sub. Notes 7.375% due 12/01/09 ..................................... 100 113 Fleet Financial Group, Inc. - Sub. Debs. 6.7% due 07/15/28 ....................................... 75 78 HSBC Holdings Plc 7.5% due 07/15/09 ....................................... 150 169 InterAmerican Development Bank - Debs. 8.5% due 03/15/11 ....................................... 200 242 Intermediate American Development Bank - Bonds 6.125% due 03/08/06 ..................................... 1,300 1,373 International Bank of Reconstruction & Development - Notes 5.0% due 03/28/06 ....................................... 750 779 JP Morgan Chase & Co. - Notes 5.25% due 05/30/07 ...................................... 1,000 1,044 National City Bank of Pennsylvania - Sub. Notes 7.25% due 10/21/11 ...................................... 50 58 NationsBank Corp. - Sub. Notes 7.75% due 08/15/15 ...................................... 400 464 Royal Bank of Scotland plc - Sub. Notes 6.4% due 04/01/09 ....................................... 150 163 United Bank National Association of Minneapolis 6.375% due 08/01/11 .................................... 325 351 Wachovia Corp. - Notes 4.95% due 11/01/06 ...................................... 1,350 1,398 Wachovia Corp. - Sub. Notes 5.625% due 12/15/08 .................................... 75 78 ------- 10,355 Beverages - 0.4% Anheuser Busch Cos., Inc. 9.0% due 12/01/09 ....................................... 470 571 Coca-Cola Enterprises, Inc. - Debs. 8.5% due 02/01/22 ....................................... 100 127 Pepsi Bottling Group, Inc. - Sr. Notes - Ser. B 7.0% due 03/01/29 ....................................... 100 111 ------- 809 Chemicals - 0.2% E.I. Du Pont De Nemours 6.5% due 01/15/28 ....................................... 150 160 Eastman Chemical - Debs. 7.6% due 02/01/27 ....................................... 50 55 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Chemicals - Continued Morton International, Inc. - Debs. 9.25% due 06/01/20 ...................................... $ 40 $ 52 Rohm & Haas Co. - Notes 7.4% due 07/15/09 ....................................... 80 90 ------ 357 Commercial Services & Supplies - 0.3% First Data Corp. - Sr. Notes 5.625% due 11/01/11 ..................................... 400 417 Honeywell International, Inc. - Notes 7.5% due 03/01/10 ....................................... 75 86 ------ 503 Communications Equipment - 0.2% Motorola, Inc. - Notes 6.75% due 02/01/06 ...................................... 300 315 Computers & Peripherals - 0.5% Hewlett - Packard Co. - Notes 7.15% due 06/15/05 ...................................... 200 209 International Business Machines Corp. - Debs. 7.0% due 10/30/25 ....................................... 100 111 International Business Machines Corp. - Notes 4.25% due 09/15/09 ...................................... 600 599 ------ 919 Credit Card - 0.8% American Express Co. - Notes 4.875% due 07/15/13 ..................................... 150 145 MBNA Credit Card Master Note Trust - Ser. 2002-1 Notes Cl. A 4.95% due 06/15/09 ...................................... 1,000 1,041 MBNA Master Credit Card Trust II - Notes 6.5% due 04/15/10 ....................................... 400 436 ------ 1,622 Diversified Financials - 4.3% Bear Stearns & Co., Inc. - Notes 5.7% due 11/15/14 ....................................... 240 241 Chase Commercial & Mortgage Securities Corp. - Ser. 1997-2 Pass Thru Certs Cl. A2 6.6% due 12/19/29 ....................................... 461 488 Chase Commercial Mortgage Securities Corp. - Ser. 200-2 CTF Cl. A2 7.631% due 07/15/32 ..................................... 300 340 Citicorp Capital II 8.015% due 02/15/27 ..................................... 100 110 Citigroup, Inc. 7.25% due 10/01/10 ...................................... 400 451 Citigroup, Inc. - Notes 6.625% due 01/15/28 ..................................... 100 105 Citigroup, Inc. - Sub. Notes 5.875% due 02/22/33 ..................................... $ 190 $ 179 GE Capital Commercial Mortgage Corp. - Ser. 2001-2 Cl. A4 6.59% due 08/11/33 ...................................... 550 589 Goldman Sachs Capital 6.345% due 02/15/34 ..................................... 160 150 Goldman Sachs Group, Inc. - Notes 7.35% due 10/01/09 ...................................... 500 562 Hartford Financial Services Group, Inc. - Sr. Notes 7.75% due 06/15/05 ...................................... 150 157 Kreditanstalt Fur Wiederaufbau - Notes 3.25% due 03/30/09 ...................................... 500 485 Morgan Stanley Capital, Inc. - CTF 1998- WF1 Cl. A1 6.25% due 03/15/30 ...................................... 205 207 Morgan Stanley Capital, Inc. - Pass Thru Certs. Ser. 1999-RM1 6.37% due 12/15/31 ...................................... 603 633 Morgan Stanley Group, Inc. 6.1% due 04/15/06 ....................................... 1,065 1,121 6.75% due 04/15/11 ...................................... 250 274 Prudential Commercial Mortgage Trust - Cl. A2 4.493% due 02/11/36 ..................................... 450 428 Salomon Brothers Commercial & Mortgage Trust - Ser. 2000-C3 Pass Thru Certs Cl. A2 6.592% due 12/18/33 ..................................... 500 544 Salomon Brothers Mortgage Securities Inc. - Pass Thru Certs - Ser. 2000-C1 Cl. A2 7.52% due 12/18/09 ...................................... 300 339 Wells Fargo & Co. - Sub. Notes 6.875% due 04/01/06 ..................................... 1,100 1,173 ------ 8,576 Diversified Telecommunication Services - 1.2% AT&T Corp. - Notes 6.5% due 03/15/13 ....................................... 340 316 Bell Canada 7.75% due 04/01/06 ...................................... 125 134 Bellsouth Corp. - Notes 6.875% due 10/15/31 ..................................... 200 208 British Telecommunications plc - Notes 8.375% due 12/15/10 ..................................... 200 234 8.875% due 12/15/30 ..................................... 130 160 France Telecom SA - Notes 8.7% due 03/01/06 ....................................... 350 375 10.0% due 03/01/31 ...................................... 100 126 GTE Corp. - Debs. 6.94% due 04/15/28 ...................................... 100 102 Telefonica Europe BV - Notes 8.25% due 09/15/30 ...................................... 100 122 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Telecommunication Services - Continued Vodafone Group plc 7.75% due 02/15/10 ...................................... $ 500 $ 573 ------ 2,350 Electric Utilities - 0.0% CalEnergy Co., Inc. - Bonds 8.48% due 09/15/28 ...................................... 60 72 Electric/Gas - 1.4% Alabama Power Co. - Sr. Notes 5.5% due 10/15/17 ....................................... 100 99 5.7% due 02/15/33 ....................................... 80 76 Cincinnati Gas & Electric Co. - Debs 5.7% due 09/15/12 ....................................... 300 307 Constellation Energy Group, Inc. - Notes 7.0% due 04/01/12 ....................................... 240 261 Dominion Resources, Inc. 8.125% due 06/15/10 ..................................... 200 231 Duke Energy Co. - Sr. Notes 5.625% due 11/30/12 ..................................... 400 399 Keyspan Corp. 7.25% due 11/15/05 ...................................... 100 106 Niagara Mohawk Power Corp. 7.75% due 10/01/08 ...................................... 200 225 Oncor Electric Delivery Co. - Sr. Sec. Notes 6.375% due 05/01/12 ..................................... 400 428 Ontario Hydro 6.1% due 01/30/08 ....................................... 100 107 Progress Energy, Inc. - Sr. Notes 7.1% due 03/01/11 ....................................... 500 548 ------ 2,787 Finance - 3.8% Ameritech Capital Funding Corp. 6.875% due 10/15/27 ..................................... 60 62 Anardarko Finance Co. - Sr. Notes 6.75% due 05/01/11 ...................................... 200 220 Boeing Capital Corp. - Sr. Notes 7.1% due 09/27/05 ....................................... 500 528 Countrywide Funding Corp. 5.5% due 02/01/07 ....................................... 200 209 Deutsche Telekom International Finance 8.75% due 06/15/30 ...................................... 300 365 Devon Financing Corp. United L C - Notes 6.875% due 09/30/11 ..................................... 400 435 Financing Corp. 8.6% due 09/26/19 ....................................... 150 196 General Electric Capital Corp. 6.0% due 06/15/12 ....................................... 550 580 6.125% due 02/22/11 ..................................... 1,150 1,232 Household Finance Corp. - Notes 8.0% due 07/15/10 ....................................... 350 406 Household Finance Corp. - Sr. Unsub. Notes 5.875% due 02/01/09 ..................................... 280 296 KFW International Finance, Inc. - Sr. Notes 5.25% due 06/28/06 ...................................... $ 300 $ 314 Lehman Brothers Holdings, Inc. - Notes 6.25% due 05/15/06 ...................................... 500 528 Lehman Brothers, Inc. - Sr. Sub. Notes 7.5% due 08/01/26 ....................................... 150 171 National Rural Utilities Cooperative Finance - Notes 5.75% due 08/28/09 ...................................... 700 739 Sprint Capital Corp. 6.875% due 11/15/28 ..................................... 150 144 7.625% due 01/30/11 ..................................... 300 332 Sumitomo Bank International Finance NV - Notes 8.5% due 06/15/09 ....................................... 100 116 Verizon Global Funding Corp. - Notes 7.25% due 12/01/10 ...................................... 230 257 Washington Mutual Capital I 8.375% due 06/01/27 ..................................... 60 67 Washington Mutual Finance Corp. - Sr. Notes 6.25% due 05/15/06 ...................................... 300 318 ------ 7,515 Financials - 0.1% Aetna Inc. 7.625% due 08/15/26 ..................................... 100 112 Food & Drug Retailing - 0.3% Albertson's, Inc. - Notes 6.625% due 06/01/28 ..................................... 50 49 Albertson's, Inc. - Sr. Notes 7.5% due 02/15/11 ....................................... 345 389 Safeway, Inc. - Notes 5.8% due 08/15/12 ....................................... 150 151 ------ 589 Food Products - 0.8% Conagra Foods, Inc. - Notes 7.875% due 09/15/10 ..................................... 250 289 Conagra, Inc. - Debs. 9.75% due 03/01/21 ...................................... 75 100 General Mills, Inc. - Notes 6.0% due 02/15/12 ....................................... 250 262 Kellogg Co. - Debs. - Ser. B 7.45% due 04/01/31 ...................................... 100 115 Kraft Foods, Inc. - Notes 4.625% due 11/01/06 ..................................... 300 307 5.25% due 10/01/13 ...................................... 325 317 Sara Lee Corp. - Notes 6.25% due 09/15/11 ...................................... 100 108 The Kroger Co. 8.05% due 02/01/10 ...................................... 150 173 ------ 1,671 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Foreign Governmental - 2.3% Government of Canada 5.25% due 11/05/08 ...................................... $ 125 $ 132 Government of New Zealand - Debs. 8.75% due 12/15/06 ...................................... 120 135 Hydro-Quebec 8.4% due 01/15/22 ....................................... 100 128 Kingdom of Spain 7.0% due 07/19/05 ....................................... 250 262 Malaysia - Bonds 8.75% due 06/01/09 ...................................... 50 59 Manitoba Province Canada - Ser. BU 9.625% due 12/01/18 ..................................... 300 424 Province of Ontario - Bonds 6.0% due 02/21/06 ....................................... 300 315 Province of Quebec - Debs. 7.5% due 07/15/23 ....................................... 100 120 Republic of Greece - Notes 6.95% due 03/04/08 ...................................... 405 446 Republic of Italy - Debs. 6.875% due 04/15/03 ..................................... 460 520 Republic of Korea - Unsub. Notes 8.875% due 04/15/08 ..................................... 600 696 United Mexican States - Notes 9.875% due 02/01/10 ..................................... 970 1,165 United Mexican States - Notes Ser. A 8.3% due 08/15/31 ....................................... 200 210 ------ 4,612 Gas Utilities - 0.2% Sempra Energy - Notes 6.0% due 02/01/13 ....................................... 400 413 Home Equity Loan - 0.1% Countrywide Home Loan Corp. 6.25% due 04/15/09 ...................................... 250 267 Insurance - 0.3% Allstate Corp. 7.2% due 12/01/09 ....................................... 170 194 AXA - Sub Notes 8.6% due 12/15/30 ....................................... 120 147 Hartford Life, Inc. - Debs. 7.65% due 06/15/27 ...................................... 50 58 Torchmark, Inc. - Debs. 8.25% due 08/15/09 ...................................... 100 113 Travelers Property Casualty Corp. - Sr. Notes 7.75% due 04/15/26 ...................................... 50 57 ------ 569 Machinery - 0.2% Caterpillar, Inc. - Debs. 8.0% due 02/15/23 ....................................... 50 61 John Deere Capital Corp. - Global Notes 5.1% due 01/15/13 ....................................... 170 169 John Deere Capital Corp. - Notes 6.0% due 02/15/09 ....................................... $ 60 $ 64 ------ 294 Media - 1.7% Clear Channel Communications, Inc. 7.65% due 09/15/10 ...................................... 400 451 Comcast Cable Communications - Notes 8.875% due 05/01/17 ..................................... 75 91 Cox Communications, Inc. - Notes 5.5% due 10/01/15 ....................................... 300 289 News America Holdings, Inc. - Debs. 7.7% due 10/30/25 ....................................... 100 113 News America Holdings, Inc. - Sr. Debs. 7.75% due 01/20/24 ...................................... 180 204 TCI Communications, Inc. - Sr. Notes 7.125% due 02/15/28 ..................................... 70 73 The Walt Disney Co. - Sr. Notes 6.75% due 03/30/06 ...................................... 1,000 1,059 Time Warner Entertainment, Inc. - Sr. Notes 8.375% due 07/15/33 ..................................... 200 234 Time Warner, Inc. 7.625% due 04/15/31 ..................................... 75 81 Time Warner, Inc. - Debs. 7.25% due 10/15/17 ...................................... 350 379 Viacom, Inc. 7.875% due 07/30/30 ..................................... 50 59 Viacom, Inc. - Sr. Notes 7.75% due 06/01/05 ...................................... 350 366 ------ 3,399 Metals & Mining - 0.2% ALCOA, Inc. - Notes 7.375% due 08/01/10 ..................................... 200 227 Noranda, Inc. - Debs. 7.0% due 07/15/05 ....................................... 200 206 ------ 433 Multi-Utilities - 0.2% United Technologies Corp. - Notes 6.1% due 05/15/12 ....................................... 180 193 United Utilities plc - Notes 6.875% due 08/15/28 ..................................... 100 104 ------ 297 Multiline Retail - 0.3% Federated Department Stores, Inc. 6.625% due 04/01/11 ..................................... 200 217 Target Corp. - Notes 7.5% due 08/15/10 ....................................... 100 115 Wal Mart Stores, Inc. 7.55% due 02/15/30 ...................................... 110 132 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Multiline Retail - Continued Wal-Mart Stores, Inc. - Debs. 6.75% due 10/15/23 ...................................... $ 100 $ 110 ------ 574 Municipal - 0.3% Illinois Saint 5.1% due 06/01/33 ....................................... 230 204 Massachusetts Special Purpose Trust - Ser. BEC-1 Cl. A5 7.03% due 03/15/12 ...................................... 150 167 Tennessee Valley Authority 6.75% due 11/01/25 ...................................... 260 289 ------ 660 Oil & Gas - 0.6% Burlington Resources, Inc - Debs. 9.125% due 10/01/21 ..................................... 90 116 Chevron Texaco Capital Co. - Notes 3.5% due 09/17/07 ....................................... 600 599 Norsk Hydro A/S 7.25% due 09/23/27 ...................................... 75 84 Occidental Petroleum Corp. - Debs. 7.2% due 04/01/28 ....................................... 40 45 Phillips Petroleum Co. - Debs. 6.65% due 07/15/18 ...................................... 50 55 Tosco Corp. 8.125% due 02/15/30 ..................................... 110 136 Trans-Canada Pipelines 7.7% due 06/15/29 ....................................... 100 118 Union Oil Co. of California 7.5% due 02/15/29 ....................................... 60 68 ------ 1,221 Other Mortgage - 1.0% GMAC Commercial Mortgaged Securities, Inc. - CTF - Ser. 1998-C1 Cl. A2 6.7% due 05/15/30 ....................................... 900 974 LB Commercial Conduit Mortgage Trust - Ser. 1999-C2 Pass Thru Certs. Cl. A2 7.325% due 09/15/09 ..................................... 400 448 LU UBS Commercial Mortgage Trust - Ser. 2000-C5 Pass Thru Certs. Cl. A1 6.41% due 01/15/10 ...................................... 592 629 ------ 2,051 Paper & Forest Products - 0.5% International Paper Co. - Notes 6.75% due 09/01/11 ...................................... 250 271 MeadWestvaco Corp. - Notes 6.85% due 04/01/12 ...................................... 100 107 Westvaco Corp. - Notes 7.1% due 11/15/09 ....................................... 35 39 Weyerhaeuser Co. 7.125% due 07/15/23 ..................................... 130 137 Weyerhaeuser Co. - Notes 6.125% due 03/15/07 ..................................... $ 450 $ 476 ------ 1,030 Personal Products - 0.2% Procter & Gamble Co. - Debs. 6.45% due 01/15/26 ...................................... 100 107 Unilever Capital 7.125% due 11/01/10 ..................................... 200 226 ------ 333 Pharmaceuticals - 0.6% Abbott Laboratories - Notes 5.625% due 07/01/06 ..................................... 250 262 Bristol Myers Squibb Co. - Notes 5.75% due 10/01/11 ...................................... 300 313 Eli Lilly & Co. - Notes 7.125% due 06/01/25 ..................................... 80 92 Schering Plough Corp. - Sr. Notes 5.3% due 12/01/13 ....................................... 250 245 Wyeth - Notes 5.25% due 03/15/13 ...................................... 200 193 ------ 1,105 Real Estate Investment Trust - 0.4% Simon Property Group Puerto - Notes 6.375% due 11/15/07 ..................................... 700 749 Real Estate Operations - 0.2% EOP Operating LP - Notes 6.8% due 01/15/09 ....................................... 150 162 EOP Operating, Ltd. Partenership - Notes 7.0% due 07/15/11 ....................................... 250 273 ------ 435 Road & Rail - 0.8% Burlington Northern Railroad Company 6.125% due 03/15/09 ..................................... 150 159 Canadian National Railway Co. - Notes 6.375% due 10/15/11 ..................................... 300 324 CSX Corp. - Debs. 7.45% due 05/01/07 ...................................... 125 137 Norfolk Southern Corp. - Notes 7.35% due 05/15/07 ...................................... 855 937 Union Pacific Corp. - Debs. 6.625% due 02/01/29 ..................................... 85 87 ------ 1,644 Specialty Retail - 0.0% Dayton Hudson Corp. - Debs. 6.75% due 01/01/28 ...................................... 25 27 U.S. Government Agencies - 44.5% Federal Home Loan Bank 3.875% due 06/14/13 ..................................... 1,750 1,610 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued Federal Home Loan Bank - Bonds 4.5% due 06/01/18 ....................................... $ 923 $ 904 5.0% due 06/01/19 ....................................... 200 201 Federal Home Loan Bank - Disc. Notes 5.125% due 03/06/06 ..................................... 1,400 1,453 Federal Home Loan Bank - Sr. Notes 5.8% due 09/02/08 ....................................... 225 240 Federal Home Loan Mortgage Corp. - Bonds 4.0% due 09/01/18 ....................................... 236 225 4.0% due 10/01/18 ....................................... 703 671 4.5% due 08/01/18 ....................................... 1,476 1,445 4.5% due 11/01/18 ....................................... 373 365 4.5% due 05/01/24 ....................................... 250 240 4.5% due 08/01/33 ....................................... 342 320 4.5% due 10/01/33 ....................................... 196 184 5.0% due 01/01/18 ....................................... 825 827 5.0% due 02/01/18 ....................................... 966 969 5.0% due 03/01/18 ....................................... 355 357 5.0% due 04/01/24 ....................................... 396 391 5.0% due 06/01/33 ....................................... 546 529 5.0% due 09/01/33 ....................................... 956 926 5.0% due 10/01/33 ....................................... 1,441 1,396 5.0% due 05/01/34 ....................................... 150 145 5.0% due 05/01/34 ....................................... 100 97 5.0% due 06/01/34 ....................................... 250 242 5.5% due 06/01/16 ....................................... 215 220 5.5% due 03/01/17 ....................................... 131 135 5.5% due 06/01/17 ....................................... 196 200 5.5% due 01/01/18 ....................................... 257 263 5.5% due 01/01/18 ....................................... 118 121 5.5% due 02/01/23 ....................................... 501 508 5.5% due 04/01/32 ....................................... 141 141 5.5% due 01/01/33 ....................................... 742 742 5.5% due 02/01/33 ....................................... 864 863 5.5% due 04/01/33 ....................................... 975 974 5.5% due 06/01/33 ....................................... 405 404 5.5% due 12/01/33 ....................................... 280 280 5.5% due 01/01/34 ....................................... 373 373 5.5% due 02/01/34 ....................................... 484 483 5.5% due 05/01/34 ....................................... 250 249 6.0% due 08/01/14 ....................................... 65 68 6.0% due 10/01/14 ....................................... 164 171 6.0% due 07/01/16 ....................................... 122 127 6.0% due 11/01/16 ....................................... 67 70 6.0% due 02/01/17 ....................................... 143 150 6.0% due 02/01/17 ....................................... 131 137 6.0% due 06/01/22 ....................................... 134 139 6.0% due 05/01/29 ....................................... 187 192 6.0% due 08/01/29 ....................................... 110 113 6.0% due 07/01/31 ....................................... 102 104 6.0% due 01/01/32 ....................................... 119 122 6.0% due 02/01/32 ....................................... 326 333 6.0% due 02/01/32 ....................................... 292 299 6.0% due 11/01/32 ....................................... $ 649 $ 663 6.0% due 12/01/32 ....................................... 434 445 6.0% due 02/01/33 ....................................... 250 255 6.0% due 11/01/33 ....................................... 225 230 6.0% due 01/01/34 ....................................... 191 195 6.5% due 11/01/15 ....................................... 33 35 6.5% due 07/01/16 ....................................... 76 81 6.5% due 11/01/16 ....................................... 121 127 6.5% due 05/01/17 ....................................... 63 66 6.5% due 01/01/21 ....................................... 39 41 6.5% due 06/01/21 ....................................... 139 146 6.5% due 09/01/28 ....................................... 49 51 6.5% due 06/01/29 ....................................... 8 9 6.5% due 07/01/29 ....................................... 16 17 6.5% due 07/01/29 ....................................... 118 124 6.5% due 11/01/30 ....................................... 54 56 6.5% due 12/01/30 ....................................... 38 40 6.5% due 03/01/31 ....................................... 180 188 6.5% due 05/01/31 ....................................... 186 194 6.5% due 05/01/31 ....................................... 44 46 6.5% due 07/01/31 ....................................... 23 25 6.5% due 11/01/31 ....................................... 113 118 6.5% due 11/01/31 ....................................... 83 87 6.5% due 12/01/31 ....................................... 323 337 6.5% due 04/01/32 ....................................... 94 98 6.5% due 05/01/32 ....................................... 33 34 6.5% due 08/01/32 ....................................... 150 156 6.5% due 08/01/32 ....................................... 177 185 6.5% due 08/01/32 ....................................... 92 96 6.5% due 08/01/32 ....................................... 164 171 7.0% due 02/01/16 ....................................... 53 56 7.0% due 04/01/17 ....................................... 202 215 7.0% due 04/01/29 ....................................... 160 170 7.0% due 02/01/30 ....................................... 92 98 7.0% due 04/01/31 ....................................... 20 21 7.0% due 05/01/31 ....................................... 20 21 7.0% due 05/01/31 ....................................... 26 28 7.0% due 07/01/31 ....................................... 33 35 7.0% due 08/01/31 ....................................... 77 81 7.0% due 04/01/32 ....................................... 163 172 7.1% due 04/10/07 ....................................... 2,500 2,744 7.5% due 02/01/16 ....................................... 18 19 7.5% due 09/01/30 ....................................... 13 14 7.5% due 11/01/30 ....................................... 66 71 7.5% due 03/01/32 ....................................... 130 140 8.0% due 02/01/30 ....................................... 38 41 8.0% due 09/01/30 ....................................... 35 38 8.5% due 10/01/31 ....................................... 44 48 Federal Home Loan Mortgage Corp. - Debs. 5.75% due 04/15/08 ...................................... 2,500 2,668 6.0% due 06/15/11 ....................................... 1,000 1,074 6.25% due 07/15/32 ...................................... 400 421 7.0% due 07/15/05 ....................................... 4,855 5,089 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued Federal Home Loan Mortgage Corp. - Notes 2.75% due 08/15/06 ...................................... $1,300 $1,291 4.0% due 05/01/09 ....................................... 140 140 5.0% due 11/01/07 ....................................... 98 100 5.0% due 10/01/09 ....................................... 109 111 6.0% due 01/01/09 ....................................... 80 82 Federal National Mortgage Assoc. - Bonds 4.0% due 09/01/18 ....................................... 204 194 4.0% due 12/01/18 ....................................... 332 317 4.0% due 04/01/19 ....................................... 100 95 4.5% due 04/01/18 ....................................... 587 575 4.5% due 05/01/18 ....................................... 987 968 4.5% due 10/01/18 ....................................... 803 787 4.5% due 12/01/18 ....................................... 797 781 4.5% due 09/01/33 ....................................... 216 203 4.5% due 10/01/33 ....................................... 534 500 5.0% due 12/01/17 ....................................... 432 434 5.0% due 04/01/18 ....................................... 858 862 5.0% due 06/01/18 ....................................... 408 410 5.0% due 03/01/23 ....................................... 917 920 5.0% due 08/01/23 ....................................... 580 574 5.0% due 11/01/32 ....................................... 445 432 5.0% due 06/01/33 ....................................... 400 388 5.0% due 06/01/33 ....................................... 653 633 5.0% due 08/01/33 ....................................... 1,227 1,189 5.0% due 09/01/33 ....................................... 809 784 5.0% due 09/01/33 ....................................... 1,071 1,038 5.0% due 12/01/33 ....................................... 624 605 5.0% due 05/01/34 ....................................... 400 387 5.5% due 03/01/16 ....................................... 48 49 5.5% due 04/01/16 ....................................... 34 35 5.5% due 02/01/17 ....................................... 242 248 5.5% due 04/01/17 ....................................... 145 148 5.5% due 07/01/17 ....................................... 258 265 5.5% due 09/01/17 ....................................... 200 205 5.5% due 09/01/17 ....................................... 224 230 5.5% due 02/01/23 ....................................... 386 391 5.5% due 01/01/32 ....................................... 662 662 5.5% due 01/01/32 ....................................... 93 93 5.5% due 12/01/32 ....................................... 463 462 5.5% due 02/01/33 ....................................... 482 482 5.5% due 03/01/33 ....................................... 395 394 5.5% due 04/01/33 ....................................... 945 944 5.5% due 04/01/33 ....................................... 790 788 5.5% due 06/01/33 ....................................... 1,126 1,124 5.5% due 06/25/33 ....................................... 400 399 5.5% due 08/01/33 ....................................... 1,570 1,567 5.5% due 12/01/33 ....................................... 691 689 5.5% due 12/01/33 ....................................... 220 220 5.5% due 01/01/34 ....................................... 782 780 5.5% due 06/01/34 ....................................... 140 140 6.0% due 05/01/14 ....................................... 37 39 6.0% due 02/01/16 ....................................... 93 97 6.0% due 07/01/17 ....................................... $ 400 $ 417 6.0% due 08/01/17 ....................................... 178 186 6.0% due 01/01/29 ....................................... 183 188 6.0% due 08/01/30 ....................................... 231 237 6.0% due 07/01/31 ....................................... 95 99 6.0% due 11/01/31 ....................................... 270 277 6.0% due 01/01/32 ....................................... 334 342 6.0% due 02/01/32 ....................................... 119 122 6.0% due 03/01/32 ....................................... 205 210 6.0% due 03/01/32 ....................................... 158 161 6.0% due 04/01/32 ....................................... 199 203 6.0% due 10/01/32 ....................................... 384 392 6.0% due 12/01/32 ....................................... 211 215 6.0% due 04/01/33 ....................................... 318 325 6.0% due 05/01/33 ....................................... 590 603 6.0% due 02/01/34 ....................................... 254 259 6.125% due 03/15/12 ..................................... 1,000 1,078 6.5% due 02/01/15 ....................................... 39 41 6.5% due 07/01/16 ....................................... 48 51 6.5% due 07/01/16 ....................................... 216 229 6.5% due 07/01/17 ....................................... 86 90 6.5% due 03/01/22 ....................................... 207 216 6.5% due 11/01/29 ....................................... 80 83 6.5% due 12/01/30 ....................................... 54 56 6.5% due 01/01/31 ....................................... 6 7 6.5% due 02/01/31 ....................................... 19 20 6.5% due 02/01/31 ....................................... 18 19 6.5% due 02/01/31 ....................................... 78 81 6.5% due 07/01/31 ....................................... 65 67 6.5% due 08/01/31 ....................................... 75 78 6.5% due 12/01/31 ....................................... 149 155 6.5% due 02/01/32 ....................................... 184 192 6.5% due 04/01/32 ....................................... 242 252 6.5% due 04/01/32 ....................................... 60 62 6.5% due 04/01/32 ....................................... 103 107 6.5% due 04/01/32 ....................................... 94 98 6.5% due 05/01/32 ....................................... 43 45 6.5% due 05/01/32 ....................................... 595 620 6.5% due 07/01/32 ....................................... 236 246 6.5% due 07/01/32 ....................................... 241 251 7.0% due 12/01/15 ....................................... 69 73 7.0% due 03/01/16 ....................................... 61 64 7.0% due 01/01/30 ....................................... 71 75 7.0% due 02/01/31 ....................................... 101 107 7.0% due 04/01/31 ....................................... 19 20 7.0% due 05/01/31 ....................................... 97 103 7.0% due 08/01/31 ....................................... 155 163 7.0% due 12/01/31 ....................................... 201 212 7.0% due 02/01/32 ....................................... 121 128 7.0% due 05/01/32 ....................................... 72 76 7.0% due 10/01/32 ....................................... 142 150 7.125% due 01/15/30 ..................................... 559 651 7.25% due 05/15/30 ...................................... 150 177 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 7.5% due 10/01/15 ....................................... $ 61 $ 65 7.5% due 09/01/30 ....................................... 68 72 7.5% due 09/01/30 ....................................... 61 65 7.5% due 11/01/30 ....................................... 16 17 7.5% due 06/01/31 ....................................... 86 93 7.5% due 06/01/31 ....................................... 38 40 7.5% due 08/01/31 ....................................... 110 118 8.0% due 08/01/30 ....................................... 31 34 8.0% due 09/01/31 ....................................... 155 168 8.5% due 09/01/30 ....................................... 34 37 Federal National Mortgage Assoc. - Debs. 6.25% due 05/15/29 ...................................... 1,165 1,226 6.375% due 06/15/09 ..................................... 800 875 6.625% due 11/15/30 ..................................... 130 143 Federal National Mortgage Assoc. - Notes 4.0% due 11/01/10 ....................................... 417 408 5.0% due 01/15/07 ....................................... 400 416 5.5% due 01/01/09 ....................................... 91 93 6.0% due 10/01/12 ....................................... 110 114 6.625% due 09/15/09 ..................................... 750 830 Government National Mortgage Assoc. - Bonds 4.5% due 05/15/19 ....................................... 100 98 4.5% due 08/15/33 ....................................... 191 180 5.0% due 05/15/18 ....................................... 195 197 5.0% due 08/15/33 ....................................... 466 453 5.0% due 09/15/33 ....................................... 186 181 5.0% due 10/15/33 ....................................... 190 184 5.0% due 10/15/33 ....................................... 289 280 5.5% due 11/15/32 ....................................... 990 991 5.5% due 03/15/33 ....................................... 447 447 5.5% due 04/15/33 ....................................... 378 378 5.5% due 09/15/33 ....................................... 384 384 5.5% due 06/15/34 ....................................... 175 175 6.0% due 04/15/17 ....................................... 114 120 6.0% due 07/15/29 ....................................... 153 158 6.0% due 05/15/31 ....................................... 205 211 6.0% due 04/15/32 ....................................... 251 258 6.0% due 11/15/32 ....................................... 462 475 6.0% due 01/15/33 ....................................... 243 250 6.0% due 11/15/33 ....................................... 303 311 6.0% due 01/15/34 ....................................... 145 149 6.5% due 01/15/16 ....................................... 36 38 6.5% due 05/15/28 ....................................... 203 213 6.5% due 04/15/31 ....................................... 95 100 6.5% due 05/15/31 ....................................... 77 80 6.5% due 05/15/31 ....................................... 162 170 6.5% due 08/15/31 ....................................... 144 150 6.5% due 01/15/32 ....................................... 255 266 6.5% due 05/15/32 ....................................... 146 153 6.5% due 05/15/32 ....................................... 77 81 7.0% due 08/15/29 ....................................... 101 108 7.0% due 12/15/30 ....................................... 212 225 7.0% due 03/15/31 ....................................... 251 267 7.0% due 06/15/31 ....................................... $ 42 $ 44 7.0% due 08/15/31 ....................................... 77 82 7.0% due 09/15/31 ....................................... 134 142 7.0% due 05/15/32 ....................................... 99 105 7.5% due 08/15/29 ....................................... 104 112 7.5% due 09/15/30 ....................................... 73 78 7.5% due 01/15/31 ....................................... 13 14 7.5% due 06/15/32 ....................................... 170 183 8.0% due 02/15/31 ....................................... 119 131 8.0% due 04/15/31 ....................................... 79 87 8.0% due 07/15/31 ....................................... 5 6 8.5% due 09/15/30 ....................................... 7 8 9.0% due 01/15/31 ....................................... 27 29 ------- 88,494 U.S. Governmental - 20.7% U.S. Treasury - Bonds 5.375% due 02/15/31 ..................................... 645 651 5.5% due 08/15/28 ....................................... 270 274 6.125% due 11/15/27 ..................................... 520 570 6.125% due 08/15/29 ..................................... 100 110 6.25% due 05/15/30 ...................................... 1,850 2,071 6.5% due 11/15/26 ....................................... 300 343 6.625% due 02/15/27 ..................................... 295 342 6.75% due 08/15/26 ...................................... 775 911 7.5% due 11/15/16 ....................................... 1,250 1,541 7.875% due 02/15/21 ..................................... 900 1,162 8.125% due 08/15/19 ..................................... 1,000 1,310 8.75% due 08/15/20 ...................................... 1,400 1,939 8.875% due 08/15/17 ..................................... 1,450 1,987 9.25% due 02/15/16 ...................................... 800 1,111 10.375% due 11/15/12 .................................... 4,800 5,861 11.25% due 02/15/15 ..................................... 260 401 11.75% due 02/15/10 ..................................... 250 265 11.75% due 11/15/14 ..................................... 465 639 12.0% due 08/15/13 ...................................... 1,000 1,320 12.75% due 11/15/10 ..................................... 1,000 1,138 13.25% due 05/15/14 ..................................... 1,200 1,699 U.S. Treasury - Notes 1.25% due 05/31/05 ...................................... 100 99 2.0% due 05/15/06 ....................................... 200 198 3.25% due 08/15/07 ...................................... 525 526 3.375% due 12/15/08 ..................................... 1,000 987 4.25% due 08/15/13 ...................................... 400 390 4.625% due 05/15/06 ..................................... 300 311 4.75% due 11/15/08 ...................................... 1,700 1,775 4.75% due 05/15/14 ...................................... 750 758 5.0% due 02/15/11 ....................................... 1,100 1,151 5.0% due 08/15/11 ....................................... 2,685 2,803 5.5% due 02/15/08 ....................................... 500 535 6.0% due 08/15/09 ....................................... 500 549 6.5% due 10/15/06 ....................................... 3,550 3,832 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Governmental - Continued 7.0% due 07/15/06 ..................................... $ 1,450 $ 1,571 -------- 41,130 Wireless Telecommunications Services - 0.2% Alltel Corp. - Sr. Notes 7.6% due 04/01/09 ..................................... 100 113 AT&T Wireless, Inc. - Notes 7.875% due 03/01/11 ................................... 300 341 -------- 454 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $192,378) 97.4% 193,480 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 25.7% State Street Navigator Securities Lending Portfolio ... 51,182 51,182 SHORT-TERM INVESTMENTS - 1.7% Investment in joint trading account 1.344% due 07/01/04 (Cost $3,357) ......................................... 3,357 3,357 ------- -------- TOTAL INVESTMENTS- (Cost $246,917) 124.8% 248,019 Payables, less cash and receivables- (24.8)% (49,289) ------- -------- NET ASSETS- 100.% $198,730 ======= ======== See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Bond Index Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued 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 interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York . These agreements enable the Fund to participipate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For the period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times wih cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $50,439 $51,182 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 investment 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of it's fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $100 Million and Excess Over First $100 Million $250 Million $250 Million ------------------ ---------------- ------------ 0.15% 0.13% 0.11% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $21 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Standish Mellon Asset Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $20,300 $20,482 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ ------------- $262,513 $6,719 $(987) $5,732 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and premium amortization and market discount accretion on debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $-- $5,732 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $9,830 $1,105 $689 2002 9,249 179 217 Inception: May 1, 1996 -------------------------------------------------------------------------------- Earnings Growth Fund Fidelity Management & Research Company Joseph Day -------------------------------------------------------------------------------- . Year to date, the Fund returned 1.71%, underperforming its benchmark, the Russell 1000 Growth Index. Relative to Morningstar peers, the Fund has a below average rating of 1 with an average risk profile. . The Fund underperformed its benchmark primarily due to unfavorable security selection, especially in the information technology and telecom sectors. . The Fund's exposure to the consumer staples and industrial sectors were the largest contributors to absolute performance, while exposure to the information technology sector was the largest detractor. . The manager employs a bottom-up, research approach to identify companies with above average, long term growth potential and that are reasonably priced. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Microsoft Corp. 5.4% Pfizer, Inc. 5.4% Cisco Systems, Inc. 3.0% General Electric Co. 3.0% Intel Corp. 2.7% Merck & Co., Inc. 2.6% Gillette Co. 2.3% Johnson & Johnson 2.3% Procter & Gamble Co. 2.1% Wal-Mart Stores, Inc. 2.1% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Earnings Earnings Growth Growth Fund Benchmark/1/ ----------- --------------- YTD/3/ 1.71% 2.74% 1 Year 14.88 17.89 3 Years -10.30 -2.84 5 Years -9.81 -1.37 Since Inception (5/1/96) 2.90 6.09 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Growth MORNINGSTAR RISK/1/: . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . * (VL/VUL) . * (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 26% Health Care 24% Consumer Staples 15% Consumer Discretionary 11% Industrials 10% Financials 7% Energy 5% Telecommunication Services 2% Materials 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 1,143 VL/VUL subaccounts and 2,144 VA subaccounts in the Morningstar Large Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represents past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Earnings Growth Benchmark represents the Russell Mid Cap Growth Index from May 1996 to April 2002 and then the Russell 1000 Growth Index from May 2002-present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $7,741 of securities loaned (Note B)) ............................................... $ 162,694 Net unrealized appreciation of investments ........................ 27,744 Short-term investments at value ................................... 8,540 --------- Total investments ........................................... 198,978 Receivable for: Investments sold ............................................... 3,485 Dividends ...................................................... 155 --------- Total assets ...................................................... 202,618 --------- LIABILITIES Payables for: Investments purchased .......................................... 1,757 Collateral for securities on loan .............................. 7,815 Accrued operating expenses ..................................... 12 Other liabilities .............................................. 1 --------- Total liabilities ................................................. 9,585 --------- Net assets ........................................................ $ 193,033 ========= Shares outstanding, $0.01 Par Value (unlimited shares authorized) .................................................... 23,257 --------- Net asset value per share ......................................... $ 8.30 ========= Composition of net assets: Capital paid-in ................................................ $ 477,418 Accumulated net realized loss on investments, futures and foreign currency transactions ............................... (312,131) Undistributed net investment income ............................ 2 Net unrealized appreciation of investments ..................... 27,744 --------- Net assets ........................................................ $ 193,033 ========= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 12 Dividends (net of foreign withholding tax of $1) ................. 1,110 Securities lending ............................................... 26 ------- Total investment income ............................................. 1,148 ------- EXPENSES Investment advisory fee .......................................... 919 Auditors fees .................................................... 13 Custodian fees ................................................... 30 Legal fees ....................................................... 12 Printing & mailing fees .......................................... 16 Trustees' fees ................................................... 3 Other fees ....................................................... 3 ------- Total expenses ...................................................... 996 Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (8) ------- Net expenses ........................................................ 988 ------- Net investment income ............................................... 160 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................. 4,851 Change in unrealized depreciation on investments ................. (1,750) ------- Net realized and unrealized gain .................................... 3,101 ------- Net increase in net assets resulting from operations ................ $ 3,261 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 160 $ 301 Net realized gain ......................................... 4,851 2,598 Change in net unrealized appreciation (depreciation) ...... (1,750) 36,150 --------- -------- Net increase in net assets resulting from operations ... 3,261 39,049 Distributions to shareholders from: Net investment income ..................................... (158) (108) Realized gains ............................................ (3,020) --------- -------- Decrease in net assets resulting from distributions .... (158) (3,128) From fund share transactions: Proceeds from shares sold ................................. 17,982 40,423 Distributions reinvested .................................. 158 3,128 Payment for shares redeemed ............................... (24,575) (42,966) --------- -------- Increase (decrease) in net assets from fund share transactions ........................................ (6,435) 585 --------- -------- NET INCREASE (DECREASE) IN NET ASSETS ........................ (3,332) 36,506 NET ASSETS Beginning of Period ....................................... 196,365 159,859 --------- -------- End of Period (including undistributed net investment income of $2 and $0, respectively) ..................... $ 193,033 $196,365 ========= ======== Analysis of fund share transactions: Sold ...................................................... 2,176 5,521 Reinvested ................................................ 19 388 Redeemed .................................................. (2,980) (5,896) --------- -------- Net increase (decrease) in fund shares outstanding ........... (785) 13 ========= ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Earnings Growth Fund ----------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, ---------------------------------------------- 2004 2003(c) 2002 2001 2000 ---------------- -------- -------- -------- -------- Net Assets Value at Beginning of Period ............... $ 8.17 $ 6.65 $ 9.84 $ 15.60 $ 29.22 Income from Investment Operations: Net Investment Income (Loss) ....................... 0.01 (0.04) (0.06) (0.05) Net Realized and Unrealized Gain (Loss) on Investment(a) ................................ 0.14 1.64 (3.15) (5.70) (10.49) -------- -------- -------- -------- -------- Total From Investment Operations ................... 0.14 1.65 (3.19) (5.76) (10.54) Less Distributions: Distribution from Net Investment Income ............ (0.01) Distribution from Net Realized Gains on Investments ..................................... (0.13) (0.41) Distribution from Excess of Net Investment Income/Gains .................................... (1.61) Distribution from Capital Paid-in .................. (1.06) -------- -------- -------- -------- -------- Total Distributions ................................ (0.01) (0.13) (3.08) -------- -------- -------- -------- -------- Net Assets Value at End of Period ..................... 8.30 $ 8.17 $ 6.65 $ 9.84 $ 15.60 ======== ======== ======== ======== ======== Total Investment Return(b) ............................ 1.71%(f) 24.80% (32.39)% (36.93)% (35.86)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets 1.04%(e)(g) 1.05%(d) 1.04% 0.94% 0.85% Ratio of Net Investment Income (Loss) to Average Net Assets .............................. 0.17%(g) 0.17% (0.42)% (0.49)% (0.43)% Portfolio Turnover Rate ............................ 13.96%(f) 124.28% 192.54% 111.69% 140.94% Net Assets End of Period (000's Omitted) .............. $193,033 $196,365 $159,859 $245,899 $393,988
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Fidelity Management Company during the period shown. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.07% for the years ended December 31, 2003. (e) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (f) Not annualized. (g) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 0.8% Boeing Co. * ............................................ 26,900 $1,374 Precision Castparts Corp. ............................... 4,300 235 ------ 1,609 Air Freight & Couriers - 1.0% United Parcel Service, Inc. - Cl. B ..................... 26,300 1,977 Auto Components - 0.2% Gentex Corp. * .......................................... 8,500 337 Banks - 0.9% Bank of America Corp. * ................................. 10,500 888 Bank One Corp. * ........................................ 12,000 612 Silicon Valley Bancshares * ............................. 5,800 230 ------ 1,730 Beverages - 2.6% Coca-Cola Co. * ......................................... 55,200 2,786 PepsiCo, Inc. * ......................................... 42,500 2,290 ------ 5,076 Biotechnology - 2.1% Amgen, Inc. * ........................................... 16,100 879 Biogen IDEC, Inc. * ..................................... 10,800 683 Cephalon, Inc. * ........................................ 7,000 378 Genetech, Inc. * ........................................ 32,200 1,810 Millennium Pharmaceuticals, Inc. * ...................... 22,200 306 ------ 4,056 Chemicals - 0.3% Praxair, Inc. * ......................................... 15,300 611 Commercial Services & Supplies - 3.2% Automatic Data Processing, Inc. ......................... 33,800 1,415 Avery Dennison Corp. * .................................. 6,400 410 Career Education Corp. * ................................ 8,200 374 First Data Corp. * ...................................... 38,300 1,705 Herman Miller, Inc. * ................................... 13,900 402 Paychex, Inc. ........................................... 23,400 793 Waste Management, Inc. * ................................ 33,200 1,018 ------ 6,117 Communications Equipment - 3.4% Cisco Systems, Inc. * ................................... 243,115 5,762 Qualcomm, Inc. * ........................................ 11,000 803 ------ 6,565 Computers & Peripherals - 3.6% Dell, Inc. * ............................................ 82,600 2,959 EMC Corp. * ............................................. 114,100 1,301 International Business Machines Corp. ................... 29,500 2,600 ------ 6,860 Diversified Financials - 3.3% American Express Co. * .................................. 37,000 1,901 Charles Schwab Corp. * .................................. 26,000 250 Citigroup, Inc. * ....................................... 28,403 $1,321 Federal National Mortgage Assoc. * ...................... 18,809 1,342 MBNA Corp. * ............................................ 30,300 782 Morgan Stanley, Dean Witter, Discover & Co. ............. 14,900 786 ------ 6,382 Diversified Telecommunication Services - 1.9% Qwest Communications International, Inc. ................ 64,500 232 SBC Communications, Inc. * .............................. 62,500 1,516 Verizon Communications * ................................ 54,500 1,972 ------ 3,720 Electronic Equipment & Instruments - 0.8% Amphenol Corp. - Cl. A * ................................ 6,200 207 Molex, Inc. * ........................................... 13,200 424 Thermo Electron Corp. * ................................. 16,500 507 Waters Corp. * .......................................... 8,400 401 ------ 1,539 Energy Equipment & Services - 4.6% Baker Hughes, Inc. * .................................... 54,800 2,063 BJ Services Co. * ....................................... 36,900 1,691 Nabors Industries, Ltd. * ............................... 45,800 2,071 Rowan Cos., Inc. * ...................................... 18,900 460 Schlumberger, Ltd. * .................................... 28,100 1,785 Transocean Sedco Forex, Inc. * .......................... 12,100 350 Weatherford Bermuda * ................................... 9,600 432 ------ 8,852 Food & Drug Retailing - 1.5% Safeway, Inc. * ......................................... 35,200 892 Sysco Corp. * ........................................... 19,600 703 Walgreen Co. * .......................................... 38,700 1,401 ------ 2,996 Food Products - 1.6% ConAgra, Inc. ........................................... 29,000 785 Hershey Foods Corp. * ................................... 14,800 685 J.M. Smucker Co. * ...................................... 19,400 891 Kellogg Co. * ........................................... 16,100 674 ------ 3,035 Health Care Equipment & Supplies - 3.4% Alcon, Inc. * ........................................... 7,200 566 Bausch & Lomb, Inc. * ................................... 3,400 221 Baxter International, Inc. .............................. 34,800 1,201 Becton, Dickinson & Co. * ............................... 14,500 751 Boston Scientific Corp. * ............................... 15,700 672 Medtronic, Inc. * ....................................... 54,980 2,679 St. Jude Medical, Inc. * ................................ 6,200 469 ------ 6,559 Health Care Providers & Services - 2.7% Cardinal Health, Inc. * ................................. 19,647 1,376 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Health Care Providers & Services - Continued Health Management Assoc., Inc. - Cl. A * ................ 28,800 $ 646 McKesson HBOC, Inc. ..................................... 12,700 436 Quest Diagnostics, Inc. * ............................... 5,800 493 UnitedHealth Group, Inc. * .............................. 36,980 2,302 ------- 5,253 Hotels Restaurants & Leisure - 0.3% McDonald's Corp. * ...................................... 21,600 562 Household Durables - 0.3% Leggett & Platt, Inc. * ................................. 22,700 606 Household Products - 3.4% Clorox Co. * ............................................ 20,400 1,097 Colgate-Palmolive Co. ................................... 23,500 1,373 Procter & Gamble Co. * .................................. 73,800 4,018 ------- 6,488 Industrial Conglomerates - 5.4% 3M Co. .................................................. 38,600 3,474 General Electric Co. * .................................. 177,800 5,761 Tyco International, Ltd. * .............................. 37,700 1,249 ------- 10,484 Insurance - 2.6% AFLAC, Inc. * ........................................... 25,170 1,027 Ambac Financial Group, Inc. ............................. 7,700 565 American International Group, Inc. * .................... 49,000 3,493 ------- 5,085 Internet & Catalog Retail - 1.3% Amazon.com, Inc. * ...................................... 30,010 1,633 eBay, Inc. * ............................................ 9,800 901 ------- 2,534 Internet Software & Services - 0.6% Yahoo, Inc. * ........................................... 34,600 1,257 IT Consulting & Services - 0.4% Affiliated Computer Services, Inc. - Cl. A * ............ 14,100 746 Machinery - 1.2% Danaher Corp. * ......................................... 23,800 1,234 Dover Corp. ............................................. 9,800 413 Parker-Hannifin Corp. ................................... 10,500 624 ------- 2,271 Media - 4.3% Clear Channel Communications, Inc. ...................... 21,500 794 Comcast Corp. - Cl. A ................................... 35,700 1,001 EchoStar Communications Corp. - Cl. A * ................. 5,025 155 Fox Entertainment Group, Inc. - Cl. A * ................. 25,800 689 Omnicom Group, Inc. ..................................... 9,700 736 The Walt Disney Co. * ................................... 51,400 1,310 Time Warner, Inc. * ..................................... 129,651 2,279 Univision Communications, Inc. - Cl. A * ................ 18,500 591 Viacom, Inc. - Cl. B * .................................. 20,700 $ 739 ------- 8,294 Multiline Retail - 2.8% Big Lots, Inc. * ........................................ 50,600 732 J.C. Penney Co., Inc. * ................................. 17,600 664 Wal-Mart Stores, Inc. * ................................. 75,000 3,957 ------- 5,353 Oil & Gas - 0.4% Exxon Mobil Corp. * ..................................... 18,400 817 Personal Products - 3.1% Avon Products, Inc. ..................................... 35,660 1,645 Gillette Co. ............................................ 102,900 4,363 ------- 6,008 Pharmaceuticals - 15.3% Abbott Laboratories * ................................... 59,900 2,442 Allergan, Inc. * ........................................ 10,000 895 Eli Lilly & Co. * ....................................... 13,925 973 Forest Laboratories, Inc. * ............................. 13,230 749 Johnson & Johnson ....................................... 78,100 4,350 Merck & Co., Inc. * ..................................... 102,500 4,869 Pfizer, Inc. * .......................................... 302,124 10,357 Schering-Plough Corp. * ................................. 136,300 2,519 Wyeth * ................................................. 63,900 2,311 ------- 29,465 Semiconductor Equipment & Products - 8.0% Altera Corp. * .......................................... 47,600 1,058 Analog Devices, Inc. * .................................. 52,000 2,448 Applied Materials, Inc. * ............................... 76,095 1,493 Intel Corp. ............................................. 183,300 5,059 KLA-Tencor Corp. * ...................................... 16,045 792 Linear Technology Corp. * ............................... 13,500 533 Texas Instruments, Inc. * ............................... 121,475 2,937 Xilinx, Inc. * .......................................... 31,900 1,063 ------- 15,383 Software - 7.1% BEA Systems, Inc. * ..................................... 111,300 915 Cadence Design Systems, Inc. * .......................... 27,400 401 Intuit, Inc. * .......................................... 21,000 810 Microsoft Corp. * ....................................... 363,210 10,373 Oracle Corp. * .......................................... 98,400 1,174 ------- 13,673 Specialty Retail - 2.7% Gap, Inc. ............................................... 47,000 1,140 Home Depot, Inc. * ...................................... 65,700 2,313 Lowe's Cos., Inc. * ..................................... 13,600 715 Sherwin-Williams Co. * .................................. 11,000 457 Staples, Inc. * ......................................... 21,200 621 ------- 5,246 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------ -------- (000's) COMMON STOCK - Continued Textiles & Apparel - 0.8% Nike, Inc. - Cl. B ...................................... 19,600 $ 1,485 Tobacco - 0.3% Altria Group, Inc. ...................................... 11,600 581 Wireless Telecommunications Services - 0.4% Nextel Communications, Inc. - Cl. A * ................... 31,000 826 -------- TOTAL COMMON STOCK- (Cost $162,694) 98.6% 190,438 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 4.1% State Street Navigator Securities Lending Portfolio .. $7,815 7,815 SHORT-TERM INVESTMENTS - 0.4% Investment in joint trading account 1.344% due 07/01/04 (Cost $725) ....................................... 725 725 ------ -------- TOTAL INVESTMENTS- (Cost $171,234) 103.1% 198,978 Payables, less cash and receivables- (3.1)% (5,945) ------ -------- NET ASSETS- 100.0% $193,033 ====== ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Earnings Growth Fund, (formerly Multi Cap Growth), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $7,741 $7,815 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 June 30, 2004 the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $207,299, $105,946 and $2,956 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $1. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $100 Million $100 Million ------------------ ------------ 1.00% 0.90% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $8. John Hancock has entered into a Sub-Advisory Agreement with Fidelity Management & Research Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $26,717 $30,458 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $215,297 $30,476 $(1,764) $28,712 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends paid deduction on it's federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $316,201 $28,712 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $118 $-- $3,010 2002 -- -- -- Inception: May 1, 1996 -------------------------------------------------------------------------------- Equity Index Fund SSgA Funds Management, Inc. J. Tucker/J. May -------------------------------------------------------------------------------- . Year to date, the Fund returned 3.34%, underperforming its benchmark, the S&P 500 Index. Relative to Morningstar peers, the Fund has an average rating of 3 with an average / above average risk profile. . The Fund underperformed its benchmark primarily due to investment management fees. . The Fund continues to meet its investment objective to closely track the performance of the S&P 500 Index, which covers the broad U.S. equity market. . The manager attempts to track the performance of the Index by using a full replication strategy in which the Fund invests in each security at the weight represented within the index. The Fund is broadly diversified across sectors with sector weights similar to the benchmark. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- General Electric Co. 3.2% Microsoft Corp. 2.9% Exxon Mobil Corp. 2.7% Pfizer, Inc. 2.5% Citigroup, Inc. 2.3% Wal-Mart Stores, Inc. 2.1% American International Group, Inc. 1.8% Intel Corp. 1.7% Bank of America Corp. 1.6% Johnson & Johnson 1.6% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Equity Index S&P 500(R) Fund/4/ Index/5/ ------------ ---------- YTD/3/ 3.34% 3.44% 1 Year 18.85 19.10 3 Years -0.90 -0.70 5 Years -2.35 -2.20 Since Inception (5/1/96) 8.48 8.75 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Blend MORNINGSTAR RISK/2/: . Above Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 20% Information Technology 17% Health Care 13% Industrials 12% Consumer Discretionary 11% Consumer Staples 11% Energy 7% TelecommunicationServices 3% Materials 3% Utilities 3% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts. Hancock VL/VUL subaccounts were rated against 1,110 VL/VUL subaccounts and 1,932 VA subaccounts in the Morningstar Large Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ Returns reflect waiver of advisory fee, reimbursement of all non-advisory fund expenses, and extra-ordinary capital contributions of $84,000 in 1996 and $250,000 in 1997. /5/ "Standard & Poor's 500(R)" is a trademark of McGraw-Hill Companies, Inc. and has been licensed for use by John Hancock Life Insurance Company. The product is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the product. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $731,480 Net unrealized depreciation of investments ......................... (32,522) Short-term investments at value .................................... 20,788 -------- Total investments ............................................ 719,746 Receivable for: Dividends ....................................................... 786 Futures contracts variation margin .............................. 86 Other receivables ............................................... 68 -------- Total assets ....................................................... 720,686 -------- LIABILITIES Payables for: Accrued operating expenses ...................................... 203 Other payables .................................................. 24 Other liabilities ............................................... 3 -------- Total liabilities .................................................. 230 -------- Net assets ......................................................... $720,456 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 49,494 -------- Net asset value per share .......................................... $ 14.56 ======== Composition of net assets: Capital paid-in ................................................. $784,188 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (31,409) Undistributed net investment income ............................. 74 Net unrealized appreciation (depreciation) of: Investments .................................................. (32,522) Futures ...................................................... 125 -------- Net assets ......................................................... $720,456 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 126 Dividends ....................................................... 5,619 -------- Total investment income ............................................ 5,745 -------- EXPENSES Investment advisory fee ......................................... 467 Auditors fees ................................................... 43 Custodian fees .................................................. 95 Fidelity Bond fees .............................................. 1 Legal fees ...................................................... 42 Printing & mailing fees ......................................... 56 Trustees' fees .................................................. 12 Other fees ...................................................... 37 -------- Total expenses ..................................................... 753 Less custodian expense reduction offset by commission recapture arrangement (Note C) .................... (24) -------- Net expenses ....................................................... 729 -------- Net investment income .............................................. 5,016 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments .................................................. 830 Financial futures contracts .................................. 1,038 Change in unrealized appreciation (depreciation) on: Investments .................................................. 16,077 Futures ...................................................... (574) -------- Net realized and unrealized gain ................................... 17,371 -------- Net increase in net assets resulting from operations ............... $ 22,387 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income ....................................... $ 5,016 $ 8,718 Net realized gain (loss) .................................... 1,868 (1,233) Change in net unrealized appreciation ....................... 15,503 135,781 -------- -------- Net increase in net assets resulting from operations ..... 22,387 143,266 Distributions to shareholders from: Net investment income ....................................... (4,942) (14,075) Realized gains .............................................. (3,229) -------- -------- Decrease in net assets resulting from distributions ...... (4,942) (17,304) From fund share transactions: Proceeds from shares sold ................................... 96,177 162,921 Distributions reinvested .................................... 4,942 17,304 Payment for shares redeemed ................................. (79,789) (90,764) -------- -------- Increase in net assets from fund share transactions ...... 21,330 89,461 -------- -------- NET INCREASE IN NET ASSETS ..................................... 38,775 215,423 NET ASSETS Beginning of Period ......................................... 681,681 466,258 -------- -------- End of Period (including undistributed net investment income of $74 and $0, respectively) ...................... $720,456 $681,681 ======== ======== Analysis of fund share transactions: Sold ..................................................... 6,664 13,034 Reinvested ............................................... 343 1,303 Redeemed ................................................. (5,572) (7,307) -------- -------- Net increase in fund shares outstanding ........................ 1,435 7,030 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Equity Index Fund ----------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------ 2004 2003 2002 2001 2000 ------------ -------- -------- -------- -------- Net Assets Value at Beginning of Period ........... $ 14.18 $ 11.36 $ 14.85 $ 17.64 $ 20.46 Income from Investment Operations: Net Investment Income .......................... 0.10 0.20 0.16 0.19 0.22 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................... 0.38 3.00 (3.48) (2.30) (2.09) -------- -------- -------- -------- -------- Total From Investment Operations ............... 0.48 3.20 (3.32) (2.11) (1.87) Less Distributions: Distribution from Net Investment Income ........ (0.10) (0.31) (0.11) (0.19) (0.22) Distribution from Net Realized Gains on Investments ................................. (0.07) (0.06) (0.49) (0.72) Distribution from Capital Paid-in .............. (0.01) -------- -------- -------- -------- -------- Total Distributions ............................ (0.10) (0.38) (0.17) (0.68) (0.95) -------- -------- -------- -------- -------- Net Assets Value at End of Period ................. $ 14.56 $ 14.18 $ 11.36 $ 14.85 $ 17.64 ======== ======== ======== ======== ======== Total Investment Return(b) ........................ 3.34%(e) 28.42% (22.31)% (11.98)% (9.15)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...................................... 0.22%(c)(f) 0.21%(c) 0.23% 0.20% 0.19% Ratio of Net Investment Income to Average Net Assets ...................................... 1.43%(f) 1.59% 1.39% 1.20% 1.12% Portfolio Turnover Rate ........................ 4.41%(e) 4.91% 10.63% 17.61%(d) 34.11% Net Assets End of Period (000's Omitted) .......... $720,456 $681,681 $466,258 $538,791 $525,659
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (d) Excludes merger activity. (e) Not annualized. (f) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.7% B.F. Goodrich Co. * ..................................... 8,450 $ 273 Boeing Co. * ............................................ 55,237 2,822 General Dynamics Corp. * ................................ 13,292 1,320 Lockheed Martin Corp. ................................... 30,232 1,575 Northrop Grumman Corp. .................................. 24,200 1,300 Raytheon Co. * .......................................... 29,759 1,064 Rockwell Collins, Inc. * ................................ 11,166 372 United Technologies Corp. * ............................. 34,285 3,136 ------- 11,862 Air Freight & Couriers - 1.0% Fedex Corp. ............................................. 20,014 1,635 Ryder System, Inc. ...................................... 4,988 200 United Parcel Service, Inc. - Cl. B ..................... 74,800 5,622 ------- 7,457 Airlines - 0.1% Delta Air Lines, Inc. * ................................. 6,679 48 Southwest Airlines Co. .................................. 51,958 871 ------- 919 Auto Components - 0.2% Cooper Tire & Rubber Co. * .............................. 5,206 120 Dana Corp. .............................................. 10,930 214 Delphi Automotive Systems Corp. * ....................... 37,483 400 Goodyear Tire & Rubber Co. * ............................ 13,231 120 Johnson Controls, Inc. .................................. 12,750 681 Visteon Corp. * ......................................... 9,756 114 ------- 1,649 Automobiles - 0.7% Ford Motor Co. .......................................... 122,297 1,914 General Motors Corp. * .................................. 37,198 1,733 Harley-Davidson, Inc. * ................................. 19,640 1,216 ------- 4,863 Banks - 6.5% AmSouth Bancorp. * ...................................... 23,039 587 Bank of America Corp. * ................................. 134,945 11,419 Bank of New York Co., Inc. .............................. 51,270 1,512 Bank One Corp. * ........................................ 74,345 3,792 BB&T Corp. * ............................................ 35,737 1,321 Charter One Financial, Inc. ............................. 14,130 624 Comerica, Inc. .......................................... 11,460 629 Fifth Third Bancorp * ................................... 37,691 2,027 First Horizon National Corp. ............................ 8,300 377 Golden West Financial Corp. * ........................... 10,110 1,075 Huntington Bancshares, Inc. * ........................... 15,896 364 JP Morgan Chase & Co. ................................... 135,237 5,243 KeyCorp * ............................................... 27,217 814 M & T Bank Corp. * ...................................... 7,800 681 Marshall & Ilsley Corp. * ............................... 15,100 590 Mellon Financial Corp. * ................................ 28,694 842 National City Corp. * ................................... 40,674 1,424 North Fork Bancorporation, Inc. * ....................... 11,800 $ 449 Northern Trust Corp. .................................... 14,524 614 PNC Bank Corp. * ........................................ 18,620 988 Regions Financial Corp. ................................. 14,831 542 SouthTrust Corp. * ...................................... 21,333 828 Suntrust Banks, Inc. * .................................. 18,625 1,210 Synovus Financial Corp. * ............................... 20,372 516 Union Planters Corp. * .................................. 12,098 361 US Bancorp * ............................................ 124,890 3,442 Wachovia Corp. * ........................................ 87,185 3,880 Zions Bancorp * ......................................... 5,634 346 ------- 46,497 Beverages - 2.6% Adolph Coors Co. - Cl. B * .............................. 2,054 148 Anheuser-Busch Cos., Inc. ............................... 53,005 2,862 Brown-Forman Corp. - Cl. B * ............................ 7,600 367 Coca-Cola Co. * ......................................... 160,517 8,103 Coca-Cola Enterprises, Inc. * ........................... 29,348 851 Pepsi Bottling Group, Inc. * ............................ 16,918 517 PepsiCo, Inc. * ......................................... 112,291 6,050 ------- 18,898 Biotechnology - 1.1% Amgen, Inc. * ........................................... 84,798 4,627 Biogen IDEC, Inc. * ..................................... 21,083 1,334 Chiron Corp. * .......................................... 11,876 530 Genzyme Corp. * ......................................... 15,000 710 MedImmune, Inc. * ....................................... 15,409 361 ------- 7,562 Building Products - 0.2% Crane Co. * ............................................. 4,637 146 Masco Corp. ............................................. 30,469 950 ------- 1,096 Chemicals - 1.5% Air Products & Chemicals, Inc. * ........................ 14,732 773 Dow Chemical Co. * ...................................... 62,048 2,525 E.I. du Pont de Nemours & Co. * ......................... 65,699 2,918 Eastman Chemical Co. * .................................. 5,012 232 Ecolab, Inc. * .......................................... 17,172 544 Engelhard Corp. * ....................................... 8,490 274 Great Lakes Chemical Corp. .............................. 4,273 116 Hercules, Inc. * ........................................ 6,957 85 International Flavors & Fragrances, Inc. * .............. 5,639 211 Monsanto Co. ............................................ 17,136 660 PPG Industries, Inc. * .................................. 11,245 703 Praxair, Inc. * ......................................... 21,514 858 Rohm & Haas Co. ......................................... 14,547 605 Sigma-Aldrich Corp. * ................................... 4,410 263 ------- 10,767 Commercial Services & Supplies - 1.9% Allied Waste Industries, Inc. ........................... 21,697 286 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Commercial Services & Supplies - Continued Apollo Group, Inc. - Cl. A * ............................ 11,800 $ 1,042 Automatic Data Processing, Inc. ......................... 38,608 1,617 Avery Dennison Corp. * .................................. 6,960 445 Cendant Corp. * ......................................... 67,407 1,650 Cintas Corp. * .......................................... 11,446 546 Convergys Corp. * ....................................... 10,749 166 Deluxe Corp. * .......................................... 3,303 144 Equifax, Inc. * ......................................... 8,608 213 First Data Corp. * ...................................... 57,525 2,561 Fiserv, Inc. * .......................................... 12,181 474 H & R Block, Inc. * ..................................... 11,866 566 Monster Worldwide, Inc. ................................. 7,355 189 Paychex, Inc. ........................................... 24,493 830 Pitney Bowes, Inc. * .................................... 14,859 657 R.R. Donnelley & Sons Co. * ............................. 14,071 465 Robert Half International, Inc. * ....................... 11,155 332 Sabre Group Holdings, Inc. * ............................ 9,067 251 Waste Management, Inc. * ................................ 37,567 1,151 ------- 13,585 Communications Equipment - 3.0% ADC Telecommunications, Inc. * .......................... 58,737 167 Andrew Corp. * .......................................... 10,368 207 Avaya, Inc. * ........................................... 29,715 469 Ciena Corp. * ........................................... 44,876 167 Cisco Systems, Inc. * ................................... 445,461 10,557 Comverse Technology, Inc. * ............................. 11,970 239 Corning, Inc. * ......................................... 88,753 1,159 JDS Uniphase Corp. * .................................... 95,191 361 Lucent Technologies, Inc. * ............................. 285,478 1,079 Motorola, Inc. .......................................... 155,589 2,840 Qualcomm, Inc. * ........................................ 53,401 3,897 Scientific-Atlanta, Inc. * .............................. 9,437 326 Tellabs, Inc. * ......................................... 28,695 251 ------- 21,719 Computers & Peripherals - 3.5% Apple Computer, Inc. * .................................. 24,708 804 Dell, Inc. * ............................................ 166,183 5,953 EMC Corp. * ............................................. 159,122 1,814 Gateway, Inc. * ......................................... 22,870 103 Hewlett-Packard Co. * ................................... 200,550 4,232 International Business Machines Corp. ................... 111,027 9,787 Lexmark International Group, Inc. - Cl. A * ............. 8,387 809 NCR Corp. * ............................................. 6,440 319 Network Appliance, Inc. * ............................... 22,373 482 NVIDIA Corp. * .......................................... 11,803 242 Sun Microsystems, Inc. * ................................ 212,926 924 ------- 25,469 Construction & Engineering - 0.1% American Standard Cos., Inc. * .......................... 14,100 568 Construction & Engineering - Continued Fluor Corp. * .... 5,615 $ 268 ------- 836 Construction Materials - 0.1% United States Steel Corp. * ............................. 7,229 254 Vulcan Materials Co. * .................................. 6,447 306 ------- 560 Containers & Packaging - 0.2% Ball Corp. .............................................. 3,380 244 Bemis Co., Inc. * ....................................... 7,554 213 Pactiv Corp. * .......................................... 9,831 245 Sealed Air Corp. * ...................................... 5,318 283 Temple-Inland, Inc. * ................................... 3,472 241 ------- 1,226 Credit Card - 0.3% MBNA Corp. * ............................................ 83,771 2,160 Diversified Financials - 6.9% American Express Co. * .................................. 84,624 4,348 Bear Stearns Cos., Inc. * ............................... 6,569 554 Capital One Financial Corp. ............................. 15,203 1,040 Charles Schwab Corp. * .................................. 90,091 866 Citigroup, Inc. * ....................................... 340,127 15,816 Countrywide Credit Industries, Inc. * ................... 17,844 1,254 E*TRADE Group, Inc. * ................................... 23,900 266 Federated Investments, Inc. - Cl. B ..................... 6,900 209 Franklin Resources, Inc. * .............................. 16,385 821 Goldman Sachs Group, Inc. ............................... 32,100 3,023 Janus Capgroup, Inc. .................................... 14,819 244 Lehman Brothers Holdings, Inc. .......................... 17,858 1,344 Merrill Lynch & Co., Inc. * ............................. 64,407 3,477 Moody's Corp. * ......................................... 9,529 616 Morgan Stanley, Dean Witter, Discover & Co. ............. 72,818 3,843 Principal Financial Group. * ............................ 21,400 744 Providian Financial Corp. * ............................. 17,815 261 SLM Corp. * ............................................. 28,911 1,169 State Street Corp. ...................................... 21,517 1,055 T. Rowe Price Group, Inc. * ............................. 8,279 417 Washington Mutual, Inc. * ............................... 56,953 2,201 Wells Fargo & Co. * ..................................... 111,013 6,353 ------- 49,921 Diversified Telecommunication Services - 2.7% Alltel Corp. * .......................................... 20,955 1,061 AT&T Corp. * ............................................ 51,385 752 BellSouth Corp. ......................................... 121,726 3,192 CenturyTel, Inc. ........................................ 9,805 294 Citizens Communications Co. * ........................... 17,115 207 Qwest Communications International, Inc. ................ 117,484 422 SBC Communications, Inc. * .............................. 217,295 5,269 Sprint Corp. * .......................................... 92,920 1,635 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- --------- (000's) COMMON STOCK - Continued Diversified Telecommunication Services - Continued Verizon Communications * ............................ 181,180 $ 6,557 ------- 19,389 Electric Utilities - 2.2% AES Corp. * ......................................... 38,692 384 Allegheny Energy, Inc. * ............................ 6,781 104 Ameren Corp. * ...................................... 12,200 524 American Electric Power Co. * ....................... 25,329 811 Calpine Corp. ....................................... 30,034 130 CenterPoint Energy, Inc. ............................ 19,857 228 Cinergy Corp. * ..................................... 12,331 469 CMS Energy Corp. * .................................. 12,192 111 Consolidated Edison, Inc. * ......................... 16,408 652 Constellation Energy Group, Inc. * .................. 11,138 422 Dominion Resources, Inc. ............................ 21,731 1,371 DTE Energy Co. * .................................... 11,740 476 Edison International * .............................. 21,838 558 Entergy Corp. * ..................................... 14,938 837 Exelon Corp. * ...................................... 42,832 1,426 Firstenergy Corp. * ................................. 22,081 826 FPL Group, Inc. ..................................... 12,056 771 PG & E Corp. * ...................................... 26,663 745 Pinnacle West Capital Corp. * ....................... 5,523 223 PPL Corp. ........................................... 11,912 547 Progress Energy, Inc. * ............................. 16,572 730 Public Services Enterprise Group, Inc. * ............ 15,902 637 Southern Co. ........................................ 49,120 1,432 Teco Energy, Inc. * ................................. 13,497 162 TXU Corp. ........................................... 20,786 842 Xcel Energy, Inc. ................................... 26,349 440 ------- 15,858 Electric/Gas - 0.2% Duke Energy Co. ..................................... 60,311 1,224 Electrical Equipment - 0.4% American Power Conversion ........................... 13,984 275 Cooper Industries, Ltd. - Cl. A * ................... 6,136 364 Emerson Electric Co. ................................ 27,823 1,768 Power One, Inc. * ................................... 6,714 74 Rockwell International Corp. * ...................... 12,266 460 Thomas & Betts Corp. * .............................. 4,485 122 ------- 3,063 Electronic Equipment & Instruments - 0.6% Agilent Technologies, Inc. * ........................ 30,938 906 Broadcom Corp. - Cl. A * ............................ 20,303 950 Jabil Circuit, Inc. * ............................... 13,478 339 Molex, Inc. * ....................................... 12,634 405 PerkinElmer, Inc. * ................................. 8,578 172 Sanmina Corp. * ..................................... 34,365 313 Solectron Corp. * ................................... 67,770 438 Symbol Technologies, Inc. * ......................... 14,629 216 Tektronix, Inc. * ................................... 5,036 171 Thermo Electron Corp. * ............................. 10,264 316 Waters Corp. * ...................................... 7,500 $ 358 ------- 4,584 Energy Equipment & Services - 0.9% Baker Hughes, Inc. * ................................ 21,288 802 BJ Services Co. * ................................... 10,900 500 Halliburton Co. * ................................... 28,124 851 Nabors Industries, Ltd. * ........................... 9,914 448 Noble Corp. * ....................................... 8,295 314 Rowan Cos., Inc. * .................................. 7,437 181 Schlumberger, Ltd. * ................................ 39,234 2,492 Transocean Sedco Forex, Inc. * ...................... 21,398 619 ------- 6,207 Food & Drug Retailing - 1.1% Albertson's, Inc. * ................................. 23,466 623 CVS Corp. ........................................... 25,372 1,066 Safeway, Inc. * ..................................... 28,835 731 SuperValu, Inc. * ................................... 8,593 263 Sysco Corp. * ....................................... 43,178 1,549 The Kroger Co. ...................................... 49,179 895 Walgreen Co. * ...................................... 67,180 2,432 Winn-Dixie Stores, Inc. * ........................... 8,104 58 ------- 7,617 Food Products - 1.2% Archer Daniels Midland Co. * ........................ 42,244 709 Campbell Soup Co. * ................................. 27,394 736 ConAgra, Inc. ....................................... 34,381 931 General Mills, Inc. * ............................... 24,529 1,166 H.J. Heinz Co. ...................................... 22,607 886 Hershey Foods Corp. * ............................... 16,998 787 Kellogg Co. * ....................................... 27,390 1,146 McCormick & Co., Inc. ............................... 9,100 309 Sara Lee Corp. * .................................... 51,361 1,181 WM Wrigley Jr. Co. .................................. 15,029 948 ------- 8,799 Gas Utilities - 0.3% El Paso Corp. ....................................... 41,028 323 KeySpan Corp. * ..................................... 10,600 389 Kinder Morgan, Inc. * ............................... 8,166 484 Nicor, Inc. ......................................... 2,666 91 Peoples Energy Corp. * .............................. 1,951 82 Sempra Energy * ..................................... 14,904 513 Williams Cos., Inc. * ............................... 32,248 384 ------- 2,266 Health Care Equipment & Supplies - 2.2% Applera Corporation - Applied Biosystems Group ...... 12,907 281 Bausch & Lomb, Inc. * ............................... 3,678 239 Baxter International, Inc. .......................... 39,562 1,365 Becton, Dickinson & Co. * ........................... 16,575 859 Biomet, Inc. * ...................................... 16,615 738 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- --------- (000's) COMMON STOCK - Continued Health Care Equipment & Supplies - Continued Boston Scientific Corp. * ........................... 54,568 $ 2,336 C.R. Bard, Inc. * ................................... 7,348 416 Guidant Corp. ....................................... 20,546 1,148 IMS Health, Inc. * .................................. 16,187 380 Medtronic, Inc. * ................................... 80,458 3,920 Millipore Corp. * ................................... 2,868 162 St. Jude Medical, Inc. * ............................ 10,950 828 Stryker Corp. * ..................................... 26,570 1,461 Zimmer Holdings, Inc. * ............................. 15,715 1,386 ------- 15,519 Health Care Providers & Services - 1.9% Aetna US Healthcare, Inc. * ......................... 10,007 851 Amerisource Bergen Corp. * .......................... 7,355 440 Anthem, Inc. * ...................................... 9,000 806 Cardinal Health, Inc. * ............................. 28,679 2,009 Caremark Rx, Inc. * ................................. 28,550 940 CIGNA Corp. * ....................................... 8,918 614 Express Scripts, Inc. - Cl. A * ..................... 5,300 420 HCA-The Healthcare Corp. * .......................... 32,432 1,349 Health Management Assoc., Inc. - Cl. A * ............ 15,856 355 Humana, Inc. * ...................................... 9,547 161 Manor Care, Inc. * .................................. 6,265 205 McKesson HBOC, Inc. ................................. 19,047 654 Quest Diagnostics, Inc. * ........................... 6,900 586 Tenet Healthcare Corp. * ............................ 30,658 411 UnitedHealth Group, Inc. * .......................... 40,622 2,529 Wellpoint Health Networks, Inc. * ................... 10,084 1,129 ------- 13,459 Hotels Restaurants & Leisure - 1.3% Carnival Corp. ...................................... 41,750 1,962 Darden Restaurants, Inc. * .......................... 10,658 219 Harrah's Entertainment, Inc. ........................ 7,670 415 Hilton Hotels Corp. * ............................... 24,936 465 International Game Technology * ..................... 23,232 897 Marriott International, Inc. - Cl. A * .............. 15,555 776 McDonald's Corp. * .................................. 84,081 2,186 Starbucks Corp. * ................................... 25,653 1,115 Starwood Hotels & Resorts Worldwide, Inc. * ......... 13,689 614 Wendy's International, Inc. * ....................... 7,165 250 Yum Brands, Inc. * .................................. 18,728 697 ------- 9,596 Household Durables - 0.5% Black & Decker Corp. * .............................. 5,400 335 Centex Corp. * ...................................... 7,772 356 Fortune Brands, Inc. * .............................. 9,522 718 KB Home * ........................................... 2,764 190 Leggett & Platt, Inc. * ............................. 13,185 352 Maytag Corp. * ...................................... 6,111 150 Newell Rubbermaid, Inc. ............................. 17,604 414 Pulte Homes, Inc.. * ................................ 7,772 404 Snap-On, Inc. * ..................................... 3,084 $ 103 Stanley Works * ..................................... 5,324 243 Whirlpool Corp. * ................................... 4,697 322 ------- 3,587 Household Products - 2.0% Clorox Co. * ........................................ 14,044 755 Colgate-Palmolive Co. ............................... 35,516 2,076 Kimberly-Clark Corp. * .............................. 33,474 2,205 Procter & Gamble Co. * .............................. 169,368 9,221 ------- 14,257 Industrial Conglomerates - 4.8% 3M Co. .............................................. 51,546 4,640 General Electric Co. * .............................. 695,400 22,531 Honeywell International, Inc. ....................... 56,739 2,078 Textron, Inc. * ..................................... 9,305 552 Tyco International, Ltd. * .......................... 132,647 4,396 ------- 34,197 Insurance - 4.6% Ace, Ltd. ........................................... 17,900 757 AFLAC, Inc. * ....................................... 34,365 1,402 Allstate Corp. ...................................... 46,354 2,158 Ambac Financial Group, Inc. ......................... 6,854 503 American International Group, Inc. * ................ 172,326 12,283 Aon Corp. * ......................................... 21,681 617 Chubb Corp. * ....................................... 12,055 822 Cincinnati Financial Corp. * ........................ 10,850 472 Hartford Financial Services Group, Inc. * ........... 18,745 1,289 Jefferson-Pilot Corp. * ............................. 9,496 482 Lincoln National Corp. * ............................ 11,673 552 Loews Corp. * ....................................... 12,487 749 Marsh & McLennan Cos., Inc. * ....................... 35,502 1,611 MBIA, Inc. * ........................................ 9,716 555 Metlife, Inc. * ..................................... 49,590 1,778 MGIC Investment Corp. * ............................. 6,156 467 Progressive Corp. ................................... 14,205 1,212 Prudential Financial, Inc. * ........................ 34,700 1,613 Safeco Corp. * ...................................... 9,186 404 St. Paul Cos., Inc. ................................. 43,894 1,779 Torchmark, Inc. * ................................... 7,282 392 UnumProvident Corp. * ............................... 19,771 314 XL Capital, Ltd. - Cl. A * .......................... 8,794 664 ------- 32,875 Internet & Catalog Retail - 0.6% eBay, Inc. * ........................................ 42,900 3,945 Internet Software & Services - 0.5% Yahoo, Inc. * ....................................... 88,444 3,213 IT Consulting & Services - 0.3% Affiliated Computer Services, Inc. - Cl. A * ........ 8,900 471 Computer Sciences Corp. * ........................... 11,845 550 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- --------- (000's) COMMON STOCK - Continued IT Consulting & Services - Continued Electronic Data Systems Corp. * ..................... 31,681 $ 607 SunGard Data Systems, Inc. * ........................ 19,400 504 Unisys Corp. * ...................................... 21,261 295 ------- 2,427 Leisure Equipment & Products - 0.2% Brunswick Corp. * ................................... 6,427 262 Eastman Kodak Co. * ................................. 18,922 510 Hasbro, Inc. * ...................................... 10,976 209 Mattel, Inc. * ...................................... 28,327 517 ------- 1,498 Machinery - 1.4% Caterpillar, Inc. * ................................. 22,699 1,803 Cummins Engine Co., Inc. ............................ 2,460 154 Danaher Corp. * ..................................... 20,814 1,079 Deere & Co. * ....................................... 15,608 1,095 Dover Corp. ......................................... 12,996 547 Eaton Corp. * ....................................... 10,032 650 Illinois Tool Works, Inc. * ......................... 20,542 1,970 Ingersoll-Rand Co. - Cl. A * ........................ 11,349 775 ITT Industries, Inc. * .............................. 6,228 517 Navistar International Corp., Inc. - Cl. B * ........ 4,486 174 Paccar, Inc. * ...................................... 11,799 684 Pall Corp. * ........................................ 7,379 193 Parker-Hannifin Corp. ............................... 8,020 477 ------- 10,118 Media - 3.5% Clear Channel Communications, Inc. .................. 40,754 1,506 Comcast Corp. - Cl. A ............................... 147,967 4,148 Dow Jones & Co., Inc. * ............................. 5,726 258 Gannett Co., Inc. * ................................. 18,185 1,543 Interpublic Group Cos., Inc. * ...................... 28,046 385 Knight-Ridder, Inc. * ............................... 5,306 382 McGraw-Hill Cos., Inc. .............................. 12,284 941 Meredith Corp. * .................................... 2,872 158 New York Times Co. - Cl. A * ........................ 9,832 440 Omnicom Group, Inc. ................................. 12,269 931 The Walt Disney Co. * ............................... 135,940 3,465 Time Warner, Inc. * ................................. 299,094 5,258 Tribune Co. * ....................................... 21,099 961 Univision Communications, Inc. - Cl. A * ............ 20,903 667 Viacom, Inc. - Cl. B * .............................. 114,151 4,077 ------- 25,120 Metals & Mining - 0.6% Alcoa, Inc. * ....................................... 57,349 1,894 Allegheny Technologies, Inc. * ...................... 3,867 70 Freeport-McMoran Copper & Gold, Inc. - Cl. B ........ 10,609 352 Newmont Mining Corp. ................................ 28,485 1,104 Nucor Corp. ......................................... 4,913 377 Phelps Dodge Corp. * ................................ 6,110 474 Worthington Industries, Inc. * ...................... 5,124 $ 105 ------- 4,376 Multi-Utilities - 0.1% Dynegy, Inc. - Cl.A * ............................... 29,874 127 NiSource, Inc. * .................................... 16,466 340 ------- 467 Multiline Retail - 3.2% Big Lots, Inc. * .................................... 6,765 98 Costco Wholesale Corp. .............................. 30,754 1,263 Dillard's, Inc. - Cl. A * ........................... 4,824 108 Dollar General Corp. ................................ 22,027 431 Family Dollar Stores, Inc. .......................... 11,350 345 Federated Department Stores, Inc. * ................. 11,787 579 J.C. Penney Co., Inc. * ............................. 18,083 683 Kohl's Corp. * ...................................... 21,784 921 May Department Stores Co. * ......................... 18,385 505 Nordstrom, Inc. ..................................... 8,795 375 Sears, Roebuck & Co. * .............................. 14,178 535 Target Corp. * ...................................... 60,608 2,574 Wal-Mart Stores, Inc. * ............................. 282,598 14,910 ------- 23,327 Office Electronics - 0.1% Xerox Corp. * ....................................... 51,710 750 Oil & Gas - 5.3% Amerada Hess Corp. * ................................ 6,056 480 Anadarko Petroleum Corp. * .......................... 16,637 975 Apache Corp. ........................................ 20,890 910 Ashland, Inc. ....................................... 4,501 238 Burlington Resources, Inc. * ........................ 26,036 942 ChevronTexaco Corp. * ............................... 70,839 6,667 Conoco Phillips ..................................... 45,448 3,467 Devon Energy Corp. * ................................ 14,988 989 EOG Resources, Inc. * ............................... 7,169 428 Exxon Mobil Corp. * ................................. 430,845 19,134 Kerr-McGee Corp. * .................................. 6,315 339 Marathon Oil Corp. * ................................ 22,749 861 Occidental Petroleum Corp. * ........................ 26,147 1,266 Sunoco, Inc. * ...................................... 5,422 345 Unocal Corp. * ...................................... 16,854 640 Valero Energy Corp. ................................. 8,300 612 ------- 38,293 Paper & Forest Products - 0.6% Boise Cascade Corp. * ............................... 6,062 228 Georgia-Pacific Corp. * ............................. 16,755 620 International Paper Co. * ........................... 31,669 1,416 Louisiana-Pacific Corp. * ........................... 7,452 176 MeadWestvaco Corp. * ................................ 13,833 406 Plum Creek Timber Co., Inc. * ....................... 11,400 371 Weyerhaeuser Co. .................................... 14,935 943 ------- 4,160 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Personal Products - 0.6% Alberto-Culver Co. - Cl. B * ............................ 6,273 $ 315 Avon Products, Inc. ..................................... 31,090 1,434 Gillette Co. ............................................ 66,934 2,838 ------- 4,587 Pharmaceuticals - 7.8% Abbott Laboratories * ................................... 103,642 4,224 Allergan, Inc. * ........................................ 8,391 751 Bristol-Myers Squibb Co. * .............................. 128,926 3,159 Eli Lilly & Co. * ....................................... 73,835 5,162 Forest Laboratories, Inc. * ............................. 24,012 1,360 Hospira, Inc. ........................................... 10,334 285 Johnson & Johnson ....................................... 196,061 10,921 King Pharmaceuticals, Inc. * ............................ 16,622 190 Medco Health Solutions, Inc. * .......................... 17,605 660 Merck & Co., Inc. * ..................................... 147,135 6,989 Mylan Laboratories, Inc. ................................ 17,100 346 Pfizer, Inc. * .......................................... 503,385 17,256 Schering-Plough Corp. * ................................. 97,428 1,800 Watson Pharmaceuticals, Inc. * .......................... 6,654 179 Wyeth * ................................................. 88,512 3,201 ------- 56,483 Real Estate Investment Trust - 0.3% Apartment Investment & Management Co. ................... 6,200 193 Equity Office Properties Trust * ........................ 25,990 707 Equity Residential Properties Trust * ................... 18,386 547 Prologis Trust .......................................... 11,300 372 Simon Property Group, Inc. .............................. 12,900 663 ------- 2,482 Road & Rail - 0.4% Burlington Northern Santa Fe Corp. * .................... 24,170 848 CSX Corp. * ............................................. 14,410 472 Norfolk Southern Corp. * ................................ 25,459 675 Union Pacific Corp. ..................................... 16,561 985 ------- 2,980 Semiconductor Equipment & Products - 3.4% Advanced Micro Devices, Inc. ............................ 23,600 375 Altera Corp. * .......................................... 25,562 568 Analog Devices, Inc. * .................................. 24,723 1,164 Applied Materials, Inc. * ............................... 112,154 2,200 Applied Micro Circuits Corp. * .......................... 19,737 105 Intel Corp. ............................................. 426,140 11,761 KLA-Tencor Corp. * ...................................... 12,570 621 Linear Technology Corp. * ............................... 20,446 807 LSI Logic Corp. * ....................................... 24,026 183 Maxim Integrated Products, Inc. * ....................... 21,777 1,142 Micron Technology, Inc. ................................. 40,167 615 National Semiconductor Corp. * .......................... 24,104 530 Novellus Systems, Inc. * ................................ 10,207 321 PMC-Sierra, Inc. * ...................................... 12,439 $ 178 QLogic Corp. * .......................................... 5,834 155 Teradyne, Inc. * ........................................ 11,754 267 Texas Instruments, Inc. * ............................... 115,225 2,786 Xilinx, Inc. * .......................................... 22,084 736 ------- 24,514 Software - 4.4% Adobe Systems, Inc. ..................................... 15,148 705 Autodesk, Inc. * ........................................ 7,856 336 BMC Software, Inc. * .................................... 16,054 297 Citrix Systems, Inc. .................................... 10,669 217 Computer Associates International, Inc. ................. 38,763 1,088 Compuware Corp. * ....................................... 27,435 181 Electronic Arts, Inc. * ................................. 19,100 1,042 Intuit, Inc. * .......................................... 13,203 509 Mercury Interactive Corp. * ............................. 6,104 304 Microsoft Corp. * ....................................... 712,569 20,351 Novell, Inc. * .......................................... 23,124 194 Oracle Corp. * .......................................... 346,764 4,137 Parametric Technology Corp. ............................. 20,384 102 Peoplesoft, Inc. * ...................................... 25,528 472 Siebel Systems, Inc. * .................................. 33,059 353 Symantec Corp. * ........................................ 20,500 898 Veritas Software Corp. * ................................ 28,063 777 ------- 31,963 Specialty Retail - 2.2% AutoNation, Inc. * ...................................... 17,500 299 AutoZone, Inc. * ........................................ 5,763 462 Bed Bath & Beyond, Inc. * ............................... 19,020 731 Best Buy Co., Inc. * .................................... 20,807 1,056 Circuit City Stores, Inc. ............................... 11,603 150 Gap, Inc. ............................................... 60,025 1,456 Home Depot, Inc. * ...................................... 146,444 5,155 Limited, Inc. * ......................................... 31,734 593 Lowe's Cos., Inc. * ..................................... 52,319 2,749 Office Depot, Inc. * .................................... 21,548 386 RadioShack Corp. * ...................................... 10,370 297 Sherwin-Williams Co. * .................................. 8,928 371 Staples, Inc. * ......................................... 32,761 960 Tiffany & Co. * ......................................... 9,212 340 TJX Cos., Inc. * ........................................ 33,016 797 Toys "R" Us, Inc. * ..................................... 13,687 218 ------- 16,020 Textiles & Apparel - 0.3% Jones Apparel Group, Inc. ............................... 8,900 351 Liz Claiborne, Inc. * ................................... 6,652 239 Nike, Inc. - Cl. B ...................................... 17,094 1,295 Reebok International, Ltd. * ............................ 3,485 126 V.F. Corp. * ............................................ 7,263 354 ------- 2,365 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Tobacco - 1.0% Altria Group, Inc. ..................................... 134,299 $ 6,722 R.J. Reynolds Tobacco Holdings, Inc. ................... 5,700 385 UST, Inc. * ............................................ 10,337 372 -------- 7,479 Trading Companies & Distributors - 0.1% Genuine Parts Co. * .................................... 12,000 476 W.W. Grainger, Inc. * .................................. 6,238 359 -------- 835 U.S. Government Agencies - 1.0% Federal Home Loan Mortgage Corp. ....................... 45,807 2,899 Federal National Mortgage Assoc. * ..................... 63,855 4,557 -------- 7,456 Wireless Telecommunications Services - 0.6% AT&T Wireless Group * .................................. 181,349 2,597 Nextel Communications, Inc. - Cl. A * .................. 73,513 1,960 -------- 4,557 -------- TOTAL COMMON STOCK- (Cost $731,480) 97.0% 698,958 Par Value ------- (000's) SHORT-TERM INVESTMENTS Investment in joint trading account - 2.7% 1.344% due 07/01/04 .................................... $19,395 19,395 U.S. Treasury Bills - 0.2% 1.25% due 09/09/04 (a) ................................. 1,393 1,393 ------- -------- TOTAL SHORT-TERM INVESTMENTS- (Cost $20,788) 2.9% 20,788 ------- -------- TOTAL INVESTMENTS- (Cost $752,268) 99.9% 719,746 Cash and Receivables, less payables- 0.1% 710 ------- -------- NET ASSETS- 100.0% $720,456 ======= ======== * Non-income producing security. (a) Security segregated to cover initial margin requirements on open financial futures. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Equity Index Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit with Fleet Bank. This agreement enables the Fund to participate in an unsecured line of credit, which permits borrowing up to $10 million. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For the period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At June 30, 2004, open financial futures contracts for the Fund were as follows: Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ S&P 500 Index Futures 75 Long September 04 $125 ==== 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $396 and $15,815 which expire in 2009 and 2010, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $75 Million and Excess Over First $75 Million $125 Million $125 Million ----------------- --------------- ------------ 0.15% 0.14% 0.13% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $24. John Hancock has entered into a Sub-Advisory Agreement with State Street Global Advisers Funds Management, Inc., and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $51,977 $30,098 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Depreciation ---------- ------------ ------------ -------------- $747,395 $47,147 $(112,113) $(64,966) Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Depreciation ------------- ------------- ------------- -------------- $-- $-- $16,211 $(64,966) In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $16,969 $ -- $335 2002 4,601 2,918 -- Included in the Fund's 2003 distributions from ordinary income is $2,813 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. Inception: April 30, 1997 -------------------------------------------------------------------------------- Financial Industries Fund John Hancock Advisors, LLC J. Schmidt/L. Welch -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 1.61%, underperforming its benchmark, the S&P 500 Financials Sector Index. Relative to Morningstar peers, the Fund has a below average rating of 1/2 with an average risk profile. . The Fund underperformed its benchmark due to unfavorable sub-sector allocation decisions broadly across subsectors, while stock selection decisions contributed positively to performance. . The Fund's exposures to multi-line insurance and thrifts & mortgage financial sub-sectors were among the largest contributors to absolute performance, while exposure to investment banking & brokerage was the biggest detractor. . The manager selects stocks using bottom-up fundamental research and focuses on stocks presenting opportunities based upon market themes, takeover potential and value relative to balance sheet, earnings and liquidity. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Bank of America Corp. 5.7% Citigroup, Inc. 4.8% Wells Fargo & Co. 4.3% Fifth Third Bancorp 4.2% State Street Corp. 4.0% Berkshire Hathaway, Inc. 3.9% American Express Co. 3.1% Marsh & McLennan Cos., Inc. 3.0% Federal National Mortgage Assoc. 2.9% Merrill Lynch & Co., Inc. 2.9% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Financial Standard & Industries Poor's Financial S&P 500(R) Fund Index(4) Index(5) ---------- ---------------- ---------- YTD/3/ 1.61% 2.37% 3.44% 1 Year 17.32 19.33 19.10 3 Years -2.02 2.27 -0.70 5 Years 0.93 3.86 -2.20 Since Inception (4/30/97) 6.82 10.23 6.64 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Specialty Financial MORNINGSTAR RISK/1/: . (VL/VUL) Average . (VA) Average MORNINGSTAR RATING/1/: . ** (VL/VUL) . * (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Banks: Outside New York City 38.0% Diversified Financial Services 18.0% Insurance: Property-Casualty 8.9% Financial Miscellaneous 8.6% Insurance: Multi-Line 7.7% Securities Brokerage & Services 5.2% Banks: New York City 4.8% Multi-Sector Companies 3.9% Insurance: Life 2.1% Savings & Loan 1.2% Financial Data Processing Svcs and Systems 0.6% Renting and Leasing Services: Commercial 0.5% Investment Management Companies 0.3% Finance: Small Loan 0.2% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 32 VL/VUL subaccounts and 84 VA subaccounts in the Morningstar Financial Industries category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are additional risks associated with a non diversified fund, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Standard & Poor's Financial Index is an unmanaged index of financial sector stocks in the Standard & Poor's 500(R) Index. /5/ "S&P 500(R)" is an unmanaged stock index commonly used as a broad measure of stock market performance. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $ 55,835 Net unrealized appreciation of investments ......................... 4,792 Short-term investments at value .................................... 1,244 -------- Total investments ............................................ 61,871 Receivable for: Investments sold ................................................ 225 Dividends ....................................................... 66 Other receivables ............................................... 2 -------- Total assets ....................................................... 62,164 -------- LIABILITIES Payables for: Fund shares purchased ........................................... 469 Accrued operating expenses ...................................... 9 -------- Total liabilities .................................................. 478 -------- Net assets ......................................................... $ 61,686 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 4,249 -------- Net asset value per share .......................................... $ 14.52 ======== Composition of net assets: Capital paid-in ................................................. 67,806 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (10,923) Undistributed net investment income ............................. 11 Net unrealized appreciation of investments ...................... 4,792 -------- Net assets ......................................................... $ 61,686 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 6 Dividends ........................................................ 622 ------- Total investment income ............................................. 628 ------- EXPENSES Investment advisory fee .......................................... 253 Auditors fees .................................................... 3 Custodian fees ................................................... 14 Legal fees ....................................................... 4 Printing & mailing fees .......................................... 18 Trustees' fees ................................................... 1 ------- Total Expenses ...................................................... 293 Less expenses reimbursed ......................................... (21) Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (6) ------- Net expenses ........................................................ 266 ------- Net Investment Income ............................................... 362 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................. 2,467 Change in unrealized depreciation investments .................... (1,868) ------- Net realized and unrealized gain .................................... 599 ------- Net increase in net assets resulting from operations ................ $ 961 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ......................................................... $ 362 $ 791 Net realized gain (loss) ...................................................... 2,467 (1,519) Change in net unrealized appreciation (depreciation) .......................... (1,868) 14,169 ------- -------- Net increase in net assets resulting from operations ....................... 961 13,441 Distributions to shareholders from: Net investment income ......................................................... (351) (914) Realized gains ................................................................ (114) ------- -------- Decrease in net assets resulting from distributions ........................ (351) (1,028) From fund share transactions: Proceeds from shares sold ..................................................... 3,497 4,734 Distributions reinvested ...................................................... 351 1,028 Payment for shares redeemed ................................................... (5,760) (12,562) ------- -------- Decrease in net assets from fund share transactions ........................ (1,912) (6,800) ------- -------- NET INCREASE (DECREASE) IN NET ASSETS ............................................ (1,302) 5,613 NET ASSETS Beginning of Period ........................................................... 62,988 57,375 ------- -------- End of Period (including undistributed net investment income of $11 and $0, respectively) .............................................................. $61,686 $ 62,988 ======= ======== Analysis of fund share transactions: Sold .......................................................................... 237 318 Reinvested .................................................................... 24 59 Redeemed ...................................................................... (396) (619) ------- -------- Decrease in fund shares outstanding .............................................. (135) (242) ======= ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Financial Industries Fund ------------------------------------------------------------------ Unaudited Period Year Ended December 31, Ended June 30, ----------------------------------------------- 2004 2003(f) 2002 2001 2000 ---------------- -------- ------- ------- ------- Net Assets Value at Beginning of Period ...... $ 14.37 $ 11.60 $ 14.56 $ 18.34 $ 14.46 Income from Investment Operations: Net Investment Income ..................... 0.05 0.18 0.12 0.11 0.06 Net Realized and Unrealized Gain (Loss) on Investment(a) ....................... 0.18 2.82 (2.95) (3.33) 3.87 ------- ------- ------- ------- ------- Total From Investment Operations .......... 0.23 3.00 (2.83) (3.22) 3.93 Less Distributions: Distribution from Net Investment Income ... (0.08) (0.20) (0.13) (0.09) (0.05) Distribution from Net Realized Gains on Investments ............................ (0.03) (0.47) Distribution from Capital Paid-in ......... ------- ------- ------- ------- ------- Total Distributions ....................... (0.08) (0.23) (0.13) (0.56) (0.05) Capital Contributions ..................... ------- ------- ------- ------- ------- Net Assets Value at End of Period ............ $ 14.52 $ 14.37 $ 11.60 $ 14.56 $ 18.34 ======= ======= ======= ======= ======= Total Investment Return(b) ................... 1.61%(c) 26.03%(c) (19.46)% (17.51)% 27.16% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................. 0.87%(d)(g)(h) 0.85%(d) 0.90% 0.89% 0.90% Ratio of Net Investment Income to Average Net Assets ..................... 1.15%(d) 1.35%(d) 0.87% 0.71% 0.36% Portfolio Turnover Rate ................... 24.39%(c) 50.20%(c)(e) 2.00% 97.00%(e) 41.00% Net Assets End of Period (000's Omitted) ..... $61,686 $62,988 $57,375 $88,920 $71,367
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Excludes merger activity. (f) Commencement of investment operations. (g) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 0.93% for the period ending June 30, 2004. (h) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FINANCIAL INDUSTRIES FUND Market Name of Issuer Shares Value -------------- ------ -------- (000's) COMMON STOCK Banks - 36.0% Bank of America Corp. * ................................. 40,653 $ 3,440 Bank of New York Co., Inc. .............................. 48,000 1,415 Bank One Corp. * ........................................ 23,000 1,173 Banknorth Group, Inc. * ................................. 9,000 292 City National Corp. ..................................... 14,000 920 Fifth Third Bancorp * ................................... 47,842 2,573 First Horizon National Corp. ............................ 8,000 364 Golden West Financial Corp. * ........................... 6,600 702 M & T Bank Corp. * ...................................... 14,400 1,257 Mellon Financial Corp. * ................................ 46,500 1,364 National City Corp. * ................................... 15,000 525 PNC Bank Corp. * ........................................ 18,344 974 SouthTrust Corp. * ...................................... 20,000 776 Suntrust Banks, Inc. * .................................. 6,500 422 US Bancorp * ............................................ 38,000 1,047 Wachovia Corp. * ........................................ 32,942 1,466 Wells Fargo & Co. * ..................................... 46,000 2,633 Wintrust Financial Corp. ................................ 3,250 164 Zions Bancorp * ......................................... 11,000 676 ------- 22,183 Commercial Services & Supplies - 1.1% Fiserv, Inc. * .......................................... 8,800 342 Marlin Business Services Corp. * ........................ 21,050 317 ------- 659 Diversified Financials - 34.8% American Express Co. * .................................. 37,000 1,901 Ameritrade Holding Corp. * .............................. 13,750 156 Assured Guaranty, Ltd. * ................................ 22,330 378 Bear Stearns Cos., Inc. * ............................... 7,400 624 Citigroup, Inc. * ....................................... 63,000 2,930 Countrywide Credit Industries, Inc. * ................... 13,500 948 Doral Financial Corp. ................................... 15,000 518 Federal Home Loan Mortgage Corp. ........................ 22,000 1,393 Federal National Mortgage Assoc. * ...................... 25,000 1,784 Goldman Sachs Group, Inc. ............................... 18,500 1,742 JP Morgan Chase & Co. ................................... 39,000 1,512 Legg Mason, Inc. * ...................................... 3,000 273 Lehman Brothers Holdings, Inc. .......................... 15,500 1,166 MBNA Corp. * ............................................ 48,475 1,250 Merrill Lynch & Co., Inc. * ............................. 32,800 1,771 Morgan Stanley, Dean Witter, Discover & Co. ............. 7,000 369 National Financial Partners Corp. * ..................... 5,060 178 Nelnet, Inc. - Cl. A * .................................. 7,993 142 State Street Corp. ...................................... 50,000 2,452 ------- 21,487 Insurance - 26.4% Ace, Ltd. ............................................... 13,000 550 Allstate Corp. .......................................... 14,500 675 American International Group, Inc. * .................... 23,000 1,640 Arch Capital Group, Ltd. * .............................. 29,200 1,165 Axis Capital Holdings, Ltd. * ........................... 20,085 $ 562 Benfield * .............................................. 13,795 63 Berkshire Hathaway, Inc. - Cl. B * ...................... 800 2,364 Conseco, Inc. ........................................... 27,200 541 Direct General Corp. * .................................. 8,500 274 Genworth Financial, Inc. - Cl. A * ...................... 18,483 424 Hartford Financial Services Group, Inc. * ............... 10,000 687 Marsh & McLennan Cos., Inc. * ........................... 40,000 1,815 Metlife, Inc. * ......................................... 11,000 394 Montpelier Re Holdings, Ltd. ............................ 3,750 131 PartnerRe, Ltd. ......................................... 22,000 1,248 Prudential Financial, Inc. * ............................ 4,000 186 Radian Group, Inc. ...................................... 14,750 707 Renaissancere Holdings, Ltd. ............................ 18,000 971 Scottish Annuity & Life ................................. 22,500 523 Torchmark, Inc. * ....................................... 12,900 694 Transatlantic Holdings, Inc. ............................ 6,200 502 United National Group, Ltd. - Cl. A * ................... 2,050 31 XL Capital, Ltd. - Cl. A * .............................. 2,000 151 ------- 16,298 ------- TOTAL COMMON STOCK- (Cost $55,835) 98.3% 60,627 Par Value ------- (000's) SHORT-TERM INVESTMENTS - 2.0% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,244) .......................................... $1,244 1,244 ------ ------- TOTAL INVESTMENTS- (Cost $57,079) 100.3% 61,871 Payables, less cash and receivables- (0.3)% (185) ------ ------- NET ASSETS- 100.0% $61,686 ====== ======= * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Financial Industries Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $91 1.52% $-- Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's 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 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $1,143, $9,571 and $2,372 which expire in 2006, 2008 and 2011, respectively. Certain of the above losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the rate of 0.80% on an annual basis of the Fund's net assets. In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued and JHVLICO will reimburse the Fund for such excess. Accordingly, the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $21 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with John Hancock Advisers, with respect to the Fund. John Hancock Advisers is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $6. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $15,233 $16,485 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ --------------- $56,440 $8,483 $(2,003) $6,480 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $13,086 $6,480 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $787 $-- $241 2002 -- -- -- NOTE E--COMBINATION On April 25, 2003, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund ------------------------ ----------------------- VST Financial Industries VA Financial Industries This combination provided for the transfer of substantially all of the assets and liabilities of the target fund to the acquiring fund in exchange solely for the fund shares of the acquiring fund. Accordingly, the former VA Financial Industries is the accounting survivor of this merger and historical performance for it's periods prior to April 28, 2003 will be used by the surviving fund. The acquisition was accounted for as tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination --------------- -------------- ----------- ------------ ---------------- -------------------- VST Financial Industries vs. VA Financial Industries 4,640 $55,074 $(5,280) $200 $55,274
Inception: August 31, 1999 -------------------------------------------------------------------------------- Fundamental Growth Fund Independence Investment LLC Paul F. McManus -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 0.18% underperforming its benchmark, the Russell Growth Index. Relative to Morningstar peers, the Fund has a below average rating of 2 with an above average risk profile. . Independence assumed management of the Fund in December 2003. . The Fund underperformed its benchmark primarily due to unfavorable stock selection decisions broadly especially within the information technology and consumer discretionary sectors, with sector allocation exposures also detracting. . The largest absolute performance contributors were exposures to companies in the industrials sector, while exposures to information technology companies were the largest detractors. . The manager uses both fundamental equity research and quantitative portfolio construction to identify stocks having both favorable valuations and improving earnings growth prospects. The Fund is broadly diversified across sectors with sector weights similar to the benchmark. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Microsoft Corp. 4.6% Intel Corp. 4.0% Pfizer, Inc. 4.0% Cisco Systems, Inc. 3.6% American International Group, Inc. 2.7% Procter & Gamble Co. 2.5% Johnson & Johnson 2.4% Home Depot, Inc. 2.2% Standard and Poor's Depositary Receipts 2.2% 3M Co. 2.2% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Fundamental Fundamental Growth Growth Fund Benchmark/4/ ----------- ------------------ YTD/3/ 0.18% 2.74% 1 Year 16.33 23.48 3 Years -7.50 -0.79 Since Inception (8/31/99) -1.38 0.76 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Mid Cap Growth MORNINGSTAR RISK/1/: . Above Average (VL/VUL) . Above Average (VA) MORNINGSTAR RATING/1/: . ** (VL/VUL) . ** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 30% Health Care 18% Financials 14% Consumer Discretionary 12% Industrials 12% Consumer Staples 10% Energy 3% Materials 1% Telecommunication Services 0% Utilities 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. Data reviewed by MorningStar reflects the Fund's previous investment strategy. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 482 VL/VUL subaccounts and 850 VA subaccounts in the Morningstar Mid Cap Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ The Fundamental Growth Benchmark represents the Russell Mid Cap Growth Index from August 1999 to December 2003 and then the Russell 1000 Growth Index from January 2004 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $473 of securities loaned (Note B)) ....................................................... $ 24,239 Net unrealized appreciation of investments ......................... 1,004 Short-term investments at value .................................... 762 -------- Total investments ............................................ 26,005 Receivable for: Investments sold ................................................ 837 Dividends ....................................................... 22 -------- Total assets ....................................................... 26,864 -------- LIABILITIES Payables for: Investments purchased ........................................... 933 Collateral for securities on loan ............................... 478 Accrued operating expenses ...................................... 7 Other payables .................................................. 2 -------- Total liabilities .................................................. 1,420 -------- Net assets ......................................................... $ 25,444 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 3,561 -------- Net asset value per share .......................................... $ 7.15 ======== Composition of net assets: Capital paid-in ................................................. $ 57,696 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (33,261) Undistributed net investment income ............................. 5 Net unrealized appreciation of investments ...................... 1,004 -------- Net assets ......................................................... $ 25,444 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Growth Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 1 Dividends .................................................... 123 -------- Total investment income ............................................ 124 -------- EXPENSES Investment advisory fee ...................................... 112 Auditors fees ................................................ 2 Custodian fees ............................................... 10 Legal fees ................................................... 10 Printing & mailing fees ...................................... 4 -------- Total expenses ..................................................... 138 Less expenses reimbursed ..................................... (12) Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................ (7) -------- Net expenses ....................................................... 119 -------- Net investment income .............................................. 5 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 241 Change in unrealized depreciation on investments ................ (211) -------- Net realized and unrealized gain ................................... 30 -------- Net increase in net assets resulting from operations ............... $ 35 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Fundamental Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income (loss) ................................................ $ 5 $ (86) Net realized gain ........................................................... 241 1,982 Change in net unrealized appreciation (depreciation) ........................ (211) 4,240 ------- -------- Net increase in net assets resulting from operations ..................... 35 6,136 Distributions to shareholders from: Realized gains .............................................................. (2,176) -------- Decrease in net assets resulting from distributions ...................... (2,176) From fund share transactions: Proceeds from shares sold ................................................... 1,920 6,270 Distributions reinvested .................................................... 2,176 Payment for shares redeemed ................................................. (2,568) (6,414) ------- -------- Increase (decrease) in net assets from fund share transactions ........... (648) 2,032 ------- -------- NET INCREASE (DECREASE) IN NET ASSETS .......................................... (613) 5,992 NET ASSETS Beginning of Period ......................................................... 26,057 20,065 ------- -------- End of Period (including undistributed net investment income of $5 and $0, respectively) ............................................................ $25,444 $ 26,057 ======= ======== Analysis of fund share transactions: Sold ........................................................................ 269 907 Reinvested .................................................................. 309 Redeemed .................................................................... (361) (956) ------- -------- Net increase (decrease) in fund shares outstanding ............................. (92) 260 ======= ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Fundamental Growth Fund ------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, ------------------------------------------- 2004 2003(i) 2002 2001 2000(e) ---------------- ------- ------- ------- ------- Net Assets Value at Beginning of Period ...... $ 7.13 $ 5.91 $ 8.48 $ 12.52 $ 14.42 Income from Investment Operations: Net Investment Loss ....................... (0.01) (0.06) (0.03) (0.02) Net Realized and Unrealized Gain (Loss) on Investment(a) ....................... 0.02 1.88 (2.51) (4.01) (0.44) ------- ------- ------- ------- ------- Total From Investment Operations .......... 0.02 1.87 (2.57) (4.04) (0.46) Less Distributions: Distribution from Net Realized Gains on Investments ............................ (0.65) (0.76) Distribution from Excess of Net Investment Income/Gains ................ (0.65) Distribution from Capital Paid-in ......... (0.03) ------- ------- ------- ------- ------- Total Distributions ....................... (0.65) (1.44) ------- ------- ------- ------- ------- Net Assets Value at End of Period ............ $ 7.15 $ 7.13 $ 5.91 $ 8.48 $ 12.52 ======= ======= ======= ======= ======= Total Investment Return(b) ................... 0.18%(c) 31.77% (30.28)% (32.23)% (3.03)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................. 0.98%(d)(f)(g) 1.00% 1.00%(f) 1.00%(f) 0.96%(f) Ratio of Net Investment Income (Loss) to Average Net Assets ..................... 0.04%(d) (0.38)% (0.52)% (0.46)% (0.38)% Portfolio Turnover Rate ................... 50.86%(c) 201.18% 93.77% 118.01%(h) 250.46% Net Assets End of Period (000's Omitted) ..... $25,444 $26,057 $20,065 $37,897 $46,114
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) The fund entered into a new sub-advisory agreement with Putnam Investment Management, Inc. during the period shown. (f) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.08% for the period ending June 30, 2004, and 1.16%, 1.19%, and 1.00% for the years ended December 31, 2002, 2001, and 2000, respectively. (g) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (h) Excludes merger activity. (i) The Fund entered into a new Sub-Advisory Agreement with Independence Investment LLC during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL GROWTH FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Aerospace & Defense - 2.3% Boeing Co. * ............................................. 6,100 $ 312 United Technologies Corp. * .............................. 3,000 274 ------ 586 Air Freight & Couriers - 0.5% Fedex Corp. .............................................. 1,400 114 Airlines - 0.4% JetBlue Airways Corp. * .................................. 3,500 103 Automobiles - 0.5% Harley-Davidson, Inc. * .................................. 2,100 130 Beverages - 4.1% Anheuser-Busch Cos., Inc. ................................ 1,900 103 Coca-Cola Co. * .......................................... 9,900 500 PepsiCo, Inc. * .......................................... 8,100 436 ------ 1,039 Biotechnology - 2.5% Amgen, Inc. * ............................................ 5,600 306 Biogen IDEC, Inc. * ...................................... 5,400 341 ------ 647 Building Products - 1.0% American Standard Cos., Inc. * ........................... 6,400 258 Chemicals - 0.6% Ecolab, Inc. * ........................................... 4,900 155 Commercial Services & Supplies - 1.1% Apollo Group, Inc. - Cl. A * ............................. 1,100 97 Automatic Data Processing, Inc. .......................... 4,300 180 ------ 277 Commingled Fund - 2.2% Standard and Poor's Depositary Receipts .................. 4,800 550 Communications Equipment - 5.8% Cisco Systems, Inc. * .................................... 38,200 906 Motorola, Inc. ........................................... 11,300 206 Qualcomm, Inc. * ......................................... 4,800 350 ------ 1,462 Computers & Peripherals - 3.5% Dell, Inc. * ............................................. 13,600 487 EMC Corp. * .............................................. 10,900 124 International Business Machines Corp. .................... 3,100 274 ------ 885 Diversified Financials - 8.7% American Express Co. * ................................... 6,900 355 Bear Stearns Cos., Inc. * ................................ 1,100 93 Capital One Financial Corp. .............................. 2,300 157 Chicago Mercantile Exchange * ............................ 900 130 Citigroup, Inc. * ........................................ 6,100 284 Federal National Mortgage Assoc. * ....................... 5,900 421 Goldman Sachs Group, Inc. ................................ 3,100 292 MBNA Corp. * ............................................. 7,500 $ 193 Merrill Lynch & Co., Inc. * .............................. 5,400 291 ------ 2,216 Electronic Equipment & Instruments - 0.4% Sanmina Corp. * .......................................... 12,200 111 Energy Equipment & Services - 1.0% Grant Prideco, Inc. * .................................... 13,200 244 Food & Drug Retailing - 0.3% Whole Foods Market, Inc. * ............................... 800 76 Health Care Equipment & Supplies - 3.0% Boston Scientific Corp. * ................................ 4,800 206 Guidant Corp. ............................................ 2,700 151 St. Jude Medical, Inc. * ................................. 3,400 257 Zimmer Holdings, Inc. * .................................. 1,600 141 ------ 755 Health Care Providers & Services - 2.1% Cardinal Health, Inc. * .................................. 2,900 203 DaVita, Inc. * ........................................... 2,400 74 UnitedHealth Group, Inc. * ............................... 2,700 168 Wellpoint Health Networks, Inc. * ........................ 900 101 ------ 546 Household Products - 2.5% Procter & Gamble Co. * ................................... 11,500 626 Industrial Conglomerates - 5.1% 3M Co. ................................................... 6,100 549 General Electric Co. * ................................... 11,400 369 Tyco International, Ltd. * ............................... 11,600 385 ------ 1,303 Insurance - 4.5% AFLAC, Inc. * ............................................ 5,000 204 American International Group, Inc. * ..................... 9,400 670 Hartford Financial Services Group, Inc. * ................ 4,100 282 ------ 1,156 Internet & Catalog Retail - 1.6% eBay, Inc. * ............................................. 3,000 276 Interactive Corp. ........................................ 4,700 142 ------ 418 Internet Software & Services - 1.4% Yahoo, Inc. * ............................................ 9,700 352 Machinery - 2.4% Danaher Corp. * .......................................... 4,400 228 Illinois Tool Works, Inc. * .............................. 1,700 163 Oshkosh Truck Corp. ...................................... 2,600 149 Pall Corp. * ............................................. 3,000 79 ------ 619 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL GROWTH FUND Market Name of Issuer Shares Value -------------- ------ -------- (000's) COMMON STOCK - Continued Media - 3.8% Comcast Corp. - Cl. A ................................... 2,200 $ 62 E.W. Scripps Co. - Cl. A ................................ 1,500 157 Lamar Advertising Co. * ................................. 3,000 130 Pixar, Inc. * ........................................... 2,200 153 The Walt Disney Co. * ................................... 7,400 189 Time Warner, Inc. * ..................................... 15,500 272 ------- 963 Multiline Retail - 2.3% Target Corp. * .......................................... 5,600 238 Wal-Mart Stores, Inc. * ................................. 6,500 343 ------- 581 Oil & Gas - 1.6% Devon Energy Corp. * .................................... 2,000 132 Murphy Oil Corp. ........................................ 2,600 191 Newfield Exploration Co. * .............................. 1,700 95 ------- 418 Personal Products - 0.7% Avon Products, Inc. ..................................... 3,600 166 Pharmaceuticals - 9.8% Abbott Laboratories * ................................... 6,200 253 Johnson & Johnson ....................................... 11,100 618 Medicinesco ............................................. 7,500 229 Merck & Co., Inc. * ..................................... 5,300 252 Pfizer, Inc. * .......................................... 29,200 1,001 Sepracor, Inc. * ........................................ 2,600 137 ------- 2,490 Semiconductor Equipment & Products - 7.4% Analog Devices, Inc. * .................................. 5,100 240 Applied Materials, Inc. * ............................... 17,400 341 Intel Corp. ............................................. 37,000 1,021 RF Micro Devices, Inc. * ................................ 11,700 88 Texas Instruments, Inc. * ............................... 8,000 194 ------- 1,884 Software - 8.8% Electronic Arts, Inc. * ................................. 6,000 327 Microsoft Corp. * ....................................... 41,000 1,171 Oracle Corp. * .......................................... 34,200 408 Take Two Interactive Software * ......................... 5,800 178 Veritas Software Corp. * ................................ 5,900 163 ------- 2,247 Specialty Retail - 5.6% Advanced Auto Parts * ................................... 3,300 146 Best Buy Co., Inc. * .................................... 3,500 178 CDW Corp. ............................................... 6,000 383 Home Depot, Inc. * ...................................... 15,800 556 TJX Cos., Inc. * ........................................ 7,100 171 ------- 1,434 Textiles & Apparel - 0.7% Coach, Inc. * ........................................... 3,700 $ 167 Tobacco - 1.0% Altria Group, Inc. ...................................... 5,300 265 ------- TOTAL COMMON STOCK- (Cost $24,239) 99.2% 25,243 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 1.9% State Street Navigator Securities Lending Portfolio ............................................ $ 478 478 SHORT-TERM INVESTMENTS - 1.1% Investment in joint trading account 1.344% due 07/01/04 (Cost $284)........................................ 284 284 ------ ------- TOTAL INVESTMENTS- (Cost $25,001) 102.2% 26,005 Payables, less cash and receivables- (2.2)% (561) ------ ------- NET ASSETS- 100.0% $25,444 ====== ======= * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Fundamental Growth Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. 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 Com- pany ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash-balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to that Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Trust. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $76 1.50% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $473 $478 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $171, $3,441, $20,156 and $9,696 which expire in 2007, 2008, 2009 and 2010, respectively. Certain of the above losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $500 Million and Excess Over First $500 Million $1 Billion $1 Billion ------------------ ---------------- ----------- 0.80% 0.75% 0.70% 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, the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $12 to the Fund. As of December 15, 2003, John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, with respect to the Fund. Independence Investment LLC is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $7. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $12,994 $13,728 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $24,929 $1,193 $(17) $1,176 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $33,464 $1,176 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $569 $-- $1,607 2002 -- -- -- Included in the Fund's 2003 distributions from ordinary income is $569 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE E-OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Fundamental Growth Fund, a new 92% 1% 7% Sub-Management Agreement among the Trust, John Hancock and Independence Investment LLC ("Independence Investment") to replace the sub-manager and to decrease the sub-investment managment fee paid by John Hancock for management of this Fund. Inception: August 31, 1999 -------------------------------------------------------------------------------- Fundamental Value Fund Wellington Management Company, LLP C. Duckworth -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 1.93%, underperforming its benchmark, the Russell 1000 Value Index. Relative to Morningstar peers, the Fund has an average rating of 3 with a below average risk profile. . The Fund underperformed its benchmark primarily due to unfavorable security selection, especially within the information technology and the materials sectors. . The Fund's exposure to the financials and energy sectors were the largest contributors to absolute performance. . The manager's strategy is to combine the firm's research analysts' best ideas within the large-cap value universe using a bottom-up stock selection process. The Fund is broadly diversified across sectors and industries with sector weights closely aligned with the benchmark to minimize industry-specific risk. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ Bank of America Corp. 4.9% Citigroup, Inc. 4.7% Golden West Financial Corp. 2.5% UnionBanCal Corp. 2.4% Total Fina SA 2.3% MBIA, Inc. 2.1% Time Warner, Inc. 2.0% Altria Group, Inc. 1.9% Federal Home Loan Mortgage Corp. 1.9% Exxon Mobil Corp. 1.8% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Fundamental Russell 1000(R) Value Fund Value Index ------------ --------------- YTD/3/ 1.93% 3.93% 1 Year 18.05 21.13 3 Years 1.01 2.96 Since Inception (8/31/99) 3.78 3.37 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Value MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 35% Energy 12% Consumer Discretionary 11% Industrials 9% Information Technology 8% Utilities 6% Consumer Staples 5% Materials 5% Telecommunication Services 5% Health Care 4% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 594 VL/VUL subaccounts and 1,129 VA subaccounts in the Morningstar Large Value category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted) ASSETS Long term investments at cost (including $6,136 of securities loaned (Note B)) ................................................ $120,393 Net unrealized appreciation of investments ......................... 17,234 Short-term investments at value .................................... 6,469 -------- Total investments ............................................ 144,096 Cash ............................................................... 988 Receivable for: Investments sold ................................................ 521 Dividends ....................................................... 269 Foreign dividend tax withholdings reclaim ....................... 22 Futures contracts variation margin .............................. 2 Other assets .................................................... 4 -------- Total assets ....................................................... 145,902 -------- LIABILITIES Payables for: Investments purchased ........................................... 447 Collateral for securities on loan ............................... 6,339 Foreign dividend tax withholding ................................ 14 Accrued operating expenses ...................................... 17 Line of credit .................................................. 220 -------- Total liabilities .................................................. 7,037 -------- Net assets ......................................................... $138,865 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 12,443 -------- Net asset value per share .......................................... $ 11.16 ======== Composition of net assets: Capital paid-in ................................................. $142,300 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (20,650) Undistributed net investment loss ............................... (20) Net unrealized appreciation of: Investments .................................................. 17,234 Futures ...................................................... 1 -------- Net assets ......................................................... $138,865 ======== See notes to financial statements STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted) INVESTMENT INCOME Interest ....................................................... 38 Dividends (net of foreign withholding tax $25) ................. 1,445 Securities lending ............................................. 9 ------ Total investment income .............................................. 1,492 ------ EXPENSES Investment advisory fee ........................................ 545 Auditors fees .................................................. 9 Custodian fees ................................................. 32 Legal fees ..................................................... 9 Printing & mailing fees ........................................ 12 Trustees' fees ................................................. 2 Other fees ..................................................... 2 ------ Total expenses ....................................................... 611 Less custodian expense reduction offset by commission recapture arrangement (Note C) ........................................ (23) ------ Net expenses ......................................................... 588 ------ Net investment income ................................................ 904 ------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments .................................................... 5,661 Financial futures contracts .................................... 114 Change in unrealized depreciation on: Investments .................................................... (3,998) Futures ........................................................ (56) ------ Net realized and unrealized gain ..................................... 1,721 ------ Net increase in net assets resulting from operations ................. 2,625 ====== STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .................................... $ 904 $ 1,751 Net realized gain (loss) ................................. 5,775 (3,702) Change in net unrealized appreciation (depreciation) ..... (4,054) 32,920 -------- -------- Net increase in net assets resulting from operations .. 2,625 30,969 Distributions to shareholders from: Net investment income .................................... (924) (1,730) Realized gains ........................................... -- (135) -------- -------- Decrease in net assets resulting from distributions ... (924) (1,865) From fund share transactions: Proceeds from shares sold ................................ 15,167 32,368 Distributions reinvested ................................. 924 1,865 Payment for shares redeemed .............................. (17,782) (45,584) -------- -------- Decrease in net assets from fund share transactions ... (1,691) (11,351) -------- -------- NET INCREASE IN NET ASSETS .................................. 10 17,753 NET ASSETS Beginning of Period ...................................... 138,855 121,102 -------- -------- End of Period (including undistributed net investment loss ($20) and $0, respectively) ...................... $138,865 $138,855 ======== ======== Analysis of fund share transactions: Sold ..................................................... 1,356 3,382 Reinvested ............................................... 83 197 Redeemed ................................................. (1,596) (4,906) -------- -------- Net decrease in fund shares outstanding ..................... (157) (1,327) ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Fundamental Value Fund --------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, -------------------------------------------------- 2004 2003 2002 2001 2000 ---------------- -------- -------- -------- ------- Net Assets Value at Beginning of Period ................ $ 11.02 $ 8.70 $ 10.66 $ 11.57 $ 10.42 Income from Investment Operations: Net Investment Income ............................... 0.07 0.14 0.12 0.10 0.09 Net Realized and Unrealized Gain (Loss) on Investment(a) .................................... 0.14 2.33 (1.96) (0.91) 1.30 -------- -------- -------- -------- ------- Total From Investment Operations .................... 0.21 2.47 (1.84) (0.81) 1.39 Less Distributions: Distribution from Net Investment Income ............. (0.07) (0.14) (0.12) (0.10) (0.10) Distribution from Net Realized Gains on Investments ...................................... (0.01) (0.08) Distribution from Excess of Net Investment Income/ Gains ............................................ (g) (0.06) -------- -------- -------- -------- ------- Total Distributions ................................. (0.07) (0.15) (0.12) (0.10) (0.24) -------- -------- -------- -------- ------- Net Assets Value at End of Period ...................... $ 11.16 $ 11.02 $ 8.70 $ 10.66 $ 11.57 ======== ======== ======== ======== ======= Total Investment Return(b) ............................. 1.93%(c) 28.70% (17.40)% (6.99)% 13.41% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........................................... 0.87%(d)(h) 0.89%(e)(h) 0.85% 0.99%(e) 1.05%(e) Ratio of Net Investment Income to Average Net Assets ........................................... 1.29%(d) 1.44% 1.26% 0.91% 0.97% Portfolio Turnover Rate ............................. 32.71%(c) 69.21% 82.22% 85.20%(f) 86.97% Net Assets End of Period (000s Omitted) ................ $138,865 $138,855 $121,102 $161,710 $15,728
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .90%, 1.20%, and 1.36% for the years ended December 31, 2003, 2001, and 2000, respectively. (f) Excludes merger activity. (g) Amount is less than $0.01. (h) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Market Value Name of Issuer Shares (000's) -------------- ------- ------- COMMON STOCK Aerospace & Defense - 2.1% General Dynamics Corp. * ................................ 17,100 $ 1,698 United Technologies Corp. * ............................. 13,000 1,189 ------- 2,887 Air Freight & Couriers - 0.6% Fedex Corp. ............................................. 10,000 817 Airlines - 0.3% Continental Airlines, Inc. - Cl. B * .................... 32,800 373 Auto Components - 1.9% Dana Corp. .............................................. 17,900 351 Johnson Controls, Inc. .................................. 10,400 555 Lear Corp. * ............................................ 28,900 1,705 ------- 2,611 Banks - 14.8% Bank of America Corp. * ................................. 79,400 6,719 City National Corp. ..................................... 8,400 552 Comerica, Inc. .......................................... 19,600 1,076 Commerce Bancshares, Inc. ............................... 18,559 853 Golden West Financial Corp. * ........................... 31,800 3,382 Hibernia Corp. - Cl. A .................................. 84,100 2,043 Regions Financial Corp. ................................. 29,500 1,078 UBS AG .................................................. 19,800 1,407 UnionBanCal Corp. ....................................... 58,900 3,322 Zions Bancorp * ......................................... 1,800 110 ------- 20,542 Beverages - 0.8% Constellation Brands, Inc. - Cl. A * .................... 28,200 1,047 Chemicals - 2.8% Dow Chemical Co. * ...................................... 29,000 1,181 E.I. du Pont de Nemours & Co. * ......................... 33,500 1,488 Rohm & Haas Co. ......................................... 29,900 1,243 ------- 3,912 Commercial Services & Supplies - 1.5% Cendant Corp. * ......................................... 62,300 1,525 Checkfree Corp. * ....................................... 9,600 288 Pitney Bowes, Inc. * .................................... 1,000 44 The Bisys Group, Inc. * ................................. 14,800 208 ------- 2,065 Communications Equipment - 1.5% Corning, Inc. * ......................................... 85,200 1,113 Motorola, Inc. .......................................... 54,800 1,000 ------- 2,113 Computers & Peripherals - 2.2% International Business Machines Corp. ................... 28,500 2,512 Maxtor Corp. * .......................................... 84,800 562 ------- 3,074 Diversified Financials - 12.3% Capital One Financial Corp. ............................. 10,000 $ 684 Citigroup, Inc. * ....................................... 137,866 6,411 Countrywide Credit Industries, Inc. * ................... 15,249 1,071 Eaton Vance Corp. * ..................................... 8,500 325 Federal Home Loan Mortgage Corp. ........................ 42,000 2,659 Franklin Resources, Inc. * .............................. 17,200 861 Goldman Sachs Group, Inc. ............................... 19,800 1,864 Legg Mason, Inc. * ...................................... 4,400 400 Merrill Lynch & Co., Inc. * ............................. 38,800 2,094 Morgan Stanley, Dean Witter, Discover & Co. ............. 14,600 771 ------- 17,140 Diversified Telecommunication Services - 4.2% AT&T Corp. * ............................................ 53,700 786 Citizens Communications Co. * ........................... 120,000 1,452 Deutsche Telekom AG - ADR ............................... 25,100 444 Qwest Communications International, Inc. ................ 246,700 886 Verizon Communications * ................................ 63,700 2,305 ------- 5,873 Electric Utilities - 5.2% Cinergy Corp. * ......................................... 21,500 817 Dominion Resources, Inc. ................................ 4,700 297 Entergy Corp. * ......................................... 14,200 795 Exelon Corp. * .......................................... 68,524 2,281 PG & E Corp. * .......................................... 32,800 917 TXU Corp. ............................................... 51,200 2,074 ------- 7,181 Electrical Equipment - 1.0% American Power Conversion ............................... 68,800 1,352 Energy Equipment & Services - 1.7% Halliburton Co. * ....................................... 75,600 2,288 Gas Utilities - 0.9% UGI Corp. ............................................... 40,500 1,300 Health Care Providers & Services - 1.0% Anthem, Inc. * .......................................... 7,300 654 McKesson HBOC, Inc. ..................................... 22,700 779 ------- 1,433 Hotels Restaurants & Leisure - 0.7% McDonald's Corp.* ....................................... 37,700 980 Household Durables - 0.4% Lennar Corp. ............................................ 13,100 586 Household Products - 0.7% Colgate-Palmolive Co. ................................... 17,600 1,029 Industrial Conglomerates - 2.2% General Electric Co. * .................................. 37,900 1,228 Tyco International, Ltd. * .............................. 56,200 1,862 ------- 3,090 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Market Value Name of Issuer Shares (000's) -------------- -------- -------- COMMON STOCK - Continued Insurance - 4.9% American International Group, Inc. * .................. 15,250 $ 1,087 MBIA, Inc. * .......................................... 51,750 2,956 Prudential Financial, Inc. * .......................... 25,800 1,199 St. Paul Cos., Inc. ................................... 39,800 1,613 -------- 6,855 Internet & Catalog Retail - 0.6% Interactive Corp. ..................................... 26,700 805 Internet Software & Services - 0.4% VeriSign, Inc. * ...................................... 27,600 549 Machinery - 1.2% Caterpillar, Inc. * ................................... 5,600 445 ITT Industries, Inc. * ................................ 15,000 1,245 -------- 1,690 Media - 5.5% Comcast Corp. - Cl. A ................................. 7,100 199 Comcast Corp. - Cl. A ................................. 40,300 1,113 Gannett Co., Inc. * ................................... 11,200 950 Liberty Media Corp. - Ser. A * ........................ 135,300 1,216 Liberty Media International, Inc. - Ser. A* ........... 6,765 251 Sirius Satellite Radio, Inc. * ........................ 196,900 607 Time Warner, Inc. * ................................... 158,900 2,794 XM Satellite Radio Holdings, Inc. - Cl. A ............. 17,200 469 -------- 7,599 Metals & Mining - 0.9% Alcoa, Inc. * ......................................... 39,400 1,301 Multiline Retail - 0.5% Federated Department Stores, Inc. * ................... 13,400 658 Office Electronics - 0.6% Xerox Corp. * ......................................... 58,200 844 Oil & Gas - 9.8% BP Amoco plc - ADR .................................... 17,000 911 ChevronTexaco Corp. * ................................. 23,400 2,202 Conoco Phillips ....................................... 20,485 1,563 Exxon Mobil Corp. * ................................... 56,700 2,518 Marathon Oil Corp. * .................................. 54,600 2,066 Premcor, Inc. * ....................................... 28,700 1,076 Total Fina SA - ADR ................................... 33,500 3,219 -------- 13,555 Paper & Forest Products - 1.5% Bowater, Inc. ......................................... 32,700 1,360 Weyerhaeuser Co. ...................................... 12,200 770 -------- 2,130 Personal Products - 2.0% Alberto-Culver Co. - Cl. B * .......................... 12,900 647 Gillette Co. .......................................... 50,600 2,145 -------- 2,792 Pharmaceuticals - 3.0% Abbott Laboratories * ................................. 27,800 $ 1,133 King Pharmaceuticals, Inc. * .......................... 41,300 473 Medco Health Solutions, Inc. * ........................ 16,600 622 Schering-Plough Corp. * ............................... 89,500 1,654 Watson Pharmaceuticals, Inc. * ........................ 8,200 221 -------- 4,103 Real Estate Investment Trust - 2.6% General Growth Properties ............................. 62,300 1,842 Kimco Realty Corp. .................................... 37,950 1,727 -------- 3,569 Road & Rail - 0.5% Canadian National Railway Co. ......................... 16,950 739 Semiconductor Equipment & Products - 1.4% Fairchild Semiconductor Corp. - Cl. A * ............... 52,400 858 National Semiconductor Corp. * ........................ 47,100 1,035 -------- 1,893 Software - 1.0% Microsoft Corp. * ..................................... 48,000 1,371 Specialty Retail - 1.0% Abercrombie & Fitch Co. ............................... 11,900 461 Foot Locker, Inc. * ................................... 37,900 923 -------- 1,384 Tobacco - 1.9% Altria Group, Inc. .................................... 53,300 2,668 Wireless Telecommunications Services - 1.0% Nextel Communications, Inc. - Cl. A * ................. 53,600 1,429 -------- TOTAL COMMON STOCK- (Cost $120,393) 99.1% 137,627 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 4.6% State Street Navigator Securities Lending Portfolio ... $ 6,339 6,339 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Par Market Name of Issuer Value Value -------------- ------- --------- (000's) (000's) SHORT-TERM INVESTMENTS U.S. Treasury Bills (a) 0.981% due 08/05/04 ................................... $ 20 $ 20 1.07% due 08/26/04 .................................... 50 50 1.164% due 09/02/04 ................................... 35 35 1.302% due 09/23/04 ................................... 25 25 -------- TOTAL SHORT-TERM INVESTMENTS- (Cost $130) 0.1% 130 ------ -------- TOTAL INVESTMENTS- (Cost $126,862) 103.8% 144,096 Payables, less cash and receivables- (3.8)% (5,231) ------ -------- NET ASSETS- 100.0% $138,865 ====== ======== * Non-income producing security. (a) Securities segregated to cover initial margin requirements on open financial futures. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Fundamental Value Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $6,136 $6,339 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 June 30, 2004, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ S&P Mini 500 Index Futures 10 Long September 04 $1 --- $1 ===
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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $406, $18,314 and $5,972 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $25. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between Between $25 Million and $50 Million and Excess Over First $25 Million $50 Million $100 Million $100 Million ----------------- --------------- --------------- ------------ 0.95% 0.85% 0.75% 0.65% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $23. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $45,485 $45,243 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $121,238 $21,179 $(1,616) $19,563 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and to certain distributions received from investments in Real Estate Investment Trusts. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $24,692 $19,563 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (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 $1,729 $-- $136 2002 1,766 -- 28 Inception: August 31, 1999 -------------------------------------------------------------------------------- Fundamental Value B Fund (FORMERLY LARGE CAP VALUE CORE(SM) FUND) WELLINGTON MANAGEMENT COMPANY, LLP C. Duckworth -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 4.27%, outperforming its benchmark, the Russell 1000 Value Index. Relative to Morningstar peers, the Fund has an average/above average rating of 3/4 with a below average risk profile. . On May 1st, the Fund's name, investment strategy and sub-adviser were changed. Wellington implemented an investment strategy for the Fund that is substantially the same as the investment strategy it now employs for the Fundamental Value Fund. . Since May 1st, the Fund underperformed its benchmark primarily due to unfavorable security selection decisions, while sector exposures added modest value. . The manager's strategy is to combine the firm's research analysts' best ideas within the large-cap value universe using a bottom-up stock selection process. The Fund is broadly diversified across sectors and industries with sector weights closely aligned with the benchmark to minimize industry-specific risk. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Bank of America Corp. 4.9% Citigroup, Inc. 4.7% UnionBanCal Corp. 2.5% Golden West Financial Corp. 2.5% Total Fina SA 2.3% Time Warner, Inc. 2.0% Altria Group, Inc. 2.0% Federal Home Loan Mortgage Corp. 1.9% Exxon Mobil Corp. 1.8% International Business Machines Corp. 1.8% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Fundamental Russell 1000(R) Value B Fund Value Index ------------ --------------- YTD/3/ 4.27% 3.93% 1 Year 22.48 21.13 3 Year 1.76 2.96 Since Inception (8/31/99) 2.74 3.37 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Value MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . **** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of assets ------ Financials 35% Consumer Discretionary 11% Energy 11% Industrials 9% Information Technology 8% Utilities 6% Consumer Staples 5% Materials 5% Telecommunication Services 5% Health Care 4% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 594 VL/VUL subaccounts and 1,129 VA subaccounts in the Morningstar Large Value category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Value B Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $ 54,236 Net unrealized appreciation of investments ......................... 2,440 Short-term investments at value .................................... 388 -------- Total investments ............................................ 57,064 Receivable for: Investments sold ................................................ 112 Dividends ....................................................... 72 Futures contracts variation margin .............................. 1 -------- Total assets ....................................................... 57,249 -------- LIABILITIES Payables for: Investment purchased ............................................ 177 Accrued operating expenses ...................................... 9 Other liabilities ............................................... 1 -------- Total liabilities .................................................. 187 -------- Net assets ......................................................... $ 57,062 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 5,647 -------- Net asset value per share .......................................... $ 10.10 ======== Composition of net assets: Capital paid-in ................................................. $ 55,916 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (1,296) Undistributed net investment income ................................ 1 Net unrealized appreciation of: Investments .................................................. 2,440 Futures ...................................................... 1 -------- Net assets ......................................................... $ 57,062 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Fundamental Value B Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 5 Dividends (net of foreign withholding tax of $7) ............. 635 ------- Total investment income ............................................ 640 ------- EXPENSES Investment advisory fee ...................................... 228 Auditors fees ................................................ 3 Custodian fees ............................................... 20 Legal fees ................................................... 3 Printing & mailing fees ...................................... 9 Trustees' ................................................... 1 Other fees ................................................... 1 ------- Total expenses ..................................................... 265 ------- Less expenses reimbursed ..................................... (10) ------- Net expenses ....................................................... 255 ------- Net investment income .............................................. 385 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. 5,551 Financial futures contracts .................................. (56) Change in unrealized depreciation on: Investments .................................................. (3,596) ------- Net realized and unrealized gain ................................... 1,899 ------- Net increase in net assets resulting from operations ............... $ 2,284 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Fundamental Value B Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ....................................................... $ 385 $ 610 Net realized gain ........................................................... 5,495 523 Change in net unrealized appreciation (depreciation) ........................ (3,596) 10,556 ------- ------- Net increase in net assets resulting from operations ..................... 2,284 11,689 Distributions to shareholders from: Net investment income ....................................................... (384) (610) Realized gains .............................................................. (1,764) ------- ------- Decrease in net assets resulting from distributions ...................... (384) (2,374) Capital contributions From fund share transactions: Proceeds from shares sold ................................................... 6,564 10,099 Distributions reinvested .................................................... 384 2,374 Payment for shares redeemed ................................................. (4,820) (9,519) ------- ------- Increase in net assets from fund share transactions ...................... 2,128 2,954 ------- ------- NET INCREASE IN NET ASSETS ..................................................... 4,028 12,269 NET ASSETS Beginning of Period ......................................................... 53,034 40,765 ------- ------- End of Period (including undistributed net investment income of $1 and $0, respectively) ............................................................ $57,062 $53,034 ======= ======= Analysis of fund share transactions: Sold ........................................................................ 654 1,163 Reinvested .................................................................. 39 254 Redeemed .................................................................... (481) (1,112) ------- ------- Net increase in fund shares outstanding ........................................ 212 305 ======= =======
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Fundamental Value B Fund ------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, ---------------------------------------------- 2004(h) 2003 2002 2001 2000 ---------------- ------- ------- ------- ------- Net Assets Value at Beginning of Period ........... $ 9.76 $ 7.95 $ 9.83 $ 10.42 $ 10.16 Income from Investment Operations: Net Investment Income .......................... 0.07 0.12 0.11 0.09 0.15 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................... 0.34 2.15 (1.88) (0.59) 0.36 ------- ------- ------- ------- ------- Total From Investment Operations ............... 0.41 2.27 (1.77) (0.50) 0.51 Less Distributions: Distribution from Net Investment Income ........ (0.07) (0.12) (0.11) (0.09) (0.15) Distribution from Net Realized Gains on Investments ................................. (0.34) (0.06) Distribution from Excess of Net Investment Income/Gains ................................ (0.03) Distribution from Capital Paid-in .............. (0.01) ------- ------- ------- ------- ------- Total Distributions ............................ (0.07) (0.46) (0.11) (0.09) (0.25) ------- ------- ------- ------- ------- Net Assets Value at End of Period ................. $ 10.10 $ 9.76 $ 7.95 $ 9.83 $ 10.42 ======= ======= ======= ======= ======= Total Investment Return(b) ........................ 4.27%(c) 28.86% (18.21)% (4.75)% 5.12% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...................................... 0.93%(d)(f) 0.85%(f) 0.84%(f) 0.85%(f) 0.85%(f) Ratio of Net Investment Income to Average Net Assets ...................................... 1.39%(d) 1.38% 1.18% 0.98% 1.54% Portfolio Turnover Rate ........................ 102.73%(c) 105.62% 89.43% 74.91%(e) 59.15% Net Assets End of Period (000s Omitted) ........... $57,062 $53,034 $40,765 $60,832 $18,164
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Excludes merger activity. (f) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .96% for the period ending June 30, 2004, and .94%, .97%, .88%, and 1.09% for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (h) The Fund entered into a new sub-advisory agreement with Wellington Management Co., LLP, during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL VALUE B FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Aerospace & Defense - 2.1% General Dynamics Corp. * ................................. 7,000 $ 695 United Technologies Corp. * .............................. 5,200 476 ------ 1,171 Air Freight & Couriers - 0.6% Fedex Corp. .............................................. 4,100 335 Airlines - 0.3% Continental Airlines, Inc. - Cl. B * ..................... 13,200 150 Auto Components - 1.9% Dana Corp. ............................................... 7,300 143 Johnson Controls, Inc. ................................... 4,200 224 Lear Corp. * ............................................. 11,800 696 ------ 1,063 Banks - 15.0% Bank of America Corp. * .................................. 32,886 2,783 City National Corp. ...................................... 3,500 230 Comerica, Inc. ........................................... 8,100 444 Commerce Bancshares, Inc. ................................ 7,700 354 Golden West Financial Corp. * ............................ 13,100 1,393 Hibernia Corp. - Cl. A ................................... 35,600 865 Regions Financial Corp. .................................. 12,200 446 UBS AG. .................................................. 8,200 583 UnionBanCal Corp. ........................................ 25,000 1,410 Zions Bancorp * .......................................... 800 49 ------ 8,557 Beverages - 0.8% Constellation Brands, Inc. - Cl. A * ..................... 11,700 434 Chemicals - 2.8% Dow Chemical Co. * ....................................... 12,000 488 E.I. du Pont de Nemours & Co. * .......................... 13,700 609 Rohm & Haas Co. .......................................... 12,400 516 ------ 1,613 Commercial Services & Supplies - 1.5% Cendant Corp. * .......................................... 25,800 631 Checkfree Corp. * ........................................ 3,800 114 Pitney Bowes, Inc. * ..................................... 400 18 The Bisys Group, Inc. * .................................. 5,900 83 ------ 846 Communications Equipment - 1.6% Corning, Inc. * .......................................... 35,300 461 Motorola, Inc. ........................................... 23,300 425 ------ 886 Computers & Peripherals - 2.2% International Business Machines Corp. .................... 11,800 1,040 Maxtor Corp. * ........................................... 34,000 226 ------ 1,266 Diversified Financials - 12.3% Capital One Financial Corp. .............................. 4,000 $ 273 Citigroup, Inc. * ........................................ 57,100 2,655 Countrywide Credit Industries, Inc. * .................... 6,300 443 Eaton Vance Corp. * ...................................... 3,300 126 Federal Home Loan Mortgage Corp. ......................... 17,400 1,101 Franklin Resources, Inc. * ............................... 6,900 346 Goldman Sachs Group, Inc. ................................ 8,100 763 Legg Mason, Inc. * ....................................... 1,800 164 Merrill Lynch & Co., Inc. * .............................. 16,000 864 Morgan Stanley, Dean Witter, Discover & Co. .............. 5,900 311 ------ 7,046 Diversified Telecommunication Services - 4.3% AT&T Corp. * ............................................. 21,500 315 Citizens Communications Co. * ............................ 49,300 596 Deutsche Telekom AG - ADR ................................ 14,500 257 Qwest Communications International, Inc. ................. 85,800 308 Verizon Communications * ................................. 26,400 955 ------ 2,431 Electric Utilities - 5.2% Cinergy Corp. * .......................................... 8,600 327 Dominion Resources, Inc. ................................. 1,800 113 Entergy Corp. * .......................................... 5,800 325 Exelon Corp. * ........................................... 28,400 945 PG & E Corp. * ........................................... 13,600 380 TXU Corp. ................................................ 21,200 859 ------ 2,949 Electrical Equipment - 1.0% American Power Conversion ................................ 28,100 552 Energy Equipment & Services - 1.7% Halliburton Co. * ........................................ 31,300 947 Gas Utilities - 0.9% UGI Corp. ................................................ 16,600 533 Health Care Providers & Services - 1.0% Anthem, Inc. * ........................................... 2,900 260 McKesson HBOC, Inc. ...................................... 9,400 322 ------ 582 Hotels Restaurants & Leisure - 0.7% McDonald's Corp. * ....................................... 15,600 406 Household Durables - 0.4% Lennar Corp. ............................................. 5,200 233 Household Products - 0.7% Colgate-Palmolive Co. .................................... 7,200 421 Industrial Conglomerates - 2.2% General Electric Co. * ................................... 15,700 509 Tyco International, Ltd. * ............................... 23,300 772 ------ 1,281 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- FUNDAMENTAL VALUE B FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Insurance - 5.0% Ambac Financial Group, Inc. .............................. 9,100 $ 668 American International Group, Inc. * ..................... 6,315 450 MBIA, Inc. * ............................................. 9,900 566 Prudential Financial, Inc. * ............................. 10,700 497 St. Paul Cos., Inc. ...................................... 16,300 661 ------- 2,842 Internet & Catalog Retail - 0.6% Interactive Corp. ........................................ 10,900 329 Internet Software & Services - 0.4% VeriSign, Inc. * ......................................... 10,900 217 Machinery - 1.2% Caterpillar, Inc. * ...................................... 2,300 183 ITT Industries, Inc. * ................................... 6,200 514 ------- 697 Media - 5.4% Comcast Corp. - Cl. A .................................... 2,863 80 Comcast Corp. - Cl. A .................................... 16,700 461 Gannett Co., Inc. * ...................................... 4,600 390 Liberty Media Corp. - Ser. A * ........................... 55,300 497 Liberty Media International, Inc. - Ser. A * ............. 2,765 103 Sirius Satellite Radio, Inc. * ........................... 78,500 242 Time Warner, Inc. * ...................................... 65,400 1,150 XM Satellite Radio Holdings, Inc. - Cl. A ................ 6,900 188 ------- 3,111 Metals & Mining - 0.9% Alcoa, Inc. * ............................................ 16,100 532 Multiline Retail - 0.5% Federated Department Stores, Inc. * ...................... 5,400 265 Office Electronics - 0.6% Xerox Corp. * ............................................ 24,100 350 Oil & Gas - 9.7% BP Amoco plc - ADR ....................................... 6,600 353 ChevronTexaco Corp. * .................................... 9,635 907 Conoco Phillips .......................................... 8,400 641 Exxon Mobil Corp. * ...................................... 23,500 1,044 Marathon Oil Corp. * ..................................... 21,700 821 Premcor, Inc. * .......................................... 11,900 446 Total Fina SA - ADR ...................................... 13,800 1,326 ------- 5,538 Paper & Forest Products - 1.5% Bowater, Inc. ............................................ 13,400 557 Weyerhaeuser Co. ......................................... 5,000 316 ------- 873 Personal Products - 2.0% Alberto-Culver Co. - Cl. B * ............................. 5,200 261 Gillette Co. ............................................. 21,100 894 ------- 1,155 Pharmaceuticals - 2.9% Abbott Laboratories * .................................... 11,500 $ 469 King Pharmaceuticals, Inc. * ............................. 16,600 190 Medco Health Solutions, Inc. * ........................... 6,600 248 Schering-Plough Corp. * .................................. 36,800 680 Watson Pharmaceuticals, Inc. * ........................... 3,200 86 ------- 1,673 Real Estate Investment Trust - 2.6% General Growth Properties ................................ 25,800 763 Kimco Realty Corp. ....................................... 15,700 714 ------- 1,477 Road & Rail - 0.5% Canadian National Railway Co. ............................ 6,900 301 Semiconductor Equipment & Products - 1.4% Fairchild Semiconductor Corp. - Cl. A * .................. 21,700 355 National Semiconductor Corp. * ........................... 19,500 429 ------- 784 Software - 1.0% Microsoft Corp. * ........................................ 19,900 568 Specialty Retail - 1.0% Abercrombie & Fitch Co. .................................. 4,700 182 Foot Locker, Inc. * ...................................... 15,700 382 ------- 564 Tobacco - 1.9% Altria Group, Inc. ....................................... 22,100 1,106 Wireless Telecommunications Services - 1.0% Nextel Communications, Inc. - Cl. A * .................... 22,200 592 ------- TOTAL COMMON STOCK- (Cost $54,236) 99.3% 56,676 Par Value ------- (000's) SHORT-TERM INVESTMENTS Investment in joint trading account - 0.5% 1.344% due 07/01/04 .................................... $ 308 308 U.S. Treasury Bills - 0.2% 0.981% due 08/05/04 (a) ................................ 80 80 ------- TOTAL SHORT-TERM INVESTMENTS- (Cost $388) 0.7% 388 ------ ------- TOTAL INVESTMENTS- (Cost $54,624) 100.0% 57,064 Payables, less cash and receivables- 0.0% (2) ------ ------- NET ASSETS- 100.0% $57,062 ====== ======= * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. (a) Security segregated to cover initial margin requirements on open financial futures. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Fundamental Value B (formerly 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 June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $397 1.56% $-- 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 June 30, 2004, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Gain --------- -------- ---------------- ---------- S&P Mini 500 Index Futures 3 Long September 04 $1 --- $1 ===
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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $7. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between Between $25 Million and $50 Million and Excess Over First $25 Million $50 Million $100 Million $100 Million ----------------- --------------- --------------- ------------ 0.95% 0.85% 0.75% 0.65% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $10 to the Fund. As of May 3, 2004, John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Purchases Sales and Maturities --------- -------------------- $58,688 $56,631 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 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 -- -- NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Fundamental Value B Fund, an 87% 9% 4% amendment to the current investment mangement agreement between the Trust and John Hancock to increase the fees paid by this Fund to John Hancock. Inception: May 1, 1996 -------------------------------------------------------------------------------- Global Bond Fund Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- . Year to date, the Fund returned -1.79%, underperforming its benchmark, the Citigroup World Government Bond Index, Unhedged. Relative to Morningstar peers, the Fund has a rating of 2/3 with a below average / average risk profile . The Fund underperformed its benchmark primarily due to currency selection decisions, while duration / yield curve and country allocation decisions added value. . The Fund's exposure to non-US developed countries was the largest contributor to positive performance, while currency exposure to the Euro was the largest detractor. . The manager employs a multiple-manager approach, with the Fund managed by several portfolio managers. The managers select securities using proprietary fundamental research and economic analysis to identify attractive markets and currencies and undervalued sectors and securities. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Federal Republic of Germany 18.0% Government of Japan 12.7% Government of France 12.5% U.S. Treasury 10.2% Kingdom of Spain 3.7% Kingdom of Sweden 3.4% KFW International Finance, Inc. 3.0% U.K. Treasury 2.6% Republic of Finland 2.6% Federal National Mortgage Assoc. 1.8% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN/2/ Global Global Bond Bond Fund/4/ Benchmark/5/ ------------ ------------ YTD/3/ -1.79% -1.52% 1 Year 5.26 5.67 3 Years 11.83 11.96 5 Years 8.32 8.92 Since Inception (5/1/96) 7.86 8.57 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . World Bond MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . ** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004)/2/ % of Credit Quality Assets -------------- ------ AAA/Government/Agency 64.01% AA 5.77% A 17.84% BBB 12.39% BB & lower 0.00% Not Rated/Other 0.00% Weighted Average Yield 3.40% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04 VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 51 VL/VUL subaccounts and 104 VA subaccounts in the Morningstar World Bond category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. There are special risks associated with a nondiversified fund and with international investing including currency fluctuations, political and economic instability, foreign taxation and different accounting standards, as outlined in the current prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ Statistics are based on bond assets only, excluding cash. /5/ Global Bond Benchmark: 75% Lehman Brothers Aggregate Bond and 25% J.P. Morgan Non-US Government Bond Index, Hedged, from May 1996 to April 1999, the J.P. Morgan Global Government Bond Index (Hedged), May 1999 to October 2000, and the Citigroup Government Bond Index, Unhedged, November 2000 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $9,871 of securities loaned (Note B)) ..................................... 96,080 Net unrealized appreciation of investments ......................... 9,410 Short-term investments at value .................................... 10,451 -------- Total investments ............................................ 115,941 Receivable for: Investments sold ................................................ 12 Interest ........................................................ 1,803 Unrealized appreciation in forward currency contracts .................................................... 108 -------- Total assets ....................................................... 117,864 -------- LIABILITIES Payables for: Foreign interest tax expenses ................................... 1 Accrued operating expenses ...................................... 43 Collateral for securities on loan ............................... 10,032 Unrealized depreciation in forward currency contracts .................................................... 312 -------- Total liabilities .................................................. 10,388 -------- Net assets ......................................................... $107,476 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 9,263 -------- Net asset value per share .......................................... $ 11.60 ======== Composition of net assets: Capital paid-in ................................................. $ 97,693 Accumulated net realized gain on investments, futures and foreign currency transactions .................... 209 Undistributed net investment income ............................. 362 Net unrealized appreciation (depreciation) of: Investments .................................................. 9,410 Translation of assets and liabilities in foreign currencies ................................................ (198) -------- Net assets ......................................................... $107,476 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 1,933 Securities lending .............................................. 4 -------- Total investment income ............................................ 1,937 -------- EXPENSES Investment advisory fee ......................................... 456 Auditors fees ................................................... 6 Custodian fees .................................................. 52 Legal fees ...................................................... 7 Printing & mailing fees ......................................... 17 Trustees' fees ................................................. 2 Other fees ...................................................... 1 -------- Total expenses ..................................................... 541 Less expenses reimbursed ........................................ (5) -------- Net expenses ....................................................... 536 -------- Net investment income .............................................. 1,401 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments .................................................. 293 Foreign currency transactions ................................ 1,007 Change in unrealized appreciation (depreciation) on: Investments .................................................. (4,908) Translation of assets and liabilities in foreign currencies ................................................ 208 -------- Net realized and unrealized loss ................................... (3,400) -------- Net decrease in net assets resulting from operations ............... $ (1,999) ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................................ $ 1,401 $ 2,744 Net realized gain ................................................................ 1,300 4,561 Change in net unrealized appreciation (depreciation) ............................. (4,700) 6,812 -------- -------- Net increase (decrease) in net assets resulting from operations ............... (1,999) 14,117 Distributions to shareholders from: Net investment income ............................................................ (1,385) (5,347) Realized gains ................................................................... (1,873) -------- -------- Decrease in net assets resulting from distributions ........................... (1,385) (7,220) From fund share transactions: Proceeds from shares sold ........................................................ 20,464 73,381 Distributions reinvested ......................................................... 1,385 7,220 Payment for shares redeemed ...................................................... (18,284) (58,674) -------- -------- Increase in net assets from fund share transactions ........................... 3,565 21,927 -------- -------- NET INCREASE IN NET ASSETS .......................................................... 181 28,824 NET ASSETS Beginning of Period .............................................................. 107,295 78,471 -------- -------- End of Period (including undistributed net investment income of $362 and $346, respectively) ................................................................. $107,476 $107,295 ======== ======== Analysis of fund share transactions: Sold ............................................................................. 1,721 6,269 Reinvested ....................................................................... 118 598 Redeemed ......................................................................... (1,541) (4,995) -------- -------- Net increase in fund shares outstanding ............................................. 298 1,872 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Global Bond Fund -------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, ----------------------- 2004 2003 2002 2001 2000(c) ---------------- -------- ------- -------- ------- Net Assets Value at Beginning of Period ................ $ 11.97 $ 11.06 $ 9.74 $ 10.34 $ 9.82 Income from Investment Operations: Net Investment Income ............................... 0.17 0.40 0.40 0.38 0.48 Net Realized and Unrealized Gain (Loss) on Investment(a) .................................... (0.39) 1.36 1.43 (0.53) 0.67 -------- -------- ------- ------- ------- Total From Investment Operations .................... (0.22) 1.76 1.83 (0.15) 1.15 Less Distributions: Distribution from Net Investment Income ............. (0.15) (0.63) (0.46) (0.45) (0.63) Distribution from Net Realized Gains on Investments ...................................... (0.22) (0.05) -------- -------- ------- ------- ------- Total Distributions ................................. (0.15) (0.85) (0.51) (0.45) (0.63) -------- -------- ------- ------- ------- Net Assets Value at End of Period ...................... $ 11.60 $ 11.97 $ 11.06 $ 9.74 $ 10.34 ======== ======== ======= ======= ======= Total Investment Return(b) ............................. (1.79)%(f) 15.91% 18.85% (1.45)% 12.00% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........................................... 1.00%(d)(g) 0.95%(d) 0.95%(d) 0.95%(d) 0.81%(d) Ratio of Net Investment Income to Average Net Assets ........................................... 2.63%(g) 2.85% 3.53% 3.73%(e) 4.71% Portfolio Turnover Rate ............................. 17.70%(f) 51.09% 64.15% 41.75% 259.60% Net Assets End of Period (000s Omitted) ................ $107,476 $107,295 $78,471 $47,646 $68,473
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Capital Guardian Trust Company during the period shown. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.01% for the period ending June 30, 2004, and .98%, 1.01%, .95%, and .91%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (e) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 3.96% for the years ended December 31, 2001. (f) Not annualized. (g) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GLOBAL BOND FUND Par Market Name of Issuer Value Value -------------- -------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Australia - 0.2% Government of Australia (FG) 5.75% due 06/15/11 .................................. $ 250 $ 173 Canada - 0.8% Government of Canada (FG) 5.5% due 06/01/10 ................................... 650 509 7.25% due 06/01/07 .................................. 250 204 Government of Canada - Bonds (FG) 7.0% due 12/01/06 ................................... 125 101 Province of British Columbia - Debs. (FG) 6.35% due 06/18/31 .................................. 125 101 ------- 915 Denmark - 2.7% NY Kredit (FB) 5.0% due 10/01/35 ................................... 6,613 1,040 RealKredit Danmark - Notes (JP) 5.0% due 10/01/35 ................................... 11,725 1,843 ------- 2,883 Finland - 2.5% Republic of Finland - Bonds (FB) 5.75% due 02/23/11 .................................. 2,030 2,729 France - 12.2% Government of France (FG) 5.0% due 10/25/11 ................................... 3,570 4,596 Government of France - Bonds (FG) 5.25% due 04/25/08 .................................. 6,580 8,542 ------- 13,138 Germany - 18.4% Bayer Hypo Vereins - Bonds (JP) 6.0% due 02/14/14 ................................... 400 517 Federal Republic of Germany (FG) 4.5% due 07/04/09 ................................... 3,000 3,800 5.0% due 02/17/06 ................................... 830 1,048 5.25% due 01/04/11 .................................. 7,000 9,176 6.0% due 07/04/07 ................................... 1,900 2,504 6.25% due 01/04/30 .................................. 1,250 1,812 Federal Republic of Germany - Bonds (FG) 5.25% due 01/04/08 .................................. 500 648 Kredit Fuer Wiederaufbau (JP) 5.0% due 07/04/11 ................................... 250 322 ------- 19,827 Greece - 0.4% Hellenic Republic - Bonds (FG) 8.8% due 06/19/07 ................................... 293 415 Italy - 0.2% Edison (J3) 1.0% due 07/20/07 ................................... 125 168 Japan - 12.5% Government of Japan (FG) 0.5% due 06/20/13 ................................... $160,000 $ 1,322 Government of Japan - Bonds (FG) 0.9% due 12/22/08 ................................... 685,000 6,323 1.1% due 03/21/11 ................................... 320,000 2,900 Government of Japan (FG) 1.8% due 03/22/10 ................................... 300,000 2,866 ------- 13,411 Luxembourg - 2.9% KFW International Finance, Inc. (FB) 1.75% due 03/23/10 .................................. 330,000 3,119 Netherlands - 1.5% Government of Netherlands (FG) 5.5% due 01/15/28 ................................... 1,220 1,609 New Zealand - 0.3% Government of New Zealand - Bonds (FG) 8.0% due 11/15/06 ................................... 500 330 Norway - 0.6% Kingdom of Norway (FG) 6.0% due 05/16/11 ................................... 3,850 610 Spain - 2.6% Kingdom of Spain (FG) 6.15% due 01/31/13 .................................. 2,000 2,769 Supra National - 15.4% Allied Irish Banks plc (JP) 7.5% due 12/29/49 ................................... 500 706 Arena Brands Co. (JG) 6.1% due 11/15/62 ................................... 500 680 Bank of America (JP) 3.625% due 03/03/08 ................................. 250 305 4.75% due 05/06/19 .................................. 400 481 Bank of Ireland (JP) 6.45% due 02/10/10 .................................. 1,000 1,356 BNP Paribas (JP) 5.25% due 01/23/14 .................................. 125 160 Daimler Chrysler International Finance Co. (FB) 6.125% due 03/21/06 ................................. 850 1,085 Deutsche Telekom International Finance (FB) 7.5% due 05/29/07 ................................... 125 169 Deutsche Telekom International Finance BV (FB) 8.125% due 05/29/12 ................................. 540 799 E On International Finance (FB) 5.75% due 05/29/09 .................................. 710 935 Edison Spa (J3) 5.125% due 12/10/10 ................................. 830 1,035 European Investment Bank - Notes (JA) 3.0% due 09/20/06 ................................... 60,000 580 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GLOBAL BOND FUND Par Market Name of Issuer Value Value -------------- -------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Supra National - Continued Federal National Mortgage Assoc. - Bonds (FD) 2.125% due 10/09/07 ................................. $100,000 $ 962 Ford Credit Canada, Ltd. (AL) 4.875% due 05/17/07 ................................. 430 534 France Telecom (J1) 8.25% due 03/14/08 .................................. 250 338 9.0% due 03/14/11 ................................... 405 802 GIE Psa Tresorerie - Bonds (BV) 5.875% due 09/27/11 ................................. 250 329 HSBC Capital Funding (FB) 8.03% due 12/29/49 .................................. 350 514 International Bank of Reconstruction & Development - Notes (JP) 2.0% due 02/18/08 ................................... 80,000 766 International-American Development Bank - Bonds (JP) 1.9% due 07/08/09 ................................... 100,000 960 Kingdom of Spain - Notes (FG) 3.1% due 09/20/06 ................................... 120,000 1,163 Misuho Finance Cayman (FB) 4.75% due 04/15/14 .................................. 475 581 PLD International Finance LLC (FB) 4.375% due 04/13/11 ................................. 350 415 RWE Finance BV (FB) 6.125% due 10/26/12 ................................. 125 169 Sogerim SA (J1) 7.25% due 04/20/11 .................................. 125 173 Veolia Environment (J6) 4.875% due 05/28/13 ................................. 440 534 ------- 16,531 Sweden - 3.9% Kingdom of Sweden (FG) 5.25% due 03/15/11 .................................. 11,000 1,535 Spintab - Bonds (JP) 6.0% due 04/20/09 ................................... 5,000 710 Swedish Government (FG) 5.0% due 01/28/09 ................................... 14,200 1,963 ------- 4,208 United Kingdom - 5.7% British Telecom Plc (J1) 7.125% due 02/15/11 ................................. 780 1,084 Imperial Tobacco Finance plc (FB) 6.375% due 09/27/06 ................................. 510 660 National Grid Group Finance (FB) 5.25% due 08/23/06 .................................. 410 520 6.125% due 08/23/11 ................................. 250 332 Royal Bank of Scotland (JP) 4.875% due 03/26/09 ................................. 125 158 Standard Chartered Bank (JP) 5.375% due 05/06/09 ................................. 500 641 United Kingdom - Continued U.K. Treasury (FG) 4.25% due 06/07/32 .................................. $ 320 $ 530 U.K. Treasury - Bonds (FG) 6.0% due 12/07/28 ................................... 50 105 U.K. Treasury (FG) 7.25% due 12/07/07 .................................. 660 1,279 8.0% due 12/07/15 ................................... 250 568 8.0% due 06/07/21 ................................... 125 303 ------- 6,180 United States - 15.3% Bank Americorp - Sr. Notes (JP) 4.875% due 09/15/12 ................................. 400 390 Clear Channel Communications, Inc. (JA) 7.65% due 09/15/10 .................................. 125 141 Dominion Resources, Inc. - Sr. Notes Ser. B (EU) 4.125% due 02/15/08 ................................. 250 250 Federal National Mortgage Assoc. - Notes (FD) 6.0% due 05/15/08 ................................... 900 969 General Motors Acceptance Corp. - Notes (AL) 6.875% due 09/15/11 ................................. 1,025 1,051 Kellogg Co. - Notes Ser. B (JH) 6.6% due 04/01/11 ................................... 500 548 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004 A1 Cl. 2A1 (OC) 4.67% due 02/25/34 .................................. 338 336 Metlife, Inc. - Debs. (JR) 3.911% due 05/15/05 ................................. 190 192 News America, Inc. - Sr. Notes (JA) 6.75% due 01/09/38 .................................. 125 137 NiSource Finance Corp. - Sr. Notes (FB) 6.15% due 03/01/13 .................................. 80 83 Pulte Homes, Inc. - Sr. Notes (BJ) 6.25% due 02/15/13 .................................. 100 102 8.125% due 03/01/11 ................................. 25 29 Schering Plough Corp. - Sr. Notes (JO) 5.3% due 12/01/13 ................................... 125 123 SLM Corp. (JQ) 5.0% due 04/15/15 ................................... 375 355 Sprint Capital Corp. - Notes (J1) 8.375% due 03/15/12 ................................. 100 115 Telstra, Ltd. - Notes (J1) 6.375% due 04/01/12 ................................. 125 134 U.S. Treasury - Notes (TN) 1.125% due 06/30/05 ................................. 1,750 1,734 2.0% due 11/30/04 ................................... 550 551 3.25% due 08/15/07 .................................. 2,500 2,502 5.75% due 08/15/10 .................................. 250 273 6.5% due 02/15/10 ................................... 500 563 6.875% due 05/15/06 ................................. 1,450 1,561 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GLOBAL BOND FUND Par Market Name of Issuer Value Value -------------- -------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued United States - Continued U.S. Treasury - Bonds (TB) 5.25% due 02/15/29 ................................ $ 500 $ 490 6.375% due 08/15/27 ............................... 1,000 1,129 8.875% due 08/15/17 ............................... 1,425 1,953 Univision Communications, Inc. - Sr. Notes (JA) 7.85% due 07/15/11 ................................ 100 115 Viacom, Inc. - Sr. Notes (JA) 6.625% due 05/15/11 ............................... 250 272 Washington Mutual, Inc. (JQ) 5.625% due 01/15/07 ............................... 125 131 Wells Fargo & Co. - Notes (JQ) 3.5% due 04/04/08 ................................. 250 246 -------- 16,475 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $96,080) .................................... 98.1% 105,490 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 9.3% State Street Navigator Securities Lending Portfolio ......................................... 10,032 10,032 SHORT-TERM INVESTMENTS - 0.4% Investment in joint trading account 1.344% due 07/01/04 (Cost $419) ....................................... 419 419 -------- ------- TOTAL INVESTMENTS- (Cost $106,531) 107.8% 115,941 Payables, less cash and receivables- (7.8)% (8,465) -------- -------- NET ASSETS- 100.0% $107,476 ======== ======== See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------- ----------- Foreign Governmental ................... FG $59,804 56.7% Finance ................................ FB 13,150 12.5% Banks .................................. JP 9,895 9.4% U.S. Treasury Notes .................... TN 7,184 6.8% U.S. Treasury Bonds .................... TB 3,572 3.4% Diversified Telecommunication Services ............................ J1 2,645 2.5% U.S. Government Agencies ............... FD 1,931 1.8% Auto Loan .............................. AL 1,585 1.5% Electric Utilities ..................... J3 1,203 1.2% Diversified Financials ................. JQ 732 0.7% Beverages .............................. JG 680 0.7% Media .................................. JA 664 0.6% Food Products .......................... JH 548 0.5% Water Utilities ........................ J6 534 0.5% Whole Loan CMOs ........................ OC 337 0.3% Automobiles ............................ BV 329 0.3% Electric/Gas ........................... EU 250 0.2% Insurance .............................. JR 193 0.2% Construction & Engineering ............. BJ 131 0.1% Pharmaceuticals ........................ JO 123 0.1% -------- ----- $105,490 100.0% ======== ===== See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Global Bond Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Investment security transactions are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain fund securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available". The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (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 period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $161 1.53% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $9,871 $10,032 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. As of June 30, 2004, the Fund had open forward currency contracts, which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Unrealized Principal Amount Appreciation/ Covered by Contract Expiration Month (Depreciation) ------------------- ---------------- -------------- Currency Purchased Euro 1,645 August 04 $ 11 Japanese Yen 2,972 July 04 95 Japanese Yen 728 August 04 5 Japanese Yen 1,637 September 04 4 Japanese Yen 7,681 October 04 (7) ----- $ 108 ===== Currency Sold Euro 2,262 July 04 $ (52) Euro 2,792 July 04 (69) Euro 1,617 August 04 (38) Euro 7,681 October 04 (153) ----- $(312) ===== Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $1,028 and $1 which expire in 2008 and 2010, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred approximately $258 in net realized currency losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending on December 31, 2004. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Between Between $150 Million and $300 Million and Excess Over First $150 Million $300 Million $500 Million $500 Million ------------------ ---------------- ---------------- ------------ 0.85% 0.80% 0.75% 0.70% For the period from January 1, 2004 to April 30, 2004, John Hancock and JVLICO agreed to reimburse the Fund for normal operating expenses, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses that exceed 0.10% of the Fund's daily net asset value. Accordingly, for the period from January 1, 2004 to April 30, 2004 the Fund was reimbursed $5 by John Hancock and JVLICO. On March 18, 2004, the Fund's Shareholders approved the removal of John Hancock and JVLICO's respective obligations to reimburse the Fund for excess operating expenses effective May 1, 2004. John Hancock has entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $22,758 $18,681 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $101,162 $14,298 $(42) $14,256 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss, premium amortization and market NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued discount accretion on debt securities, and sale of certain foreign currency denominated debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $1,029 $14,256 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $6,998 $-- $222 2002 3,132 -- 335 Included in the Fund's 2003 distributions from ordinary income is $1,714 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Global Bond Fund, an amendment 84% 7% 9% to the current investment mangement agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this expenses. Inception: March 29, 1986 -------------------------------------------------------------------------------- Growth & Income Fund Independence Investment LLC J. Forelli/T. Spicer T. Rowe Price Associates, Inc. Robert W. Sharps -------------------------------------------------------------------------------- . Fund employs a multi-style and multi-manager approach with two sub-advisers independently managing portions of the Fund. The Fund uses three distinct investment styles intended to complement each other: growth, value and blend. As of quarter end, Independence managed 81% of the Fund (61% blend sleeve / 20% value sleeve) and T. Rowe Price managed 19% of the Fund (growth sleeve). . The multi-manager approach seeks to produce more consistent investment returns over market cycles and to reduce the risk of any one manager or strategy being out of favor in certain market environments. . Independence selects stocks using a combination of fundamental equity research and quantitative portfolio construction tools. Stocks are purchased that combine cheapness and improving fundamentals with favorable valuations and earnings growth prospects. . T. Rowe Price selects stocks using a bottom-up, fundamental equity research approach, focusing on companies with above-average earnings growth and cash flow relative to peers and sustainable earnings momentum. T. Rowe Price assumed management of this portion of the Fund in mid December 2003. Fund Commentary . Year-to-date, the Fund returned 2.67%, underperforming its benchmark, the Russell 1000 Index. Relative to Morningstar peers, the Fund has a below average rating of 2 with an average risk profile. Independence Investment LLC . Blend Sleeve: This portion of the Fund underperformed its benchmark primarily due to unfavorable stock selection broadly across sectors and unfavorable sector allocation exposures. . The largest absolute performance contributors were exposures to companies in the industrials and energy sectors, while exposures to consumer discretionary and information technology companies were the largest detractors. . Value Sleeve: This portion of the Fund underperformed its benchmark primarily due to unfavorable stock selection broadly across sectors and unfavorable sector allocation exposures. . The largest absolute performance contributors were exposures to companies in the industrials and energy sectors, while exposures to information technology companies were the largest detractors. T. Rowe Price Associates . Growth Sleeve: This portion of the Fund outperformed its benchmark primarily due to favorable stock selection especially within information technology, with sector allocation exposures also contributing. . The largest absolute performance contributors were exposures to companies in industrials and information technology sectors. Inception: March 29, 1986 -------------------------------------------------------------------------------- Growth & Income Fund Independence Investment LLC J. Forelli/T. Spicer T. Rowe Price Associates, INC. Robert W. Sharps -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Citigroup, Inc. 3.4% General Electric Co. 3.2% Exxon Mobil Corp. 3.2% Microsoft Corp. 2.7% Pfizer, Inc. 2.1% Bank of America Corp. 2.0% American International Group, Inc. 1.9% Intel Corp. 1.9% Johnson & Johnson 1.4% Cisco Systems, Inc. 1.4% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Growth & Income Growth & Income Fund Benchmark/4/ --------------- --------------- YTD/3/ 2.67% 3.32% 1 Year 17.49 19.47 3 Years -2.58 -0.50 5 Years -5.32 -2.09 10 Years 9.09 11.89 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Blend MORNINGSTAR RISK/1/: . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . ** (VL/VUL) . ** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 24% Information Technology 18% Consumer Discretionary 15% Health Care 12% Industrials 12% Energy 7% Consumer Staples 6% Materials 3% Telecommunication Services 3% Utilities 2% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 1,110 VL/VUL subaccounts and 1,932 VA subaccounts in the Morningstar Large Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ The Growth & Income Benchmark represents the S&P 500 Index from April 1986 to April 2002 and then the Russell 1000 from May 2002 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted) ASSETS Long term investments at cost (including $48,887 of securities loaned (Note B)) .................................. $1,917,817 Net unrealized appreciation of investments ...................... 214,540 Short-term investments at value ................................. 60,336 ---------- Total investments ......................................... 2,192,693 Receivable for: Investments sold ............................................. 3,254 Dividends .................................................... 2,090 ---------- Total assets .................................................... 2,198,037 ---------- LIABILITIES Payables for: Investments purchased ........................................ 2,902 Collateral for securities on loan ............................ 49,792 Foreign dividend tax withholding ............................. 3 Accrued operating expenses ................................... 669 Other payables ............................................... 1 Other liabilities ............................................ 39 ---------- Total liabilities ............................................... 53,406 ---------- Net assets ...................................................... $2,144,631 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ........................................... 185,620 ---------- Net asset value per share ....................................... $ 11.55 ========== Composition of net assets: Capital paid-in .............................................. $2,633,615 Accumulated net realized loss on investments, futures and foreign currency transactions ................. (703,558) Undistributed net investment income .......................... 34 Net unrealized appreciation of investments ................... 214,540 ---------- Net assets ...................................................... $2,144,631 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 265 Dividends (net of foreign withholding tax of $24) ................................................... 14,861 Securities lending ........................................... 39 ---------- Total investment income ......................................... 15,165 ---------- EXPENSES Investment advisory fee ...................................... 7,173 Auditors fees ................................................ 137 Custodian fees ............................................... 288 Fidelity Bond fees ........................................... 2 Legal fees ................................................... 133 Printing & mailing fees ...................................... 177 Trustees' fees ............................................... 32 Other fees ................................................... 34 ---------- Total expenses .................................................. 7,976 Less custodian expense reduction offset by commission recapture arrangement (Note C) .................................................. (423) ---------- Net expenses .................................................... 7,553 ---------- Net investment income ........................................... 7,612 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ............................. 102,409 Change in unrealized depreciation on investments ............................................... (53,749) ---------- Net realized and unrealized Gain ................................ 48,660 ---------- Net increase in net assets resulting from operations ................................................... $ 56,272 ========== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ........................................................ $ 7,612 $ 18,856 Net realized gain (loss) ..................................................... 102,409 (24,691) Change in net unrealized appreciation (depreciation) ......................... (53,749) 429,847 ---------- ---------- Net increase in net assets resulting from operations ...................... 56,272 424,012 Distributions to shareholders from: Net investment income ........................................................ (7,578) (18,865) Realized gains ............................................................... (10,107) ---------- ---------- Decrease in net assets resulting from distributions ....................... (7,578) (28,972) Capital contributions From fund share transactions: Proceeds from shares sold .................................................... 79,485 104,683 Shares issued in reorganization .............................................. 66,546 Distributions reinvested ..................................................... 7,578 28,972 Payment for shares redeemed .................................................. (119,147) (229,423) ---------- ---------- Decrease in net assets from fund share transactions ....................... (32,084) (29,222) ---------- ---------- NET INCREASE IN NET ASSETS ...................................................... 16,610 365,818 NET ASSETS Beginning of Period .......................................................... 2,128,021 1,762,203 ---------- ---------- End of Period (including undistributed net investment income of $34 and $0, respectively) ............................................................. $2,144,631 $2,128,021 ========== ========== Analysis of fund share transactions: Sold ......................................................................... 6,955 10,526 Issued in reorganization ..................................................... 7,117 Reinvested ................................................................... 661 2,786 Redeemed ..................................................................... (10,426) (23,196) ---------- ---------- Net decrease in fund shares outstanding ......................................... (2,810) (2,767) ========== ==========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Growth & Income Fund --------------------------------------------------------------------------- Unaudited Period Ended June 30, Year Ended December 31, ------------------------ 2004 2003(f) 2002 2001 2000(c) ------------ ---------- ---------- ---------- ---------- Net Assets Value at Beginning of Period ..... $ 11.29 $ 9.22 $ 11.93 $ 14.18 $ 20.01 Income from Investment Operations: Net Investment Income .................... 0.04 0.10 0.08 0.06 0.17 Net Realized and Unrealized Gain (Loss) on Investment(a) ...................... 0.26 2.12 (2.71) (2.25) (2.77) ---------- ---------- ---------- ---------- ---------- Total From Investment Operations ......... 0.30 2.22 (2.63) (2.19) (2.60) Less Distributions: Distribution from Net Investment Income ................................ (0.04) (0.10) (0.08) (0.06) (0.17) Distribution from Net Realized Gains on Investments ........................... (0.05) (2.69) Distribution from Excess of Net Investment Income/Gains .......................... (0.14) Distribution from Capital Paid-in ........ (0.23) ---------- ---------- ---------- ---------- ---------- Total Distributions ...................... (0.04) (0.15) (0.08) (0.06) (3.23) ---------- ---------- ---------- ---------- ---------- Net Assets Value at End of Period ........... $ 11.55 $ 11.29 $ 9.22 $ 11.93 $ 14.18 ========== ========== ========== ========== ========== Total Investment Return(b) .................. 2.67%(g) 24.35% (22.18)% (15.44)% (13.10)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................ 0.75%(e)(h) 0.73%(e) 0.75% 0.72% 0.40% Ratio of Net Investment Income to Average Net Assets ............................ 0.72%(h) 1.00% 0.73% 0.49% 0.84% Portfolio Turnover Rate .................. 31.87%(g) 91.53%(d) 73.60% 104.47%(d) 112.94% Net Assets End of Period (000s Omitted) ..... $2,144,631 $2,128,021 $1,762,203 $2,476,319 $3,324,988
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The fund entered into a new sub-advisory agreement with Putnam Investment Management, Inc. during the period shown. (d) Excludes merger activity. (e) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (f) The Fund entered into a new Sub-Advisory Agreement with T. Rowe during the period shown. (g) Not annualized. (h) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK Aerospace & Defense - 1.6% Boeing Co. * ......................................... 280,200 $ 14,315 United Technologies Corp. * .......................... 223,400 20,437 -------- 34,752 Air Freight & Couriers - 0.8% Fedex Corp. .......................................... 129,000 10,538 United Parcel Service, Inc. - Cl. B .................. 92,900 6,983 -------- 17,521 Auto Components - 0.4% Borg-Warner Automotive, Inc. ......................... 42,600 1,865 Magna International, Inc. - Cl. A .................... 77,000 6,558 -------- 8,423 Automobiles - 1.5% Ford Motor Co. ....................................... 136,500 2,136 General Motors Corp. * ............................... 414,900 19,330 Harley-Davidson, Inc. * .............................. 183,000 11,335 -------- 32,801 Banks - 4.4% Bank of America Corp. * .............................. 513,262 43,432 Bank One Corp. * ..................................... 252,300 12,867 Golden West Financial Corp. * ........................ 81,500 8,668 SouthTrust Corp. * ................................... 175,400 6,807 US Bancorp * ......................................... 142,900 3,938 Wachovia Corp. * ..................................... 63,300 2,817 Wells Fargo & Co. * .................................. 292,800 16,757 -------- 95,286 Beverages - 1.7% Anheuser-Busch Cos., Inc. ............................ 354,000 19,116 Coca-Cola Co. * ...................................... 179,500 9,061 PepsiCo, Inc. * ...................................... 156,600 8,438 -------- 36,615 Biotechnology - 1.8% Amgen, Inc. * ........................................ 270,000 14,734 Biogen IDEC, Inc. * .................................. 148,200 9,373 Genetech, Inc. * ..................................... 114,000 6,407 Gilead Sciences, Inc. * .............................. 121,000 8,107 -------- 38,621 Chemicals - 1.4% Dow Chemical Co. * ................................... 385,000 15,670 Praxair, Inc. * ...................................... 201,200 8,030 Rohm & Haas Co. ...................................... 172,400 7,168 -------- 30,868 Commercial Services & Supplies - 1.1% Apollo Group, Inc. - Cl. A * ......................... 78,500 6,930 Automatic Data Processing, Inc. ...................... 259,000 10,847 Choicepoint, Inc. * .................................. 111,100 5,073 -------- 22,850 Communications Equipment - 3.6% Cisco Systems, Inc. * ................................ 1,264,200 $ 29,962 Corning, Inc. * ...................................... 367,000 4,793 Harris Corp. ......................................... 28,300 1,436 Juniper Networks, Inc. * ............................. 256,200 6,295 Lucent Technologies, Inc. * .......................... 913,900 3,455 Motorola, Inc. ....................................... 837,500 15,284 Qualcomm, Inc. * ..................................... 109,900 8,020 Research in Motion, Ltd. * ........................... 103,500 7,084 -------- 76,329 Computers & Peripherals - 2.6% Dell, Inc. * ......................................... 775,600 27,782 EMC Corp. * .......................................... 514,500 5,866 International Business Machines Corp. ................ 251,200 22,143 -------- 55,791 Diversified Financials - 12.3% American Express Co. * ............................... 108,100 5,554 Ameritrade Holding Corp. * ........................... 426,800 4,844 Capital One Financial Corp. .......................... 186,000 12,719 CIT Group, Inc. * .................................... 195,000 7,467 Citigroup, Inc. * .................................... 1,562,525 72,657 E*TRADE Group, Inc. * ................................ 225,600 2,515 Federal Home Loan Mortgage Corp. ..................... 250,300 15,844 Federal National Mortgage Assoc. * ................... 253,000 18,054 Goldman Sachs Group, Inc. ............................ 167,800 15,800 JP Morgan Chase & Co. ................................ 732,600 28,403 MBNA Corp. * ......................................... 549,600 14,174 Merrill Lynch & Co., Inc. * .......................... 364,100 19,654 Morgan Stanley, Dean Witter, Discover & Co. .......... 481,500 25,409 SLM Corp. * .......................................... 144,300 5,837 State Street Corp. ................................... 307,300 15,070 -------- 264,001 Diversified Telecommunication Services - 2.0% BellSouth Corp ....................................... 454,800 11,925 SBC Communications, Inc. * ........................... 72,100 1,748 Sprint Corp. * ....................................... 241,900 4,257 Verizon Communications * ............................. 671,500 24,302 -------- 42,232 Electric Utilities - 1.7% Constellation Energy Group, Inc. * ................... 308,100 11,677 Dominion Resources, Inc .............................. 50,400 3,179 Edison International * ............................... 298,200 7,625 Entergy Corp. * ...................................... 73,800 4,134 PG & E Corp. * ....................................... 190,200 5,314 TXU Corp. ............................................ 106,100 4,298 -------- 36,227 Electrical Equipment - 0.9% American Power Conversion ............................ 318,400 6,257 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued Electrical Equipment - Continued Rockwell International Corp. * ....................... 343,600 $ 12,888 -------- 19,145 Electronic Equipment & Instruments - 0.3% Sanmina Corp. * ...................................... 775,500 7,057 Energy Equipment & Services - 0.7% National-Oilwell, Inc. * ............................. 162,000 5,101 Transocean Sedco Forex, Inc. * ....................... 320,300 9,270 -------- 14,371 Food & Drug Retailing - 0.7% Sysco Corp. * ........................................ 261,200 9,369 Walgreen Co. * ....................................... 155,900 5,645 -------- 15,014 Gas Utilities - 0.3% Sempra Energy * ...................................... 158,400 5,454 Health Care Equipment & Supplies - 1.8% Boston Scientific Corp. * ............................ 170,200 7,285 Guidant Corp. ........................................ 64,500 3,604 Medtronic, Inc. * .................................... 170,800 8,321 St. Jude Medical, Inc. * ............................. 112,600 8,518 Stryker Corp. * ...................................... 43,400 2,387 Zimmer Holdings, Inc. * .............................. 104,400 9,208 -------- 39,323 Health Care Providers & Services - 2.4% Amerisource Bergen Corp. * ........................... 73,000 4,364 Anthem, Inc. * ....................................... 256,800 22,999 UnitedHealth Group, Inc. * ........................... 377,700 23,512 -------- 50,875 Hotels Restaurants & Leisure - 1.5% Carnival Corp. ....................................... 118,400 5,565 Hilton Hotels Corp. * ................................ 299,300 5,585 International Game Technology * ...................... 293,900 11,345 International Speedway Corp. - Cl. A ................. 26,900 1,308 Yum Brands, Inc. * ................................... 200,000 7,444 -------- 31,247 Household Durables - 0.9% Centex Corp. * ....................................... 109,900 5,028 Leggett & Platt, Inc. * .............................. 245,700 6,563 Maytag Corp. * ....................................... 298,700 7,321 -------- 18,912 Household Products - 0.7% Procter & Gamble Co. * ............................... 279,800 15,232 Industrial Conglomerates - 5.2% 3M Co. ............................................... 225,400 20,288 General Electric Co. * ............................... 2,096,800 67,936 Honeywell International, Inc. ........................ 235,700 8,634 Tyco International, Ltd. * ........................... 438,300 $ 14,525 -------- 111,383 Insurance - 6.7% AFLAC, Inc. * ........................................ 215,600 8,799 Allstate Corp ........................................ 310,500 14,454 American International Group, Inc. * ................. 560,700 39,967 Chubb Corp. * ........................................ 60,400 4,118 Everest Re Group, Ltd. ............................... 53,700 4,315 Hartford Financial Services Group, Inc. * ............ 424,100 29,152 Lincoln National Corp. * ............................. 180,200 8,514 Old Republic International Corp. ..................... 101,100 2,398 Protective Life Corp. ................................ 39,100 1,512 Prudential Financial, Inc. * ......................... 470,600 21,869 St. Paul Cos., Inc. .................................. 217,215 8,806 -------- 143,904 Internet & Catalog Retail - 1.0% eBay, Inc. * ......................................... 67,900 6,244 Interactive Corp. .................................... 523,500 15,778 -------- 22,022 Internet Software & Services - 0.3% Yahoo, Inc. * ........................................ 178,600 6,488 IT Consulting & Services - 1.2% Accenture, Ltd. - Cl. A * ............................ 810,500 22,273 Affiliated Computer Services, Inc. - Cl. A * ......... 75,300 3,986 -------- 26,259 Machinery - 2.2% Danaher Corp. * ...................................... 497,200 25,780 Eaton Corp. * ........................................ 156,000 10,100 ITT Industries, Inc. * ............................... 108,100 8,972 Pall Corp. * ......................................... 92,300 2,417 -------- 47,269 Media - 4.6% Clear Channel Communications, Inc. ................... 236,400 8,735 Comcast Corp. - Cl. A ................................ 707,100 19,820 E.W. Scripps Co. - Cl. A ............................. 61,400 6,447 EchoStar Communications Corp. - Cl. A * .............. 255,900 7,869 Fox Entertainment Group, Inc. - Cl. A * .............. 197,800 5,281 Omnicom Group, Inc. .................................. 77,300 5,866 The Walt Disney Co. * ................................ 687,000 17,512 Time Warner, Inc. * .................................. 1,176,400 20,681 Tribune Co. * ........................................ 134,000 6,103 -------- 98,314 Metals & Mining - 0.8% Alcoa, Inc. * ........................................ 204,300 6,748 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- ---------- (000's) COMMON STOCK - Continued Metals & Mining - Continued Nucor Corp. ........................................ 49,200 $ 3,777 United States Steel Corp. * ........................ 217,200 7,628 ---------- 18,153 Multiline Retail - 2.3% BJ's Wholesale Club, Inc. * ........................ 76,600 1,915 Family Dollar Stores, Inc. ......................... 72,600 2,209 Federated Department Stores, Inc. * ................ 264,500 12,987 Kohl's Corp.* ...................................... 44,400 1,877 Nordstrom, Inc. .................................... 281,300 11,986 Target Corp. * ..................................... 129,200 5,487 Wal-Mart Stores, Inc. * ............................ 237,200 12,515 ---------- 48,976 Office Electronics - 0.2% Xerox Corp. * ...................................... 359,800 5,217 Oil & Gas - 6.0% BP Amoco plc - ADR ................................. 78,400 4,200 Conoco Phillips .................................... 336,200 25,649 Devon Energy Corp. * ............................... 167,400 11,048 Exxon Mobil Corp. * ................................ 1,512,300 67,161 Murphy Oil Corp. ................................... 108,100 7,967 Occidental Petroleum Corp. * ....................... 84,900 4,110 Pioneer Natural Resources Co. ...................... 231,400 8,118 ---------- 128,253 Paper & Forest Products - 0.7% Georgia-Pacific Corp. * ............................ 205,000 7,581 International Paper Co. * .......................... 164,000 7,331 ---------- 14,912 Personal Products - 1.1% Avon Products, Inc. ................................ 218,200 10,068 Estee Lauder Cos., Inc. - Cl. A .................... 151,000 7,366 Gillette Co. ....................................... 131,900 5,592 ---------- 23,026 Pharmaceuticals - 5.9% Abbott Laboratories * .............................. 346,900 14,139 Bristol-Myers Squibb Co. * ......................... 43,300 1,061 Eli Lilly & Co. * .................................. 47,600 3,328 Forest Laboratories, Inc. * ........................ 152,000 8,608 Johnson & Johnson .................................. 542,400 30,212 Merck & Co., Inc. * ................................ 503,100 23,897 Pfizer, Inc. * ..................................... 1,311,960 44,974 Watson Pharmaceuticals, Inc. * ..................... 29,600 796 ---------- 127,015 Semiconductor Equipment & Products - 4.1% Analog Devices, Inc. * ............................. 270,600 12,740 Applied Materials, Inc. * .......................... 190,400 3,736 Applied Micro Circuits Corp. * ..................... 166,000 883 Intel Corp. ........................................ 1,443,400 39,838 Maxim Integrated Products, Inc. * .................. 109,400 5,735 Novellus Systems, Inc. * ........................... 180,400 $ 5,672 QLogic Corp. * ..................................... 68,400 1,819 RF Micro Devices, Inc. * ........................... 449,100 3,368 Texas Instruments, Inc. * .......................... 372,100 8,997 Xilinx, Inc. * ..................................... 152,700 5,086 ---------- 87,874 Software - 4.2% Electronic Arts, Inc. * ............................ 175,200 9,557 Intuit, Inc. * ..................................... 119,900 4,626 Microsoft Corp. * .................................. 2,040,000 58,263 Oracle Corp. * ..................................... 645,200 7,697 Red Hat, Inc. * .................................... 160,900 3,696 Veritas Software Corp. * ........................... 192,100 5,321 ---------- 89,160 Specialty Retail - 2.9% Best Buy Co., Inc. * ............................... 191,200 9,701 CDW Corp. .......................................... 201,900 12,873 Gap, Inc. .......................................... 266,300 6,458 Home Depot, Inc. * ................................. 813,800 28,646 TJX Cos., Inc. * ................................... 217,300 5,246 ---------- 62,924 Textiles & Apparel - 0.7% Liz Claiborne, Inc. * .............................. 194,000 6,980 Nike, Inc. - Cl. B ................................. 120,600 9,136 ---------- 16,116 Tobacco - 1.4% Altria Group, Inc. ................................. 591,000 29,579 Trading Companies & Distributors - 0.2% W.W. Grainger, Inc. * .............................. 78,900 4,537 Wireless Telecommunications Services - 0.6% Nextel Communications, Inc. - Cl. A * .............. 451,200 12,029 ---------- TOTAL COMMON STOCK- (Cost $1,917,817) 99.4% 2,132,357 Par Value --------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 2.3% State Street Navigator Securities Lending Portfolio ............................... $ 49,792 49,792 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- GROWTH & INCOME FUND Par Market Name of Issuer Value Value -------------- ------- ----------- (000's) (000's) SHORT-TERM INVESTMENTS - 0.5% Investment in joint trading account 1.344% due 07/01/04 (Cost $10,544) .................................. $10,544 $ 10,544 ------- ---------- TOTAL INVESTMENTS- (Cost $1,978,153) 102.2% 2,192,693 Payables, less cash and receivables- (2.2)% (48,062) ------- ---------- NET ASSETS- 100.0% $2,144,631 ======= ========== *Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Growth & Income Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $299 1.50% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $48,887 $49,792 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $158, $101, $1,207, $12,541, $487,252, $232,197 and $54,591 which expire in 2005, 2006, 2007, 2008, 2009, 2010 and 2011, respectively. Certain of the above losses may be limited under sections 382-384 of the Internal Revenue Code, as amended. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $24. 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 11, 2004, 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 $150 Million and Excess Over First $150 Million $300 Million $300 Million ------------------ ---------------- ------------ 0.71% 0.69% 0.67% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $423. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. John Hancock has also entered into a Sub-Advisory Agreement with T.Rowe Price Associates, Inc., under its supervision, is also responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued 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 period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $676,326 $707,453 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ----------- ------------ ------------ -------------- $ 1,971,792 $ 273,125 $ (22,756) $ 250,369 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $788,047 $250,369 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (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 $17,207 $-- $11,765 2002 15,248 -- -- NOTE E--COMBINATION On April 25, 2003, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund ------------------- ---------------------- VST Growth & Income VA Relative Value VST Growth & Income VA Sovereign Investors This combination provided for the transfer of substantially all of the assets and liabilities of the target fund to the acquiring fund in exchange solely for the fund shares of the acquiring fund. The acquisition was accounted for as taxfree exchange as follows:
Target Fund Trust Shares Unrealized Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Appreciation/ Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets (Depreciation) to Combination After Combination ----------------- -------------- ----------- -------------- ---------------- -------------------- VST Growth & Income vs. VA Relative Value 3,079 $28,786 $ 845 $1,744,162 $1,772,947 VST Growth & Income vs. VA Sovereign 4,038 37,760 (415) 1,772,947 1,810,708 Investors
Inception: May 1, 2001 -------------------------------------------------------------------------------- Health Sciences Fund Wellington Management Company, LLP Management Team -------------------------------------------------------------------------------- . Year to date, the Fund returned 4.93%, underperforming its benchmark, the Goldman Sachs Health Care Index. Relative to Morningstar peers, the Fund has an above average rating of 4 with an average / above average risk profile. . The Fund's exposure to the pharmaceuticals industry, as well as health care providers & services, were the largest contributors to absolute performance. On an individual security basis, the Fund's investments in pharmaceutical holdings Elan and Aventis were the top drivers of absolute returns. . The Fund emphasizes bottom-up fundamental analysis, with a focus on in-depth understanding of medical science, regulatory developments, reimbursement policy trends, and individual company business franchises. Holdings will generally be diversified across sub-sectors of health care, but will at times be concentrated in sub-sectors that provide the most compelling opportunities. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Schering-Plough Corp. 6.6% AstraZeneca Group Plc 5.6% Abbott Laboratories 4.6% McKesson HBOC, Inc. 4.3% Medco Health Solutions, Inc. 4.1% Eli Lilly & Co. 4.1% Novartis AG 3.9% AVENTIS 3.9% Genzyme Corp. 3.8% Medtronic, Inc. 3.3% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Health Goldman Sachs Sciences Health Care S&P 500(R) Fund Index/4/ Index/5/ -------- ------------- --------- YTD/3/ 4.93% 6.18% 3.44% 1 Year 17.69 13.14 19.10 3 Year 2.10 2.05 -0.70 Since Inception (5/1/01) 2.62 3.12 1.11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Specialty-Health MORNINGSTAR RISK/1/: . Above Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . **** (VL/VUL) . **** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Drugs & Pharmaceuticals 58.7% Biotechnology Research & Production 16.2% Health Care Services 11.4% Electronics: Medical Systems 5.9% Medical & Dental Instruments & Supplies 5.9% Health Care Management Services 1.1% Chemicals 0.8% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04 VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 41 VL/VUL subaccounts and 107 VA subaccounts in the Morningstar Specialty Health category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original costs. Sector investing entails special risks as discussed in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are additional risks associated with a nondiversified fund, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Goldman Sachs Healthcare Index is a modified capitalization weighted index that measures the performance of US healthcare stocks. The index has a maximum individual stock weighting which is currently 7.5%. The index includes companies in the following categories: providers of healthcare related services, researchers, manufacturers and distributors of pharmaceuticals, drugs and related sciences, and medical supplies, instruments and products. /5/ "S&P 500(R)" is an unmanaged stock index commonly used as a broad measure of stock market performance. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted) ASSETS Long term investments at cost........................................ $32,904 Net unrealized appreciation of investments........................... 5,459 Short-term investments at value...................................... 195 ------- Total investments.............................................. 38,558 Foreign currency at value (cost $13)................................. 13 Cash................................................................. 9 Receivable for: Investments sold.................................................. 99 Dividends......................................................... 26 Foreign dividend tax withholding reclaim.......................... 13 ------- Total assets......................................................... 38,718 ------- LIABILITIES Payables for: Investments purchased............................................. 51 Foreign dividend tax withholding.................................. 3 Accrued operating expenses........................................ 19 ------- Total liabilities.................................................... 73 ------- Net assets .......................................................... $38,645 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized).... 3,656 ------- Net asset value per share............................................ $ 10.57 ======= Composition of net assets: Capital paid-in................................................... $36,610 Accumulated net realized loss on investments, futures and foreign currency transactions.......................................... (3,398) Undistributed net investment loss................................. (26) Net unrealized appreciation of: Investments ................................................... 5,459 ------- Net assets........................................................... $38,645 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted) INVESTMENT INCOME Interest ....................................................... $ 5 Dividends (net of foreign withholding tax of $15) .............. 187 ------ Total investment income .............................................. 192 ------ EXPENSES Investment advisory fee ........................................ 189 Auditors fees .................................................. 2 Custodian fees ................................................. 21 Legal fees ..................................................... 2 Printing & mailing fees ........................................ 6 Trustees ....................................................... 1 Other fees ..................................................... 1 ------ Total expenses ....................................................... 222 Less expenses reimbursed ....................................... (2) Less custodian expense reduction offset by commission recapture arrangement (Note C) .............................. (4) ------ Net expenses ......................................................... 216 ------ Net investment loss .................................................. (24) ------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................... 1,500 Foreign currency transactions .................................. (3) Change in unrealized appreciation on investments .................. 230 ------ Net realized and unrealized gain ..................................... 1,727 ------ Net increase in net assets resulting from operations ................. $1,703 ====== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ....................................... $ (24) $ (33) Net realized gain ......................................... 1,497 83 Change in net unrealized appreciation ..................... 230 7,514 ------- ------- Net increase in net assets resulting from operations ... 1,703 7,564 Distributions to shareholders from: Net investment income ..................................... (72) Realized gains ............................................ (719) ------- Decrease in net assets resulting from distributions .... (791) Capital contributions From fund share transactions: Proceeds from shares sold ................................. 6,660 11,971 Distributions reinvested .................................. 791 Payment for shares redeemed ............................... (4,536) (7,387) ------- ------- Increase in net assets from fund share transactions .... 2,124 5,375 ------- ------- NET INCREASE IN NET ASSETS ................................... 3,827 12,148 NET ASSETS Beginning of Period ....................................... 34,818 22,670 ------- ------- End of Period (including undistributed net investment loss of $(26) and $(2), respectively) .................. $38,645 $34,818 ======= ======= Analysis of fund share transactions: Sold ...................................................... 632 1,372 Reinvested ................................................ 79 Redeemed .................................................. (432) (893) ------- ------- Net increase in fund shares outstanding ...................... 200 558 ======= =======
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Health Sciences Fund ------------------------------------------------------------ Unaudited Year Ended Period from Period Ended December 31, May 1, to June 30, -------------------- December 31, 2004 2003(f) 2002 2001(g) ------------ ------- ------- ------------ Net Assets Value at Beginning of Period ....................... $ 10.07 $ 7.82 $ 9.81 $ 10.00 Income from Investment Operations: Net Investment Income ...................................... (h) (h) 0.01 Net Realized and Unrealized Gain (Loss) on Investment(a) ... 0.50 2.48 (1.98) (0.18) ------- ------- ------- ------- Total From Investment Operations ........................... 0.50 2.48 (1.97) (0.18) Less Distributions: Distribution from Net Investment Income .................... (0.02) (0.02) Distribution from Net Realized Gains on Investments ........ (0.21) Distribution from Capital Paid-in .......................... (0.01) ------- ------- ------- Total Distributions ........................................ (0.23) (0.02) (0.01) ------- ------- ------- ------- Net Assets Value at End of Period ............................. $ 10.57 $ 10.07 $ 7.82 $ 9.81 ======= ======= ======= ======= Total Investment Return(b) .................................... 4.93%(c) 31.74% (19.99)% (1.85)%(c) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........... 1.17%(d)(e)(i) 1.10%(e) 1.07%(e) 1.10%(d)(e) Ratio of Net Investment Income (Loss) to Average Net Assets .................................................. (0.13)%(d) (0.12)% 0.10% (0.16)%(d) Portfolio Turnover Rate .................................... 16.64%(c) 115.75% 98.91% 37.76%(c) Net Assets End of Period (000s Omitted) ....................... $38,645 $34,818 $22,670 $29,873
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the expense ratio would have been 1.18% for the period ending June 30, 2004, and 1.25%, 1.35%, and 1.19% for the years ended December 31, 2003, 2002, and 2001, respectively. (f) The fund entered into a new sub-advisory agreement with Wellington Management Company during the period shown. (g) Commencement of investment operations. (h) Amount is less than $0.01. (i) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HEALTH SCIENCES FUND Market Name of Issuer Shares Value -------------- -------- ------- (000's) COMMON STOCK Biotechnology - 17.4% Abgenix, Inc. * ........................................ 13,100 $ 153 Amylin Pharmaceuticals, Inc. * ......................... 16,400 374 Applera Corp. - Celera Genomics Group * ................ 53,400 615 Cephalon, Inc. * ....................................... 9,300 502 Ciphergen Biosystems, Inc. * ........................... 22,200 162 Connetics Corp. * ...................................... 7,372 149 CV Therapeutics, Inc. * ................................ 19,200 322 Cytokinetics, Inc. * ................................... 2,600 39 Exelixis, Inc. * ....................................... 34,600 349 Genzyme Corp. * ........................................ 30,698 1,453 Gilead Sciences, Inc. * ................................ 8,800 590 Human Genome Sciences, Inc. * .......................... 36,500 424 ICOS Corp. ............................................. 7,100 212 ILEX Oncology, Inc. * .................................. 8,300 207 Millennium Pharmaceuticals, Inc. * ..................... 30,800 425 OSI Pharmaceuticals, Inc. * ............................ 3,300 232 Regeneron Pharmaceuticals * ............................ 16,200 171 Vertex Pharmaceuticals, Inc. * ......................... 11,800 128 Zymogenetics, Inc. * ................................... 11,200 213 ------- 6,720 Chemicals - 0.8% Bayer AG * ............................................. 10,100 292 Health Care Equipment & Supplies - 13.3% Baxter International, Inc. ............................. 24,080 831 Beckman Coulter, Inc. .................................. 6,900 421 Becton, Dickinson & Co. * .............................. 11,100 575 Bruker Biosciences Corp. * ............................. 34,600 168 CTI Molecular Imaging, Inc. ............................ 21,000 298 Edwards Lifesciences Corp. * ........................... 11,800 411 Guidant Corp. .......................................... 12,813 716 Medtronic, Inc. * ...................................... 26,200 1,276 Nobel Biocare * ........................................ 100 7 Olympus Optical Co. * .................................. 21,000 396 Viasys Healthcare, Inc. * .............................. 1,800 38 ------- 5,137 Health Care Providers & Services - 10.9% Aetna US Healthcare, Inc. * ............................ 4,700 399 Anthem, Inc. * ......................................... 6,017 539 Cardinal Health, Inc. * ................................ 11,722 821 Express Scripts, Inc. - Cl. A * ........................ 5,200 412 Gambro - Ser. A * ...................................... 41,520 403 McKesson HBOC, Inc. .................................... 47,600 1,634 ------- 4,208 Pharmaceuticals - 56.9% Abbott Laboratories * .................................. 43,734 1,783 Ariad Pharmaceuticals, Inc. * .......................... 13,100 98 AstraZeneca Group plc * ................................ 10,779 483 AstraZeneca Group plc - ADR ............................ 36,434 1,663 Atherogenics, Inc. * ................................... 14,100 268 AVENTIS - ADR .......................................... 19,600 1,491 Eisai Co. Ltd. * ....................................... 31,300 $ 899 Elan Corp. plc - ADR * ................................. 47,600 1,178 Eli Lilly & Co. * ...................................... 22,327 1,561 Forest Laboratories, Inc. * ............................ 19,200 1,087 Fujisawa Pharmeceutical Co., Ltd. * .................... 36,000 851 Hospira, Inc. .......................................... 8,673 239 King Pharmaceuticals, Inc. * ........................... 52,200 598 Medco Health Solutions, Inc. * ......................... 42,300 1,586 Medicinesco ............................................ 21,100 644 Novartis AG ............................................ 33,825 1,493 NPS Pharmaceuticals, Inc. * ............................ 9,500 199 Sankyo Co., Ltd. * ..................................... 24,000 519 Schering-Plough Corp. * ................................ 136,500 2,523 Schwarz Pharma AG * .................................... 8,700 268 Shionogi & Co., Ltd. * ................................. 41,000 703 Takeda Chemical Industries * ........................... 8,500 372 Watson Pharmaceuticals, Inc. * ......................... 14,900 401 Wyeth * ................................................ 30,395 1,099 ------- 22,006 ------- TOTAL COMMON STOCK- (Cost $32,904) 99.3% 38,363 Par Value -------- (000's) SHORT-TERM INVESTMENTS - 0.5% Investment in joint trading account 1.344% due 07/01/04 (Cost $195) ........................................... $ 195 195 -------- ------- TOTAL INVESTMENTS- (Cost $33,099) 99.8% 38,558 Cash and Receivables, less payables- 0.2% 87 -------- ------- NET ASSETS- 100.0% $38,645 ======== ======= * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Health Sciences Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $184, $3,104 and $900 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred approximately $107 in net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending on December 31, 2004. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $15. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $250 Million $250 Million ------------------ ------------ 1.00% 0.95% For the period from January 1, 2004 to April 30, 2004, John Hancock and JVLICO agreed to reimburse the Fund for normal operating expenses, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses that exceed 0.10% of the Fund's daily net asset value. Accordingly, for the period from January 1, 2004 to April 30, 2004 the Fund was reimbursed $2 by John Hancock and JVLICO. On March 18, 2004, the Fund's Shareholders approved the removal of John Hancock and JVLICO's respective obligations to reimburse the Fund for excess operating expenses effective May 1, 2004. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $4. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $8,817 $6,142 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $30,629 $4,837 $(208) $4,629 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $4,188 $4,629 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $72 $-- $719 2002 56 -- -- NOTE E--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Health Sciences Fund, an 81% 9% 10% amendment to the current investment mangement agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse expenses. Inception: May 1, 1998 -------------------------------------------------------------------------------- High Yield Bond Fund Wellington Management Company, LLP Earl E. McEvoy -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.49%, underperforming its custom benchmark. Relative to Morningstar peers, the Fund has a below average rating of 1 with a high risk profile. . The Fund underperformed its benchmark primarily due to both unfavorable sector allocation and security selection decisions. . The Fund's exposure to the chemicals sector contributed the most to absolute performance while exposure to the wireless sector was the largest detractor. . The manager employs rigorous bottom-up fundamental research, 100% of which is conducted in-house. The manager continues to focus on capturing the attractive yields currently available in the high yield market, while minimizing credit losses, and focuses on the upper tier of the high yield market. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- CSC Holdings, Inc. 1.8% Williams Cos, Inc. 1.7% Georgia Pacific Corp. 1.7% Nextel Communications, Inc. 1.7% Host Marriott LP 1.5% Qwest Corp. 1.4% Insight Midwest LP Capital, Inc. 1.2% Owens Brockway Glass Container 1.1% Rogers Wireless, Inc. 1.1% Tyco International Group SA 1.1% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ High Yield High Yield Bond Fund/4/ Bond Benchmark/5/ ------------ ----------------- YTD/3/ 0.49% 1.19% 1 Year 6.40 8.84 3 Years 2.73 7.61 5 Years 0.78 4.08 Since Inception (5/1/98) 0.62 3.35 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . High Yield Bond MORNINGSTAR RISK/1/: . High (VL/VUL) . High (VA) MORNINGSTAR RATING/1/: . * (VL/VUL) . * (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004)/2/ % of Credit Quality Assets ------ AAA/Government/Agency 1.01% AA 0% A 0% BBB 1.79% BB & lower 96.70% Not Rated/Other 0.50% Weighted Average Yield 7.40% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 292 VL/VUL subaccounts and 487 VA subaccounts in the Morningstar High Yield Bond category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are special risks associated with investing in high yield bonds, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /5/ Lehman Brothers High Yield Bond Index: from May 1998 to December 2002 and then represents a 50% Lehman Brothers B Index and 50% Lehman Brothers BB Index from January 2003 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $ 89,489 Net unrealized appreciation of investments ......................... 810 Short-term investments at value .................................... 1,410 -------- Total investments ............................................ 91,709 Cash ............................................................... 39 Receivable for: Investments sold ................................................ 25 Interest ........................................................ 1,991 -------- Total assets ....................................................... 93,764 -------- LIABILITIES Payables for: Investments purchased ........................................... 490 Accrued operating expenses ...................................... 20 -------- Total liabilities .................................................. 510 -------- Net assets ......................................................... $ 93,254 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 14,938 Net asset value per share .......................................... $ 6.24 ======== Composition of net assets: Capital paid-in ................................................. $107,626 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (15,215) Undistributed net investment income ............................. 33 Net unrealized appreciation of investments ...................... 810 -------- Net assets ......................................................... $ 93,254 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 3,558 EXPENSES Investment advisory fee ......................................... 380 Auditors fees ................................................... 6 Custodian fees .................................................. 43 Legal fees ...................................................... 6 Printing & mailing fees ......................................... 8 Trustees' ...................................................... 1 Other fees ...................................................... 1 -------- Total expenses ..................................................... 445 Less expenses reimbursed ........................................ (18) -------- Net expenses ....................................................... 427 -------- Net investment income .............................................. 3,131 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 1,825 Change in unrealized depreciation on investments ................ (4,505) -------- Net realized and unrealized loss ................................... (2,680) -------- Net increase in net assets resulting from operations ............... $ 451 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income ........................................................ $ 3,131 $ 5,394 Net realized gain (loss) ..................................................... 1,825 (724) Change in net unrealized appreciation (depreciation) ......................... (4,505) 7,272 -------- -------- Net increase in net assets resulting from operations ...................... 451 11,942 Distributions to shareholders from: Net investment income ........................................................ (3,098) (5,404) Realized gains (249) -------- -------- Decrease in net assets resulting from distributions ....................... (3,098) (5,653) From fund share transactions: Proceeds from shares sold .................................................... 16,754 109,079 Distributions reinvested ..................................................... 3,098 5,653 Payment for shares redeemed .................................................. (20,967) (84,786) -------- -------- Increase (decrease) in net assets from fund share transactions ............ (1,115) 29,946 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ........................................... (3,762) 36,235 NET ASSETS Beginning of Period .......................................................... 97,016 60,781 -------- -------- End of Period (including undistributed net investment income of $33 and $0, respectively) ............................................................. $ 93,254 $ 97,016 ======== ======== Analysis of fund share transactions: Sold ......................................................................... 2,630 17,586 Reinvested ................................................................... 488 909 Redeemed ..................................................................... (3,295) (13,667) -------- -------- Net increase (decrease) in fund shares outstanding .............................. (177) 4,828 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
High Yield Bond Fund ----------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------- 2004 2003 2002 2001 2000 ------------ -------- ------- ------- ------- Net Assets Value at Beginning of Period ............... $ 6.42 $ 5.91 $ 6.83 $ 7.33 $ 8.99 Income from Investment Operations: Net Investment Income .............................. 0.21 0.42 0.57 0.73 0.73 Net Realized and Unrealized Gain (Loss) on Investment(a) ................................... (0.18) 0.53 (0.87) (0.55) (1.65) ------- ------- ------- ------- ------- Total From Investment Operations ................... 0.03 0.95 (0.30) 0.18 (0.92) Less Distributions: Distribution from Net Investment Income ............ (0.21) (0.42) (0.62) (0.68) (0.74) Distribution from Net Realized Gains on Investments ..................................... (0.02) ------- ------- ------- ------- ------- Total Distributions ................................ (0.21) (0.44) (0.62) (0.68) (0.74) ------- ------- ------- ------- ------- Net Assets Value at End of Period ..................... $ 6.24 $ 6.42 $ 5.91 $ 6.83 $ 7.33 ======= ======= ======= ======= ======= Total Investment Return(b) ............................ 0.49%(e) 16.51% (4.51)% 2.13% (10.81)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ... 0.90%(c)(f) 0.90%(c) 0.90%(c) 0.80%(c) 0.75%(c) Ratio of Net Investment Income to Average Net Assets .......................................... 6.63%(f) 6.81% 9.84% 10.39%(d) 8.88% Portfolio Turnover Rate ............................ 31.82%(e) 47.82% 89.30% 32.50% 21.94% Net Assets End of Period (000s Omitted) ............... $93,254 $97,016 $60,781 $51,274 $25,978
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .94% for the period ending June 30, 2004, and .95%, .96%, .90%, and .87%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (d) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 9.35% for the years ended December 31, 2001. (e) Not annualized. (f) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 1.2% Alliant Techsystems, Inc. - Sr. Sub. Notes 8.5% due 05/15/11 .................................... $ 95 $ 103 Argo-Tech Corp. - Sr. Notes 144A (a) 9.25% due 06/01/11 ................................... 105 108 K & F Industries, Inc. - Sr. Notes Ser. B 9.625% due 12/15/10 .................................. 435 477 Sequa Corp. 9.0% due 08/01/09 .................................... 275 293 Sequa Corp. - Sr. Notes 8.875% due 04/01/08 .................................. 105 111 ------ 1,092 Airlines - 0.6% American Airlines, Inc. 7.024% due 04/15/11 .................................. 130 129 Continental Airlines - Ser. 1997-4 Cl. 4A 6.9% due 01/02/18 .................................... 96 90 Continental Airlines, Inc. - Ser. 1999-2 Cl. A2 7.056% due 09/15/09 .................................. 170 168 Delta Air Lines, Inc. - Notes 7.9% due 12/15/09 .................................... 290 148 Northwest Airlines - Ser. 2001 Cl. 1A2 6.841% due 10/01/12 .................................. 80 77 ------ 612 Auto Components - 3.2% Arvinmeritor, Inc. - Notes 8.75% due 03/01/12 ................................... 420 456 Cummins, Inc. - Sr. Notes 9.5% due 12/01/10 .................................... 45 51 Dana Corp. - Notes 9.0% due 08/15/11 .................................... 320 374 Dura Operating Corp. - Sr. Notes Ser. B 8.625% due 04/15/12 .................................. 260 265 Eagle Picher, Inc. - Sr. Notes 9.75% due 09/01/13 40 43 Goodyear Tire & Rubber Co. - Notes 7.857% due 08/15/11 .................................. 100 91 R.J. Towercorp - Gtd. Sr. Notes 12.0% due 06/01/13 ................................... 235 224 Tenneco Automotive, Inc. - Sr. Sec. Notes Ser. B 10.25% due 07/15/13 .................................. 130 146 TRW, Inc. - Sr. Notes 9.375% due 02/15/13 .................................. 376 425 Visteon Corp. 8.25% due 08/01/10 ................................... 250 265 Visteon Corp. - Notes 7.0% due 03/10/14 .................................... 660 639 ------ 2,979 Automobiles - 0.7% Navistar International Corp., Inc. - Sr. Notes 7.5% due 06/15/11 .................................... 70 71 Navistar International Corp., Inc. - Sr. Notes Ser. B 9.375% due 06/01/06 .................................. $100 $ 107 United Rentals North America, Inc. - Sr. Notes 6.5% due 02/15/12 .................................... 485 456 ------ 634 Banks - 0.7% Chevy Chase Bank - Sub. Debs 6.875% due 12/01/13 .................................. 175 176 Western Financial Bank - Sub. Debs 9.625% due 05/15/12 .................................. 415 452 ------ 628 Beverages - 0.7% Constellation Brands, Inc. - Sr. Sub. Notes 8.125% due 01/15/12 .................................. 430 454 The Great Atlantic & Pacific Tea Co, Inc. - Sr. Notes 9.125% due 12/15/11 .................................. 270 232 ------ 686 Biotechnology - 0.1% Bio Rad Laboratories, Inc. - Sr. Sub. Notes 7.5% due 08/15/13 .................................... 80 84 Building Products - 0.9% American Standard Cos., Inc. 7.375% due 02/01/08 .................................. 110 119 7.625% due 02/15/10 .................................. 305 335 Koppers, Inc. Pennsylvania - Sr. Sec. Notes 9.875% due 10/15/13 .................................. 200 219 Texas Industries, Inc. - Sr. Notes 10.0% due 06/01/11 ................................... 195 217 ------ 890 Chemicals - 4.9% Acetex Corp. - Sr. Notes 10.875% due 08/01/09 ................................. 75 82 Airgas, Inc. - Sr. Sub. Notes 9.125% due 10/01/11 .................................. 335 377 Equistar Chemical - Sr. Notes 10.125% due 09/01/08 ................................. 58 64 Equistar Chemicals LP - Sr. Notes 10.625% due 05/01/11 ................................. 155 172 FMC Corp. - Sr. Sec. Notes 10.25% due 11/01/09 .................................. 50 58 Huntsman LLC - Sr. Sec. Notes 11.625% due 10/15/10 ................................. 125 138 IMC Global, Inc. - Debs 6.875% due 07/15/07 .................................. 290 297 IMC Global, Inc. - Sr. Notes 10.875% due 08/01/13 ................................. 470 569 Lyondell Chemical Co. 9.875% due 05/01/07 .................................. 60 63 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Chemicals - Continued Lyondell Chemical Co. - Notes Ser. A 9.625% due 05/01/07 .................................. $800 $ 836 Methanex Corp. - Sr. Notes 8.75% due 08/15/12 ................................... 260 292 Millenium America, Inc. - Sr. Notes 9.25% due 06/15/08 ................................... 275 296 NALCO Co. - Sr. Notes 144A (a) 7.75% due 11/15/11 ................................... 180 188 Nova Chemicals Corp. - Notes 7.0% due 05/15/06 .................................... 210 219 Nova Chemicals Corp. - Sr. Notes 6.5% due 01/15/12 .................................... 80 79 Omnova Solutions, Inc. - Sr. Sec. Notes 11.25% due 06/01/10 .................................. 245 272 Pioneer Americas LLC 4.79% due 12/31/06 ................................... 10 9 Resolution Performance Products - Sr. Notes 9.5% due 04/15/10 .................................... 310 321 Union Carbide Chemicals & Plastics 7.875% due 04/01/23 .................................. 55 53 Union Carbide Corp. - Debs 6.79% due 06/01/25 ................................... 180 182 ------ 4,567 Commercial Services & Supplies - 3.0% Advanstar Communications, Inc. - Sr. Sec Notes 10.75% due 08/15/10 .................................. 75 83 Allied Waste North America, Inc. - Sr. Notes 8.5% due 12/01/08 .................................... 270 296 8.875% due 04/01/08 .................................. 355 388 Iron Mountain, Inc. - Sr. Sub. Notes 8.625% due 04/01/13 .................................. 130 138 Iron Mountain, Inc. Delaware - Sr. Sub. Notes 8.25% due 07/01/11 ................................... 115 119 Iron Mountain, Inc. Pennsylvania - Sr. Sub. Notes 7.75% due 01/15/15 ................................... 145 144 Mail Welli Corp. - Sr. Notes 9.625% due 03/15/12 .................................. 440 475 National Waterworks, Inc. - Sr. Sub. Notes - Ser. B 10.5% due 12/01/12 ................................... 385 433 Poindexter JB, Inc. - Sr. Notes 144A (a) 8.75% due 03/15/14 ................................... 235 238 SPX Corp. - Sr. Notes 7.5% due 01/01/13 .................................... 310 316 Vertis, Inc. - Sr. Notes 9.75% due 04/01/09 ................................... 105 114 10.875% due 06/15/09 ................................. 25 27 ------ 2,771 Construction & Engineering - 3.0% Beazer Homes USA, Inc. - Sr. Notes 8.375% due 04/15/12 .................................. $ 55 $ 58 8.625% due 05/15/11 .................................. 390 413 Horton, Inc. - Sr. Sub. Notes 9.375% due 03/15/11 .................................. 370 412 KB Home - Sr. Sub. Notes 8.625% due 12/15/08 .................................. 200 214 Meritage Corp. - Sr. Notes 7.0% due 05/01/14 .................................... 180 171 9.75% due 06/01/11 ................................... 90 99 Nortek, Inc. - Sr. Sub. Notes Ser. B 9.875% due 06/15/11 .................................. 50 57 Ryland Group, Inc. - Sr. Sub. Notes 9.125% due 06/15/11 .................................. 345 381 Standard Pacific Corp. - Sr. Notes 6.5% due 10/01/08 .................................... 310 311 6.875% due 05/15/11 .................................. 110 109 Toll Brothers, Inc. 8.25% due 02/01/11 ................................... 450 486 Toll Corp. - Sr. Sub. Notes 8.25% due 12/01/11 ................................... 65 70 ------ 2,781 Containers & Packaging - 3.3% AEP Industries, Inc. - Sr. Sub. Notes 9.875% due 11/15/07 .................................. 45 46 Anchor Glass Container Corp. - Sr. Notes Ser. B 11.0% due 02/15/13 ................................... 355 406 Graphic Packaging International, Inc. - Sr. Notes 8.5% due 08/15/11 .................................... 210 225 Greif Bros. Corp. - Sr. Sub. Notes 8.875% due 08/01/12 .................................. 25 27 Owens Brockway Glass Container - Sr. Notes 144A (a) 8.75% due 11/15/12 ................................... 490 534 Owens Brockway Glass Container - Sr. Sec Notes 7.75% due 05/15/11 ................................... 415 430 Pliant Corp. - Sr. Sec. Notes 11.125% due 09/01/09 ................................. 230 247 Portola Packaging, Inc. - Sr. Notes 144A (a) 8.25% due 02/01/12 ................................... 75 61 Stone Container Corp. - Sr. Notes 9.25% due 02/01/08 ................................... 200 219 9.75% due 02/01/11 ................................... 525 577 Tekni Plex, Inc. - Sr. Sec. Notes 144A (a) 8.75% due 11/15/13 ................................... 305 291 ------ 3,063 Distributors - 0.8% ADESA, Inc. - Sr. Sub. Notes 7.625% due 06/15/12 .................................. 230 231 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Distributors - Continued Owens & Minor 8.5% due 07/15/11 .................................... $ 445 $ 487 ------ 718 Diversified Financials - 0.5% Fairfax Financial Holdings, Ltd. 6.875% due 04/15/08 .................................. 15 15 Fairfax Financial Holdings, Ltd. - Notes 7.375% due 03/15/06 .................................. 150 156 Johnson Diversey, Inc. -Sr. Sub. Notes Ser. B 9.625% due 05/15/12 .................................. 215 234 Von Hoffmann Corp. - Sr. Notes 10.25% due 03/15/09 .................................. 20 21 ------ 426 Diversified Telecommunication Services - 5.6% Alaska Communications Systems - Sr. Notes 9.875% due 08/15/11 .................................. 400 416 American Cellular Corp. - Sr. Notes Ser. B 10.0% due 08/01/11 ................................... 595 518 Avaya, Inc. - Sr. Sec. Notes 11.125% due 04/01/09 ................................. 358 420 Cincinnati Bell, Inc. - Sub. Notes 8.375% due 01/15/14 .................................. 150 135 Corning, Inc. - Notes 6.2% due 03/15/16 .................................... 145 135 Fairpoint Communications, Inc. - Sr. Notes 11.875% due 03/01/10 ................................. 180 207 GCI, Inc. - Sr. Notes 144A (a) 7.25% due 02/15/14 ................................... 475 456 Intelsat, Ltd. - Sr. Notes 5.25% due 11/01/08 ................................... 30 29 7.625% due 04/15/12 .................................. 75 72 MasTec, Inc. - Sr. Sub. Notes 7.75% due 02/01/08 ................................... 410 361 MCI, Inc. 5.908% due 05/01/07 .................................. 145 141 MCI, Inc. - Notes 7.735% due 05/01/14 .................................. 100 89 National Cable plc - Sr. Notes 144A (a) 8.75% due 04/15/14 ................................... 75 77 Nortel Networks, Ltd. - Notes 6.125% due 02/15/06 .................................. 460 461 Panamsat Corp. - Sr. Notes 8.5% due 02/01/12 .................................... 365 413 Qwest Corp. - Notes 144A(a) 8.875% due 03/15/12 .................................. 1,150 1,256 ------ 5,186 Electric Utilities - 0.5% Centerpoint Energy Resources Corp. - Sr. Notes 7.875% due 04/01/13 .................................. 390 437 Electric/Gas - 6.3% AES Corp. - 144A (a) 8.75% due 05/15/13 ................................... $ 485 $ 519 AES Corp. Sr. Sec. Notes 144A (a) 9.0% due 05/15/15 .................................... 335 358 Avista Corp. - Sr. Notes 9.75% due 06/01/08 ................................... 590 696 CMS Energy Corp - Sr. Notes 8.5% due 04/15/11 .................................... 535 546 DPL, Inc. - Sr. Notes 6.875% due 09/01/11 .................................. 225 228 Edison Mission Energy - Sr. Notes 9.875% due 04/15/11 .................................. 455 472 El Paso Natural Gas Co. - Sr. Notes 7.625% due 08/01/10 .................................. 230 236 EL Paso Production Holding Co. - Sr. Notes 7.75% due 06/01/13 ................................... 525 484 Nevada Power Co. - Notes Ser. E 10.875% due 10/15/09 ................................. 355 402 Nevada Power Co. - Notes Ser. G 9.0% due 08/15/13 .................................... 345 374 NRG Energy, Inc. - Sr. Sec. Notes 144A (a) 8.0% due 12/15/13 .................................... 365 370 Semco Energy, Inc. - Sr. Notes 7.125% due 05/15/08 .................................. 165 169 7.75% due 05/15/13 ................................... 60 63 Southern Natural Gas Co. - Sr. Notes 8.875% due 03/15/10 .................................. 425 463 TNP Enterprises, Inc. - Sr. Sub. Notes 10.25% due 04/01/10 .................................. 275 286 Western Resources, Inc. - Sr. Notes 9.75% due 05/01/07 ................................... 155 177 ------ 5,843 Electrical Equipment - 0.7% General Cable Corp. - Sr. Notes 9.5% due 11/15/10 .................................... 210 225 ITT Corp. - Debs. 7.375% due 11/15/15 .................................. 30 30 Wesco Distribution, Inc. - Ser. B 9.125% due 06/01/08 .................................. 380 390 ------ 645 Electronic Equipment & Instruments - 1.5% Itron, Inc. - Sr. Sub. Notes 144A (a) 7.75% due 05/15/12 ................................... 35 35 Sanmina SCI Corp. - Sr. Sec. Notes 10.375% due 01/15/10 ................................. 560 644 Solectron Corp. - Sr. Notes 9.625% due 02/15/09 .................................. 605 662 Thomas & Betts Corp. 6.39% due 02/10/09 ................................... 15 15 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electronic Equipment & Instruments - Continued Thomas & Betts Corp. - Notes 7.25% due 06/01/13 ................................... $ 65 $ 69 ------ 1,425 Energy Equipment & Services - 0.0% Rayovac Corp. - Sr. Sub. Notes 8.5% due 10/01/13 .................................... 25 26 Finance - 4.8% Arch Western Finance LLC - Sr. Notes 144A (a) 6.75% due 07/01/13 ................................... 230 229 BCP Caylux Holdings Lux SCA - Sr. Sub. Notes 144A (a) 9.625% due 06/15/14 .................................. 455 473 Bowater Canada Finance Corp. - Notes 7.95% due 11/15/11 ................................... 425 440 Crown European Holdings SA - Sr. Sec. Notes 9.5% due 03/01/11 .................................... 410 450 10.875% due 03/01/13 ................................. 85 97 Hampshire Donnelly Finance Corp. - Sr. Sub. Notes 144A (a) 10.875% due 12/15/12 ................................. 125 145 Insight Midwest LP Capital, Inc. - Sr. Notes 10.5% due 11/01/10 ................................... 965 1,050 iStar Financial, Inc. - Sr. Notes 8.75% due 08/15/08 ................................... 82 90 MDP Acquisitions plc - Sr. Notes 9.625% due 10/01/12 .................................. 370 411 New Asat Finance, Ltd. - Sr. Notes 144A (a) 9.25% due 02/01/11 ................................... 325 323 RH Donnelley Finance - Sr. Notes 144A (a) 8.875% due 12/15/10 .................................. 60 66 RH Donnelly Finance Corp. - Sr. Sub. Notes 10.875% due 12/15/12 ................................. 120 140 RH Donnelly Finance Corp. - Sr. Notes 8.875% due 12/15/10 .................................. 90 99 Ucar Finance, Inc. - Sr. Notes 10.25% due 02/15/12 .................................. 170 189 UGS Corp. 10.0% due 06/01/12 ................................... 225 239 ------ 4,441 Food & Drug Retailing - 0.7% Winn Dixie Stores, Inc. - Sr. Notes 8.875% due 04/01/08 .................................. 695 643 Food Products - 0.8% Dole Food, Inc. - Sr. Notes 7.25% due 06/15/10 ................................... 10 10 8.875% due 03/15/11 .................................. 600 635 United Agricultural Products, Inc. - Sr. Notes 144A (a) 8.25% due 12/15/11 ................................... 60 66 ------ 711 Gas Utilities - 1.7% Williams Cos, Inc. - Notes 7.125% due 09/01/11 .................................. $ 305 $ 310 8.125% due 03/15/12 .................................. 740 788 Williams Cos, Inc. - Sr. Notes 8.625% due 06/01/10 .................................. 430 472 ------ 1,570 Health Care Equipment & Supplies - 2.1% Alaris Medical Systems, Inc. - Sr. Notes 7.25% due 07/01/11 ................................... 260 287 Apogent Technologies, Inc. - Sr. Sub. Notes 6.5% due 05/15/13 .................................... 360 366 Fisher Scientific International, Inc. - Sr. Sub. Notes 8.125% due 05/01/12 .................................. 578 619 Kinetic Concepts, Inc. - Sr. Sub. Notes Ser. B 7.375% due 05/15/13 .................................. 39 41 Radiologix, Inc. - Sr. Notes 10.5% due 12/15/08 ................................... 370 389 Sybron Dental Specialties, Inc. - Sr. Sub. Notes 8.125% due 06/15/12 .................................. 75 80 Valmont Industries, Inc. - Sr. Sub. Notes 144A (a) 6.875% due 05/01/14 .................................. 40 39 VWR International - Sr. Notes 144A (a) 6.875% due 04/15/12 .................................. 55 55 VWR International, Inc. - Sr. Sub. Notes 144A (a) 8.0% due 04/15/14 .................................... 90 92 ------ 1,968 Health Care Providers & Services - 3.1% Coventry Health Care, Inc. - Sr. Notes 8.125% due 02/15/12 .................................. 225 247 HCA, Inc. - Notes 6.3% due 10/01/12 .................................... 930 929 Iasis Healthcare LLC - Sr. Sub. Notes 144A (a) 8.75% due 06/15/14 ................................... 205 209 NCD Healthcorp - Sr. Sub. Notes 10.5% due 12/01/12 ................................... 220 242 Neighborcare, Inc. - Sr. Sub. Notes 144A (a) 6.875% due 11/15/13 .................................. 230 244 Omnicare, Inc. - Sr. Sub. Notes Ser. B 8.125% due 03/15/11 .................................. 525 562 Triad Hospitals, Inc. - Sr. Notes 7.0% due 05/15/12 .................................... 470 471 ------ 2,904 Hotels Restaurants & Leisure - 7.4% Argosy Gaming Co. - Sr. Sub. Notes 9.0% due 09/01/11 .................................... 40 44 Argosy Gaming Co. - Sr. Sub. Notes 144A (a) 7.0% due 01/15/14 .................................... 130 127 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Hotels Restaurants & Leisure - Continued AZTAR Corp. - Sr. Sub. Notes 9.0% due 08/15/11 .................................... $ 645 $ 713 Boyd Gaming Corp. - Sr. Sub. Notes 7.75% due 12/15/12 ................................... 165 166 Boyd Gaming Corp. - Sr. Sub. Notes 144A (a) 6.75% due 04/15/14 ................................... 60 56 Host Marriott LP - Sr. Notes Ser. I 9.5% due 01/15/07 .................................... 1,170 1,284 Host Marriott LP - Sr. Notes Ser. J 7.125% due 11/01/13 .................................. 95 93 Isle Capri Casinos, Inc. - Sr. Sub. Notes 144A (a) 7.0% due 03/01/14 .................................... 240 223 John Q. Hammons Hotels - Notes Ser. B 8.875% due 05/15/12 .................................. 115 126 Mandalay Resort Group - Sr. Sub. Notes 9.375% due 02/15/10 .................................. 380 414 Mandalay Resort Group - Sr. Sub. Notes Ser. B 10.25% due 08/01/07 .................................. 305 342 MGM Mirage, Inc. 8.5% due 09/15/10 .................................... 130 140 MGM Mirage, Inc. - Sr. Sub. Notes 8.375% due 02/01/11 .................................. 700 735 Park Place Entertainment Corp. - Notes 8.5% due 11/15/06 .................................... 25 27 Park Place Entertainment Corp. - Sr. Notes 7.0% due 04/15/13 .................................... 410 414 Park Place Entertainment Corp. - Sr. Sub. Notes 8.875% due 09/15/08 .................................. 215 234 Seneca Gaming Corp. - Sr. Notes 144A (a) 7.25% due 05/01/12 ................................... 215 214 Six Flags, Inc. - Sr. Notes 8.875% due 02/01/10 .................................. 235 234 Six Flags, Inc. - Sr. Notes 144A (a) 9.625% due 06/01/14 .................................. 60 60 Speedway Motorsports, Inc. - Sr. Sub. Notes 6.75% due 06/01/13 ................................... 100 101 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes 7.875% due 05/01/12 .................................. 620 662 Station Casinos, Inc. - Sr. Sub. Notes 6.5% due 02/01/14 .................................... 480 460 ------ 6,869 Household Products - 0.3% Hercules, Inc. - Sr. Notes 11.125% due 11/15/07 ................................. 200 234 Scotts Co. - Sr. Sub. Notes 6.625% due 11/15/13 .................................. 40 40 ------ 274 Industrial Conglomerates - 1.6% Invesys plc - Sr. Notes 144A (a) 9.875% due 03/15/11 .................................. 520 519 Trinity Industries, Inc. - Sr. Notes 144A (a) 6.5% due 03/15/14 .................................... $ 45 $ 41 Tyco International Group SA - Notes 6.75% due 02/15/11 ................................... 405 439 Tyco International Group SA - Sr. Notes 6.375% due 10/15/11 .................................. 485 519 ------ 1,518 Internet Software & Services - 0.4% Unisys Corp. - Sr. Notes 6.875% due 03/15/10 .................................. 355 366 Leisure Equipment & Products - 0.2% Bombadier Recreational Products - Sr. Sub. Notes 144A (a) 8.375% due 12/15/13 .................................. 200 198 K2, Inc. - Sr. Notes 144A (a) 7.375% due 07/01/14 .................................. 35 36 ------ 234 Machinery - 1.1% Case New Holland, Inc. - Sr. Notes 144A (a) 9.25% due 08/01/11 ................................... 410 433 9.25% due 08/01/11 ................................... 440 464 NMHG Holding Co. - Sr. Notes 10.0% due 05/15/09 ................................... 165 181 ------ 1,078 Media - 9.8% American Media Operations, Inc. - Sr. Sub. Notes 8.875% due 01/15/11 .................................. 285 276 Canwest Media, Inc. - Sr. Sub. Notes 10.625% due 05/15/11 ................................. 280 314 Charter Communication Operating LLC - Sr. Notes 144A (a) 8.0% due 04/30/12 .................................... 430 417 Charter Communications Operating LLC - Sr. Notes 144A (a) 8.375% due 04/30/14 .................................. 40 39 Citizens Communications Co. - Notes 9.25% due 05/15/11 ................................... 90 94 Corus Entertainment, Inc. - Sr. Sub. Notes 8.75% due 03/01/12 ................................... 510 542 CSC Holdings, Inc. - Sr. Notes 7.625% due 04/01/11 .................................. 1,410 1,421 CSC Holdings, Inc. - Sr. Notes 144A (a) 6.75% due 04/15/12 ................................... 185 179 Dex Media East LLC - Sr. Notes 9.875% due 11/15/09 .................................. 170 191 Dex Media West LLC - Sr. Notes 8.5% due 08/15/10 .................................... 200 217 Direct TV Holdings LLC - Sr. Notes 8.375% due 03/15/13 .................................. 370 410 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Media - Continued EchoStar DBS Corp. - Notes 6.375% due 10/01/11 .................................. $685 $ 675 EchoStar DBS Corp. - Sr. Notes 9.125% due 01/15/09 .................................. 179 196 Houghton Mifflin Co. - Sr. Notes 8.25% due 02/01/11 ................................... 445 446 L 3 Communications Corp. - Sr. Sub. Notes 6.125% due 07/15/13 .................................. 270 261 Lamar Media Corp. - Sr. Sub. Notes 7.25% due 01/01/13 ................................... 110 112 LBI Media, Inc. - Sr. Sub. Notes 10.125% due 07/15/12 ................................. 5 6 Lodgenet Entertainment Corp. - Sr. Sub. Notes 9.5% due 06/15/13 .................................... 85 92 Mediacom Broadband LLC - Sr. Notes 11.0% due 07/15/13 ................................... 465 493 Mediacom LLC - Sr. Notes 9.5% due 01/15/13 .................................... 200 194 Medianews Group, Inc. - Sr. Sub. Notes 144A (a) 6.875% due 10/01/13 .................................. 220 208 Quebecor Media, Inc. - Sr. Notes 11.125% due 07/15/11 ................................. 795 906 Readers Digest Association, Inc. - Sr. Notes 6.5% due 03/01/11 .................................... 10 10 Rogers Cable, Inc. - Sr. Sec. 2nd Priority Notes 7.875% due 05/01/12 .................................. 35 37 Rogers Cable, Inc. Sr. Notes 6.25% due 06/15/13 ................................... 265 252 Shaw Communications, Inc. 7.25% due 04/06/11 ................................... 15 16 Shaw Communications, Inc. - Sr. Notes 8.25% due 04/11/10 ................................... 260 283 Sinclair Broadcast Group, Inc. - Sr. Sub. Notes 8.0% due 03/15/12 .................................... 105 107 8.75% due 12/15/11 ................................... 135 144 Videotron Ltee - Sr. Notes 6.875% due 01/15/14 .................................. 245 238 Vivendi Universal - Sr. Notes Ser. B 9.25% due 04/15/10 ................................... 200 236 Warner Music Group - Sr. Sub. Notes 144A (a) 7.375% due 04/15/14 .................................. 155 149 ------ 9,161 Metals & Mining - 2.8% AK Steel Corp. 7.875% due 02/15/09 .................................. 245 229 American Rock Salt Co. LLC - Gtd. Sr. Sec Notes 144A (a) 9.5% due 03/15/14 .................................... 55 56 Century Aluminum Co. 11.75% due 04/15/08 .................................. 320 357 Compass Minerals Group, Inc. - Sr. Sub. Notes 10.0% due 08/15/11 ................................... 275 306 Consol Energy, Inc. - Notes 7.875% due 03/01/12 .................................. $200 $ 206 Kennametal, Inc. - Sr. Notes 7.2% due 06/15/12 .................................... 75 80 Massey Energy Co. - Sr. Notes 6.625% due 11/15/10 .................................. 110 110 Massey Energy Corp. - Notes 6.95% due 03/01/07 ................................... 190 195 Peabody Energy Corp. - Sr. Notes 6.875% due 03/15/13 .................................. 360 365 Russel Metals, Inc. - Sr. Notes 6.375% due 03/01/14 .................................. 45 42 Steel Dynamics, Inc. - Sr. Notes 9.5% due 03/15/09 .................................... 45 50 9.5% due 03/15/09 .................................... 155 171 Timken Co. - Notes 5.75% due 02/15/10 ................................... 205 205 United States Steel Corp. - Sr. Notes 10.75% due 08/01/08 .................................. 244 278 ------ 2,650 Multiline Retail - 0.5% J.C. Penney Co., Inc. - Notes 8.0% due 03/01/10 .................................... 225 251 J.C. Penney Co., Inc.. - Notes 7.375% due 08/15/08 .................................. 195 211 Petro Stopping Centers - Sr. Sec. Notes 144A (a) 9.0% due 02/15/12 .................................... 45 44 ------ 506 Office Electronics - 1.0% Xerox Corp. 7.2% due 04/01/16 .................................... 190 182 Xerox Corp. - Sr. Notes 9.75% due 01/15/09 ................................... 645 735 ------ 917 Oil & Gas - 6.5% ANR Pipeline Co. - Sr. Notes 8.875% due 03/15/10 .................................. 425 463 Chesapeake Energy Corp. 7.5% due 09/15/13 .................................... 280 290 Chesapeake Energy Corp. - Sr. Notes 7.75% due 01/15/15 ................................... 35 36 8.125% due 04/01/11 .................................. 545 589 Dynegy, Inc. - Sr. Sec. Notes 144A (a) 10.125% due 07/15/13 ................................. 270 293 Encore Acquisition Co. - Sr. Sub. Notes 8.375% due 06/15/12 .................................. 70 74 Evergreen Resources, Inc. - Sr. Sub. Notes 144A (a) 5.875% due 03/15/12 .................................. 55 55 EXCO Resources, Inc. - Sr. Notes 7.25% due 01/15/11 ................................... 230 233 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Oil & Gas - Continued Forest Oil Corp. - Sr. Notes 8.0% due 06/15/08 .................................... $102 $ 109 8.0% due 12/15/11 .................................... 270 289 Giant Industries, Inc. - Sr. Sub. Notes 8.0% due 05/15/14 .................................... 90 90 11.0% due 05/15/12 ................................... 179 200 Key Energy Services, Inc. - Sr. Notes 6.375% due 05/01/13 .................................. 50 47 Magnum Hunter Resources, Inc. - Sr. Notes 9.6% due 03/15/12 .................................... 500 550 Newfield Exploration Co. - Sr. Sub. Notes 8.375% due 08/15/12 .................................. 215 232 Parker Drilling Co. - Notes 9.625% due 10/01/13 .................................. 210 219 Petroleum Geo Services ASA - Sr. Notes 10.0% due 11/05/10 ................................... 220 227 Plains Exploration & Production Co. - Sr. Notes 144A (a) 7.125% due 06/15/14 .................................. 60 61 Plains Exploration & Production Co. - Sr. Sub. Notes 8.75% due 07/01/12 ................................... 45 49 Premcor Refining Group, Inc. - Sr. Notes 6.75% due 02/01/11 ................................... 290 296 9.5% due 02/01/13 .................................... 345 395 Pride International, Inc. - Sr. Notes 144A (a) 7.375% due 07/15/14 .................................. 270 273 Tesoro Petroleum Corp. - Sr. Sec. Notes 8.0% due 04/15/08 .................................... 235 251 Tesoro Petroleum Corp. - Sr. Sub. Notes 9.625% due 11/01/08 .................................. 90 98 Western Oil Sands, Inc. - Sr. Sec. Notes 8.375% due 05/01/12 .................................. 205 222 Westport Resources Corp. - Sr. Sub. Notes 8.25% due 11/01/11 ................................... 295 334 Whiting Petroleum Corp. - Sr. Sub. Notes 144A (a) 7.25% due 05/01/12 ................................... 105 105 XTO Energy, Inc. - Sr. Notes 6.25% due 04/15/13 ................................... 20 21 ------ 6,101 Paper & Forest Products - 4.8% Abitibi-Consolidated, Inc. - Notes 8.55% due 08/01/10 ................................... 880 922 Blue Ridge Paper Products, Inc. - Sr. Sec. Notes 9.5% due 12/15/08 .................................... 225 210 Boise Cascade Corp. - Sr. Notes 6.5% due 11/01/10 .................................... 220 224 Bowater, Inc. - Notes 6.5% due 06/15/13 .................................... 35 33 Caraustar Industries, Inc. - Sr. Sub. Notes 9.875% due 04/01/11 .................................. 230 228 Georgia Pacific Corp. - Sr. Notes 8.875% due 02/01/10 .................................. $590 $ 671 9.375% due 02/01/13 .................................. 780 887 Jefferson Smurfit Corp. - Sr. Notes 8.25% due 10/01/12 ................................... 115 119 Longview Fibre Co. - Sr. Sub. Notes 10.0% due 01/15/09 ................................... 245 265 Norske Skog Canada, Ltd. - Sr. Notes 144A (a) 7.375% due 03/01/14 .................................. 425 415 Tembec Industries, Inc. - Sr. Notes 8.5% due 02/01/11 .................................... 495 500 ------ 4,474 Personal Products - 0.5% Armkel LLC - Sr. Sub. Notes 9.5% due 08/15/09 .................................... 230 251 Playtex Products, Inc. - Sr. Sec. Notes 144A (a) 8.0% due 03/01/11 .................................... 240 250 ------ 501 Pharmaceuticals - 1.0% AmeriSource Bergen Corp. - Sr. Notes 7.25% due 11/15/12 ................................... 535 548 8.125% due 09/01/08 .................................. 140 151 Biovail Corp. - Sr. Sub. Notes 7.875% due 04/01/10 .................................. 230 228 ------ 927 Real Estate Investment Trust - 1.1% FelCor Lodging, Ltd. - Sr. Notes 8.5% due 06/01/11 .................................... 400 414 IStar Financial, Inc. - Sr. Notes 4.875% due 01/15/09 .................................. 335 323 6.0% due 12/15/10 .................................... 95 94 Thomburg Mortgage, Inc. - Sr. Notes 8.0% due 05/15/13 .................................... 200 200 ------ 1,031 Real Estate Operations - 0.4% CB Richard Ellis Services, Inc. - Sr. Notes 9.75% due 05/15/10 ................................... 320 352 Road & Rail - 0.4% Kansas City Southern Railway Co. 9.5% due 10/01/08 .................................... 340 368 Kansas City Southern Railway Co. - Sr. Notes 7.5% due 06/15/09 .................................... 25 25 ------ 393 Semiconductor Equipment & Products - 0.8% Amkor Technology, Inc. 9.25% due 02/15/08 ................................... 410 430 Amkor Technology, Inc. - Sr. Notes 7.75% due 05/15/13 ................................... 345 326 ------ 756 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Specialty Retail - 1.2% Gap, Inc. - Notes 10.55% due 12/15/08 .................................. $ 185 $ 224 Pantry, Inc. - Sr. Sub. Notes 7.75% due 02/15/14 ................................... 105 102 Pathmark Stores, Inc. - Sr. Sub. Notes 8.75% due 02/01/12 ................................... 60 60 Rite Aid Corp. - Sr. Sec. Notes 8.125% due 05/01/10 .................................. 180 190 Rite Aid Corp. Sr. Notes 9.5% due 02/15/11 .................................... 440 485 Suburban Propane Partners - Sr. Notes 6.875% due 12/15/13 .................................. 30 29 ------- 1,090 Tobacco - 0.2% Dimon, Inc. - Sr. Notes 9.625% due 10/15/11 .................................. 145 147 Standard Commercial Corp. - Sr. Notes 144A (a) 8.0% due 04/15/12 .................................... 75 73 ------- 220 Wireless Telecommunications Services - 3.4% Nextel Communications, Inc. - Sr. Notes 6.875% due 10/31/13 .................................. 1,510 1,491 Rogers Wireless, Inc. - Sr. Sec. Notes 9.625% due 05/01/11 .................................. 855 960 Rural Cellular Corp. - Sr. Sec. Notes 144A (a) 8.25% due 03/15/12 ................................... 95 98 Triton PCS, Inc. - Sr. Notes 8.5% due 06/01/13 .................................... 400 381 Triton PCS, Inc. - Sr. Sub. Notes 8.75% due 11/15/11 ................................... 55 45 9.375% due 02/01/11 .................................. 205 176 ------- 3,151 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $89,489) 96.8% 90,299 SHORT-TERM INVESTMENTS - 1.5% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,410) ........................................ 1,410 1,410 ----- ------- TOTAL INVESTMENTS- (Cost $90,899) 98.3% 91,709 Cash and Receivables, less payables- 1.7% 1,545 ----- ------- NET ASSETS- 100.0% $93,254 ===== ======= (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $11,054 or 11.9% of net assets of the Portfolio. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock High Yield Bond (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $479 1.56% $-- 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $275, $513, $2,223, $8,179 and $5,903 which expire in 2007, 2008, 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $100 Million $100 Million ------------------ ------------ 0.80% 0.70% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $18 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $29,773 $29,545 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: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $89,864 $5,481 $(113) $5,368 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and premium amortization and market discount accretion on debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $17,093 $5,368 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $5,469 $-- $184 2002 5,697 -- -- Inception: May 2, 1988 -------------------------------------------------------------------------------- International Equity Index Fund SSgA Funds Management, Inc. J. Francis/J. Beach -------------------------------------------------------------------------------- . Year to date, the Fund returned 3.70%, underperforming its benchmark, the MSCI All Country World Ex US Index. Relative to Morningstar peers, the Fund has an above average rating of 4/5 with an average risk profile. . On March 25th, the Fund's sub-adviser was changed, with the Fund continuing to seek to track the performance of the MSCI All Country World ex-US Index. . The manager employs a passive management strategy by normally investing in each stock in roughly the same proportion as represented in the Index. The manager seeks to replicate as closely as possible the aggregate risk characteristics and country diversification of the Index. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ BP Amoco plc 2.1% HSBC Holdings plc 1.8% Vodafone AirTouch plc 1.6% GlaxoSmithKline plc 1.3% Toyota Motor Corp. 1.3% Total Fina SA 1.2% Nestle SA 1.2% Royal Dutch Petroleum Co. 1.2% Novartis AG 1.2% Mitsubishi 1.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ International International Equity Equity Index Fund Index Benchmark/4/ ----------------- -------------------- YTD/3/ 3.70% 4.11% 1 Year 32.33 34.38 3 Years 4.10 5.14 5 Years 0.32 1.10 10 Years 3.72 5.18 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY:/1/ . Foreign Large Blend MORNINGSTAR RISK:/1/ . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING:/1/ . *****(VL/VUL) . ****(VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DIVERSIFICATION BY REGION AND COUNTRY/5/ (as of June 30, 2004) % of Assets ------ Europe (excluding U.K.) 42.7% United Kingdom (U.K.) 21% Japan 20.2% Emerging Markets 7.1% Pacific Basin (excluding Japan) 7% United States 1.3% Other .2% DIVERSIFICATION BY REGION/6/ Developed Markets 90% Emerging Markets 10% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 363 VL/VUL subaccounts and 603 VA subaccounts in the Morningstar Foreign Large Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions, and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are special risks associated with international investing, including currency fluctuations, political and economic instability, foreign taxation and different accounting standards, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The International Equity Benchmark represents the MSCI EAFE from May 1988 to April 1998 and then MSCI EAFE GDP weighted from May 1998 to June 1999 and then 90% MSCI EAFE GDP/10% MSCI Emerging Markets Free from July 1999 to October 2003 and now the MSCI All Country World Free excluding U.S. from November 2003 to present. /5/ Calculations based upon country in which security is traded (listed). /6/ Calculations based upon country in which security is domiciled. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted) ASSETS Long term investments at cost (including $43,874 of securities loaned (Note B)) ..................................... $220,877 Net unrealized appreciation on investments ......................... 20,745 Short-term investments at value .................................... 47,912 -------- Total investments ............................................ 289,534 Foreign currency at value (cost $2,271) ............................ 2,264 Segregated cash--futures margin .................................... 402 Receivable for: Investments sold ................................................ 71 Dividends ....................................................... 540 Foreign dividend tax withholding reclaim ........................ 51 Futures contracts variation margin .............................. 223 Other receivables ............................................... 4 -------- Total assets ....................................................... 293,089 -------- LIABILITIES Payables for: Investments purchased ........................................... 44 Collateral for securities on loan ............................... 46,017 Foreign dividend tax withholding ................................ 30 Foreign interest tax withholding ................................ 3 Forward foreign currency exchange contracts purchased ........... 24 Accrued operating expenses ...................................... 49 Accrued Distribution fees--Series I ............................. 20 Accrued Distribution fees--Series II ............................ 4 Other payables .................................................. 90 Other liabilities ............................................... 5 -------- Total liabilities .................................................. 46,286 -------- Net assets ......................................................... $246,803 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 17,454 -------- Net asset value per share .......................................... $ 14.14 ======== Composition of net assets: Capital paid-in ................................................. $245,620 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (19,230) Undistributed net investment loss ............................... (375) Net unrealized appreciation (depreciation) of: Investments .................................................. 20,745 Futures ...................................................... 74 Translation of assets and liabilities in foreign currencies .. (31) -------- Net assets ......................................................... $246,803 ======== Other Information: Net Assets: NAV Series ...................................................... $167,073 Series I ........................................................ $ 58,340 Series II ....................................................... $ 21,390 Shares outstanding, $0.01 par value per share: NAV Series ...................................................... 11,814 Series I ........................................................ 4,126 Series II ....................................................... 1,514 Net asset value per share: NAV Series ...................................................... $ 14.14 Series I ........................................................ $ 14.14 Series II ....................................................... $ 14.13 STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 36 Dividends (net of foreign withholding tax of $337) ........... 2,641 Securities lending ........................................... 76 -------- Total investment income ............................................ 2,753 -------- EXPENSES Investment advisory fee ...................................... 147 Distribution fee for Series I (Note C) ....................... 20 Distribution fee for Series II (Note C) ...................... 4 Auditors fees ................................................ 10 Custodian fees ............................................... 40 Legal fees ................................................... 10 Printing & mailing fees ...................................... 63 Trustees' fees ............................................... 2 Other fees ................................................... 5 -------- Total expenses ..................................................... 301 Less expenses reimbursed ..................................... (16) -------- Net expenses ....................................................... 285 -------- Net investment income .............................................. 2,468 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. 3,870 Financial futures contracts .................................. 14 Foreign currency transactions ................................ (85) Realized Thai tax ............................................ (33) Change in unrealized appreciation (depreciation) on: Investments .................................................. 7,743 Futures ...................................................... (5) Translation of assets and liabilities in foreign currencies .. (90) -------- Net realized and unrealized gain ................................... 11,414 -------- Net increase in net assets resulting from operations ............... $ 13,882 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted)
Unaudited Six-Month Year Ended Period Ended December 31, June 30, 2004 2003 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ....................................... 2,468 $ 2,614 Net realized gain (loss) .................................... 3,766 (6,337) Change in net unrealized appreciation (depreciation) ........ 7,648 51,040 -------- -------- Net increase in net assets resulting from operations ..... 13,882 47,317 Distributions to shareholders from: Net investment income ....................................... (2,422) (3,183) Net realized gains .......................................... (981) -------- -------- Decrease in net assets resulting from distributions ...... (2,422) (4,164) From fund share transactions: Proceeds from shares sold ................................... 49,118 97,542 Issued in reorganization .................................... 45,097 Unrealized appreciation/(depreciation) from merger .......... (5,399) Distributions reinvested .................................... 2,422 4,164 Payment for shares redeemed ................................. (14,931) (84,740) -------- -------- Increase in net assets from fund share transactions ...... 76,307 16,966 -------- -------- NET INCREASE IN NET ASSETS ..................................... 87,767 60,119 NET ASSETS Beginning of Period ......................................... 159,036 98,917 -------- -------- End of Period (including undistributed net investment loss of $(375) and $(421), respectively) ...................... $246,803 $159,036 ======== ======== Analysis of fund share transactions: Sold ........................................................ 3,623 9,143 Issued in reorganization .................................... 3,212 Reinvested .................................................. 172 358 Redeemed .................................................... (1,061) (7,833) -------- -------- Net increase in fund shares outstanding ........................ 5,946 1,668 ======== ========
Other Information:
Unaudited Unaudited Unaudited Six Month Period from Period from Period Ended May 3, to May 3, to June 30, June 30, June 30, Fund share transactions 2004 2004 2004 ------------ ------------ ----------- NAV Series Series I Series II ------------ ------------ ----------- Dollars Sold ................................................ $ 15,838 $32,262 $ 1,018 Issued in reorganization ............................ 24,566 20,531 Unrealized appreciation/(depreciation) from merger .. 621 (6,020) Reinvested .......................................... 2,200 187 35 Redeemed ............................................ (13,596) (992) (343) -------- ------- ------- Net increase ........................................ $ 4,442 $56,644 $15,221 ======== ======= ======= Shares Sold ................................................ 1,116 2,435 72 Issued in reorganization ............................ 1,749 1,463 Reinvested .......................................... 156 13 3 Redeemed ............................................ (966) (71) (24) -------- ------- ------- Net increase ........................................ 306 4,126 1,514 ======== ======= ======= Distributions Net investment income ............................... $ 2,200 $ 187 $ 35
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
International Equity Index--NAV Series ------------------------------------------------------------------ Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------- 2004(f) 2003 2002 2001 2000 ------------ -------- ------- -------- -------- Net Assets Value at Beginning of Period ................ $ 13.82 $ 10.05 $ 12.07 $ 15.39 $ 19.64 Income from Investment Operations: Net Investment Income ............................... 0.20 0.24 0.21 0.22 0.23 Net Realized and Unrealized Gain (Loss) on Investment(a) .................................... 0.31 3.91 (2.02) (3.32) (3.64) -------- -------- ------- -------- -------- Total From Investment Operations .................... 0.51 4.15 (1.81) (3.10) (3.41) Less Distributions: Distribution from Net Investment Income ............. (0.19) (0.29) (0.21) (0.17) (0.18) Distribution from Net Realized Gains on Investments ...................................... (0.09) (0.59) Distribution from Excess of Net Investment Income/ Gains .................................... Distribution from Capital Paid-in ................... (0.05) (0.07) -------- -------- ------- -------- -------- Total Distributions ................................. (0.19) (0.38) (0.21) (0.22) (0.84) -------- -------- ------- -------- -------- Net Assets Value at End of Period ...................... $ 14.14 $ 13.82 $ 10.05 $ 12.07 $ 15.39 ======== ======== ======= ======== ======== Total Investment Return(b) ............................. 3.70%(d) 41.99% (15.18)% (20.30)% (17.42)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .... 0.29%(c)(e) 0.27%(c) 0.28%(c) 0.27%(c) 0.28%(c) Ratio of Net Investment Income (Loss) to Average Net Assets ....................................... 2.84%(e) 2.13% 1.85% 1.66% 1.40% Portfolio Turnover Rate ............................. 21.42%(d) 37.90% 17.55% 8.31% 14.86% Net Assets End of Period (000s Omitted) ................ $167,073 $159,036 $98,917 $122,020 $195,012
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .31% for the period ending June 30, 2004, and .42%, .46%, .40%, and .37%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (d) Not annualized. (e) Annualized. (f) The fund entered into a new sub-advisory agreement with SSgA Funds Management, Inc. during the period shown. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
International International Equity Index-- Equity Index-- Series I Series II ------------------ ------------------ Period from Period from May 3, to June 30, May 3, to June 30, 2004(c) 2004(c) ------------------ ------------------ Net Assets Value at Beginning of Period ....................... $ 13.89 $ 13.89 Income from Investment Operations: Net Investment Income ...................................... 0.05 0.05 Net Realized and Unrealized Gain (Loss) on Investment(a) ... 0.26 0.26 ------- ------- Total From Investment Operations ........................... 0.31 0.31 Less Distributions: Distribution from Net Investment Income .................... (0.06) (0.07) ------- ------- Total Distributions ........................................ (0.06) (0.07) ------- ------- Net Assets Value at End of Period ............................. $ 14.14 $ 14.13 ======= ======= Total Investment Return(b) .................................... 2.26%(d) 2.22%(d) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........... 0.74%(e) 0.97%(e) Ratio of Net Investment Income (Loss) to Average Net Assets ......................................... 2.55%(e) 0.94%(e) Portfolio Turnover Rate .................................... 21.42%(d) 21.42%(d) Net Assets End of Period (000s Omitted) ....................... $58,340 $21,390
(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) Commencement of investment operations. (d) Not annualized. (e) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Argentina - 0.0% Telecom Argentina Stet-France Telecom SA - ADR (J1) ...... 2,196 $ 20 Australia - 3.7% Alumina, Ltd. (BF) ....................................... 29,205 107 Amcor, Ltd. (BE) ......................................... 22,366 108 AMP, Ltd. (JR) ........................................... 47,637 210 Ansell, Ltd. (JL) ........................................ 4,303 23 Aristocrat Leisure Limited (BZ) .......................... 7,900 27 Australia & New Zealand Banking Group, Ltd. * (JP) ....... 46,741 594 Australian Gas & Light Co., Ltd. (J4) .................... 11,777 99 Australian Stock Exchange, Ltd. (JQ) ..................... 2,627 28 BHP Steel * (BF) ......................................... 19,407 91 Boral, Ltd. * (BD) ....................................... 14,676 66 Brambles Industries, Ltd. * (BO) ......................... 25,025 104 Broken Hill Proprietary Co., Ltd. * (BF) ................. 97,223 847 Centro Properties Group Development (JS) ................. 16,287 45 CFS Gandel Retail Trust (JS) ............................. 33,022 32 Coca Cola Amatil * (JG) .................................. 11,720 57 Cochlear, Ltd. (JL) ...................................... 1,405 22 Coles Myer, Ltd. * (JF) .................................. 28,246 169 Commonwealth Bank of Australia (JP) ...................... 32,654 740 Commonwealth Property Office (JS) ........................ 32,475 26 Computershare, Ltd. (BO) ................................. 11,036 24 CSL, Ltd. * (JO) ......................................... 4,901 76 CSR, Ltd. (BD) ........................................... 24,041 37 Deutsche Office Trust (JS) ............................... 29,430 24 Foster's Brewing Group, Ltd. * (JG) ...................... 51,854 170 Futuris Corp., Ltd. (JH) ................................. 14,218 16 General Property Trust (JS) .............................. 54,363 132 Harvey Norman Holdings, Ltd. (JD) ........................ 13,516 27 Iluka Resources, Ltd. (BF) ............................... 5,843 18 ING Industrial Fund (JS) ................................. 16,218 20 Insurance Australia Group (JR) ........................... 45,748 159 Investa Property Group (JS) .............................. 35,871 49 Jame Hardie Industries NV (BD) ........................... 11,821 49 John Fairfax Holdings Ltd. (JA) .......................... 22,918 59 Leighton Holdings, Ltd. (BJ) ............................. 3,516 22 Lend Lease Corp. (JS) .................................... 9,607 69 Lion Nathan, Ltd. (JG) ................................... 7,524 35 Macquarie Goodman Industrial Trust (JS) .................. 39,783 46 Macquarie Infrastructure Group (BT) ...................... 49,784 114 Macquariebank, Ltd. (JP) ................................. 5,815 137 Mayne Group, Ltd. (BP) ................................... 18,642 44 Mirvac Group (JS) ........................................ 17,628 53 National Australia Bank, Ltd. (JP) ....................... 39,010 809 National Mutual Holdings, Ltd. * (JR) .................... 17,701 41 Newcrest Mining, Ltd. (BF) ............................... 8,453 81 News Corp., Ltd. (JA) .................................... 35,273 311 Onesteel. Ltd. (BF) ...................................... 14,186 25 Orica, Ltd. (BC) ......................................... 7,135 $ 75 Origin Energy (BB) ....................................... 17,049 67 Pacific Brands Holding Pty., Ltd. * (BY) ................. 12,597 23 Paperlinx (BG) ........................................... 11,377 38 Patrick Corp., Ltd. (BT) ................................. 13,061 49 Perpetual Trustees Australia. Ltd. (JQ) .................. 963 31 Publishing & Broadcasting, Ltd. (JA) ..................... 3,397 30 QBE Insurance Group, Ltd. * (JR) ......................... 17,319 154 Rinker Group (BD) ........................................ 24,288 136 Rio Tinto, Ltd. (BF) ..................................... 8,039 201 Santos, Ltd. * (BB) ...................................... 14,960 72 Sonic Healthcare, Ltd. (JM) .............................. 6,200 39 Southcorp, Ltd. (JG) ..................................... 16,353 36 Stockland (JS) ........................................... 32,694 118 Suncorp-Metway, Ltd. (JP) ................................ 14,513 143 TAB (BZ) ................................................. 11,576 40 Tabcorp Holdings, Ltd. (BZ) .............................. 10,658 106 Telstra Corp., Ltd. * (J1) ............................... 55,414 194 Toll Holdings, Ltd. (BP) ................................. 5,855 44 Transurban Group (BT) .................................... 12,511 42 Wesfarmers (BL) .......................................... 9,716 199 Westfield Holdings, Ltd. (JS) ............................ 10,964 117 Westfield Trust (JS) ..................................... 58,827 180 Westpac Banking Corp., Ltd. (JP) ......................... 46,619 570 WMC Resources, Ltd. * (BF) ............................... 29,135 100 Woodside Petroleum, Ltd. (BB) ............................ 12,694 147 Woolworth's, Ltd. * (JF) ................................. 26,261 208 ------ 9,201 Austria - 0.2% Bank Austria Credit * (JP) ............................... 987 58 Bohler-Uddeholm AG (BF) .................................. 200 17 Erste Bank * (JP) ........................................ 802 126 Flughafen Wien AG (BT) ................................... 298 17 Immofinanz Immobilien * (JS) ............................. 5,578 45 Mayr-Melnhof Karton AG (BE) .............................. 107 14 Oesterreichische Elektrizitaetswirtschafts AG (J3) ....... 133 23 OMV AG (BB) .............................................. 361 70 RHI AG (BD) .............................................. 481 11 Telecom Austria * (J1) ................................... 7,404 113 VA Technologie AG (BM) ................................... 253 14 Voest Alpine AG (BF) ..................................... 601 30 Wienerberger Baustoffindustrie AG (BI) ................... 1,342 47 ------ 585 Belgium - 1.0% Agfa Gevaert NV (BX) ..................................... 2,456 61 Barco NV (JY) ............................................ 324 29 Bekaert NV (BK) .......................................... 397 23 Belgacom SA (J1) ......................................... 4,215 129 Cofinimmo SA (JS) ........................................ 131 18 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- ------- (000's) COMMON STOCK - Continued Belgium - Continued Colruyt NV (JF) ........................................ 461 $ 57 Compagnie Maritime Belge SA (BR) ....................... 93 11 D' Ieteren SA (JB) ..................................... 77 16 Delhaize SA (JF) ....................................... 1,975 101 DEXIA * (JP) ........................................... 17,540 292 Electrabel SA (J3) ..................................... 743 239 Fortis * (JQ) .......................................... 31,682 702 GPE Bruxelles LAM (JQ) ................................. 1,875 120 Interbew (JG) .......................................... 4,077 130 KBC Bancassurance Holding NV (JP) ...................... 2,888 166 Mobistar SA * (J1) ..................................... 770 48 NV Union Miniere SA (BF) ............................... 604 38 Omega Pharma SA (JL) ................................... 569 29 Solvay SA (BC) ......................................... 1,712 140 UCB SA * (JO) .......................................... 2,367 110 ------ 2,459 Brazil - 0.1% Aracruz Celulose SA - ADR * (BG) ....................... 897 29 Centrais Electricas Brasileiras SA ADR - ADR (J3) ...... 3,676 19 Compahnia Vale Do Rio Doce * (BF) ...................... 900 42 Petrol Brasilieros (BB) ................................ 1,700 47 Souza Cruz (JI) ........................................ 2,100 20 Tele Norte Leste Participacoes SA * (J1) ............... 1,500,000 16 Usinas Siderurgicas de Minas Gerais SA - ADR * (BF) .... 1,669 17 ------ 190 Canada - 5.1% Aber Diamond Corp. * (BF) .............................. 1,300 38 Abitibi Consolidated, Inc. * (BG) ...................... 10,200 70 Agnico-Eagle Mines, Ltd. (BF) .......................... 2,200 29 Agrium, Inc. (BC) ...................................... 3,300 48 Alcan Aluminum, Ltd. (BF) .............................. 9,500 391 Aliant, Inc. (J1) ...................................... 1,100 23 Angiotech Pharmaceuticals, Inc. (JO) ................... 2,100 43 ATI Technologies, Inc. (JX) ............................ 6,200 116 Ballard Power Systems, Inc. (BK) ....................... 2,000 18 Bank Nova Scotia Halifax * (JP) ........................ 26,000 695 Bank of Montreal (JP) .................................. 12,900 514 Barrick Gold Corp. (BF) ................................ 13,100 260 BCE, Inc. (J1) ......................................... 7,800 155 Biovail Corp. * (JO) ................................... 3,500 66 Bombardier, Inc. - Cl. B * (BH) ........................ 36,200 109 Brascan Corp. - Cl. A (BL) ............................. 6,000 167 Brookfield Properties Corp. * (JS) ..................... 2,300 66 CAE, Inc. (BH) ......................................... 6,300 28 Cameco Corp. (BF) ...................................... 1,500 87 Canadian Imperial Bank of Commerce (JP) ................ 9,400 457 Canadian National Railway Co. (BS) ..................... 7,300 315 Canadian Natural Resources, Ltd. (BB) .................. 6,600 197 Canadian Pacific Railway (BS) .......................... 4,100 $ 100 Canadian Tire, Ltd. - Cl. A * (JD) ..................... 2,000 73 Celestica, Inc. * (JY) ................................. 5,100 102 CGI Group, Inc. - Cl. A (JU) ........................... 7,400 50 CI Fund Management, Inc. (JQ) .......................... 4,200 50 Cognos, Inc. * (JV) .................................... 2,100 75 Cott Corp. * (JG) ...................................... 1,300 42 CP Ships, Ltd. Common (BR) ............................. 2,300 41 Dofasco, Inc. (BF) ..................................... 2,000 59 Domtar, Inc. (BG) ...................................... 5,000 64 Enbridge, Inc. (J4) .................................... 4,200 153 Encana Corp. (BB) ...................................... 11,800 507 Fairfax Financial Holdings, Ltd. (JR) .................. 300 51 Fairmont Hotels Resorts, Inc. (BZ) ..................... 2,000 54 Falconbridge, Ltd. (BF) ................................ 2,100 51 Finning International, Inc. (BM) ....................... 2,000 50 Four Seasons Hotels, Inc. (BZ) ......................... 600 36 Glamis Gold, Ltd. (BF) ................................. 3,300 58 Goldcorp, Inc. (BF) .................................... 4,900 57 Great West Lifeco, Inc. (JR) ........................... 3,400 122 Hudson's Bay Co. (JD) .................................. 1,800 19 Husky Energy, Inc. (BB) ................................ 3,300 63 IGM Financial, Inc. (JQ) ............................... 3,100 76 Imperial Oil, Ltd. (BB) ................................ 3,300 154 Inco, Ltd. * (BF) ...................................... 4,800 165 Intrawest Corp. (BZ) ................................... 1,200 19 Kinross Gold Corp. * (BF) .............................. 7,600 42 Loblaw Co., Ltd. (JF) .................................. 2,800 128 Magna International, Inc. (BU) ......................... 2,500 212 Manulife Financial Corp. (JR) .......................... 20,700 835 Masonite International Corp. * (BI) .................... 1,400 36 MDS, Inc. * (JM) ....................................... 3,600 55 Meridian Gold, Inc. (BF) ............................... 2,600 33 Methanex Corp. * (BC) .................................. 3,100 41 MI Developments, Inc. - Cl. A (JS) ..................... 1,200 33 Molson Cos., Ltd. (JG) ................................. 2,700 68 National Bank of Canada (JP) ........................... 4,500 144 Nexen, Inc. (BB) ....................................... 3,200 124 Noranda, Inc. (BF) ..................................... 4,400 75 Nortel Networks Corp. (JW) ............................. 107,100 534 NOVA Chemicals Corp. (BC) .............................. 2,200 63 ONEX Corp. (JY) ........................................ 3,200 41 Open Text Corp. * (JT) ................................. 1,000 32 Penn West Petroleum, Ltd. (BB) ......................... 1,300 60 Petro Canada (BB) ...................................... 5,800 249 Placer Dome, Inc. (BF) ................................. 10,600 177 Potash Corp. of Saskatchewan, Inc. * (BC) .............. 1,400 134 Power Corp. Canada (JQ) ................................ 4,100 162 Power Financial Corp. (JQ) ............................. 3,100 127 Precision Drilling Corp. (BA) .......................... 1,400 67 QLT, Inc. (JN) ......................................... 1,800 36 Quebecor World, Ltd. (JA) .............................. 2,200 48 Rogers Comunications, Inc. - Cl. B (J1) ................ 4,300 77 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Canada - Continued Royal Bank of Canada (JP) ............................... 16,900 $ 745 Shaw Communications, Inc. (JA) .......................... 5,100 85 Shell Canada, Ltd. (BB) ................................. 1,800 87 Shoppers Drug Mart Corp. * (JF) ......................... 4,900 122 SNC-Lavalin Group, Inc. (BJ) ............................ 1,300 48 Sun Life Financial, Inc. * (JR) ......................... 15,400 441 Suncor Energy, Inc. (BB) ................................ 11,600 294 Talisman Energy, Inc. (BB) .............................. 9,900 215 Teck Cominco, Ltd. - Cl. B (BF) ......................... 4,700 84 Telus Corp. (J1) ........................................ 3,300 50 Thomson Corp. (JA) ...................................... 5,900 196 Transalta Corp. (J5) .................................... 4,900 61 TransCanada Corp. (J4) .................................. 12,400 244 TSX Group, Inc. (FB) .................................... 900 32 Weston George, Ltd. (JF) ................................ 1,300 90 ------- 12,610 Chile - 0.0% Sociedad Quimica y Minera de Chile SA - ADR (BC) ........ 736 30 Czech Republic - 0.1% Ceske Energeticke Zavody AS (J3) ........................ 3,996 28 Komercni Banka AS * (JP) ................................ 293 33 Philip Morris Credit AS (JI) ............................ 18 11 SPT Telecom AS * (J1) ................................... 3,106 38 ------- 110 Denmark - 0.7% A P Moller-Maersk AS - Cl. B (BR) ....................... 29 200 Bang & Olufsen AS - Ser. B (BW) ......................... 300 17 Carlsberg AS (JG) ....................................... 900 48 Coloplast (JL) .......................................... 350 33 Danisco AS (JH) ......................................... 1,450 75 Danske Bank (JP) ........................................ 12,600 299 DSV (BS) ................................................ 575 27 FLS Industries AS - Cl. B (BJ) .......................... 600 8 GN Store Nord (JW) ...................................... 6,000 53 Group 4 Falck (BO) ...................................... 1,973 51 H. Lundbeck AS * (JO) ................................... 1,900 41 ISS AS (BO) ............................................. 1,150 57 Kobenhauns Lufthavne AS (BT) ............................ 175 26 NKT Holdings AS (BK) .................................... 400 8 Novo Nordisk AS (JO) .................................... 7,000 361 Novozymes AS - Ser. B (BC) .............................. 1,500 68 Ostasiatiske Kompagni (JH) .............................. 500 23 Tele Danmark AS (J1) .................................... 3,500 114 Topdanmark AS * (JR) .................................... 625 37 Vestas Wind Systems AS (BK) ............................. 4,633 68 William Demant Holdings AS (JL) ......................... 700 26 ------- 1,640 Finland - 1.2% Amer Group, Ltd. (BX) ................................... 600 31 ELISA Corp. - Ser. A (J1) ............................... 3,660 49 Fortum Oyj (BB) ......................................... 9,200 $ 118 KCI Konecranes Oyj (BM) ................................. 350 13 Kesko Oyj (JF) .......................................... 1,600 32 Kone Oyj - Ser. B (BM) .................................. 938 57 Metso OYJ * (BM) ........................................ 2,700 34 Nokia Oyj * (JW) ........................................ 128,600 1,858 Nokian Renkaat (BU) ..................................... 275 27 Orion - Ser. B (JO) ..................................... 1,000 26 Outokumpu Oyj (BF) ...................................... 2,400 38 Pohoja Group plc - Ser. D (JR) .......................... 1,519 16 Rautaruukki Oyj (BF) .................................... 2,300 19 Sampo Insurance Co. plc (JR) ............................ 7,400 72 Stora Enso Oyj * (BG) ................................... 16,500 224 Tietoenator Oyj (JU) .................................... 2,220 67 UPM-Kymmene Corp. * (BG) ................................ 14,000 267 Uponor Oyj (BI) ......................................... 800 26 Wartsila (BM) ........................................... 1,000 22 ------- 2,996 France - 7.9% Accor SA (BZ) ........................................... 5,173 219 Air Liquide * (BC) ...................................... 2,880 477 Air Liquide SA * (JL) ................................... 638 88 Alcatel * (JW) .......................................... 31,994 494 Alstom (BK) ............................................. 25,536 29 Areclor (BF) ............................................ 10,477 176 Atos Origin SA * (JU) ................................... 1,193 77 Autoroutes du Sud de la France (BT) ..................... 1,791 71 Aventis SA * (JO) ....................................... 18,265 1,380 AXA * (JR) .............................................. 34,954 771 BNP Paribas * (JP) ...................................... 21,462 1,321 Bouygues SA * (J2) ...................................... 5,236 175 Business Objects (JV) ................................... 1,738 39 Caisse National Credit Agricole (JP) .................... 17,378 423 Cap Gemini SA * (JU) .................................... 3,361 135 Carrefour SA * (JF) ..................................... 15,146 736 Casino Guichard-Perrachon SA (JF) ....................... 940 85 CIE De St. Gobain * (BI) ................................ 8,044 401 CNP Assurances (JR) ..................................... 889 52 Dassault Systemes SA * (JV) ............................. 1,491 69 EADS, Inc. (BH) ......................................... 6,391 178 Essilor International (JL) .............................. 2,615 171 Euronext NV (JQ) ........................................ 2,421 68 France Telecom * (J1) ................................... 29,239 763 Gecina (JS) ............................................. 680 53 Groupe Air France * (BQ) ................................ 3,199 55 Groupe Danone * (JH) .................................... 6,306 551 Hermes International * (BY) ............................. 243 49 Imerys (BI) ............................................. 854 50 Klepierre (JS) .......................................... 583 40 L'Oreal SA * (JK) ....................................... 7,973 638 Lafarge SA * (BD) ....................................... 4,384 391 LaFarge SA (BI) ......................................... 494 55 Lagardere SCA (JA) ...................................... 3,422 214 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued France - Continued LVMH * (Louis Vuitton Moet Hennessy) (BY) ................ 6,420 $ 465 Michelin (BU) ............................................ 3,750 208 Pernod Ricard (JG) ....................................... 1,437 184 Peugoet SA (BV) .......................................... 4,460 249 Pinault-Printemps-Redoute SA * (JD) ...................... 1,842 189 Publicis Groupe SA * (JA) ................................ 2,928 87 Renault (BV) ............................................. 4,854 370 Sagem SA (JW) ............................................ 475 53 Sanofi-Synthelabo SA * (JO) .............................. 9,603 609 Schneider SA * (BK) ...................................... 5,469 374 Societe BIC SA (BO) ...................................... 857 38 Societe Generale - Cl. A * (JP) .......................... 8,677 738 Societe Television Francaise (JA) ........................ 3,079 97 Sodexho Alliance SA * (BZ) ............................... 2,478 65 STMicroelectronics * (J0) ................................ 15,349 337 SUEZ (J5) ................................................ 21,058 439 Technip SA (BA) .......................................... 491 67 Thomson CFS (BH) ......................................... 2,004 73 Thomson Multimedia * (BW) ................................ 6,171 122 Total Fina SA - Cl. B * (BB) ............................. 15,399 2,939 Unibail SA (JS) .......................................... 1,154 119 Valeo SA (BU) ............................................ 1,913 80 Veolia Environment * (J5) ................................ 7,432 210 Vinci SA * (BJ) .......................................... 1,881 190 Vivendi Universal SA * (JA) .............................. 26,678 741 Zodiac SA (BH) ........................................... 1,036 35 ------- 19,572 Germany - 5.4% Adidas-Salomon AG (BY) ................................... 1,193 143 Allianz AG * (JR) ........................................ 7,991 867 Altana AG (JO) ........................................... 1,809 109 BASF AG (BC) ............................................. 13,732 736 Bayer AG * (BC) .......................................... 17,003 491 Bayerische Vereinsbank AG * (JP) ......................... 15,156 270 Beiersdorf AG (JK) ....................................... 444 52 Celesio AG * (JM) ........................................ 778 47 Commerzbank AG (JP) ...................................... 13,118 231 Continental AG (BU) ...................................... 3,570 172 DaimlerChrysler AG * (BV) ................................ 22,341 1,045 Depfa Bank plc (JP) ...................................... 9,088 132 Deutsche Bank AG * (JP) .................................. 13,628 1,072 Deutsche Boerse AG (JQ) .................................. 2,722 138 Deutsche Post AG (BP) .................................... 11,499 249 Deutsche Telekom AG * (J1) ............................... 65,376 1,150 Douglas Holding AG (JE) .................................. 880 25 E.On AG (J3) ............................................. 16,180 1,169 Epcos AG * (JY) .......................................... 1,239 26 Fresenius Medical Care AG (JM) ........................... 909 67 Heidelberg Zement (BD) ................................... 1,566 78 Hypo Real Estate (JQ) .................................... 3,364 99 Infineon Technologies AG * (J0) .......................... 16,985 228 Karstadt AG (JD) ......................................... 1,005 22 Linde AG (BM) ............................................ 2,225 $ 123 Lufthansa AG (BQ) ........................................ 5,765 78 MAN AG (BM) .............................................. 2,723 99 Marschollek Lauten (JR) .................................. 1,569 23 Merck KGAA (JO) .......................................... 1,229 74 Metro AG (JD) ............................................ 3,770 179 Muenchener Rueckversicherungs- Gesellschaft AG * (JR) .... 4,508 489 Puma AG (BY) ............................................. 439 112 Qiagen NV (JL) ........................................... 2,971 35 RWE AG (J5) .............................................. 10,193 480 SAP AG * (JV) ............................................ 5,272 875 Schering AG * (JO) ....................................... 4,593 271 Siemens AG * (BK) ........................................ 20,836 1,500 Suedzucker AG (JH) ....................................... 1,350 27 Thyssen Krupp AG * (BF) .................................. 7,996 136 Tui AG (BZ) .............................................. 3,297 63 Volkswagen AG (BV) ....................................... 5,838 247 ------- 13,429 Greece - 0.3% Alpha Credit Bank (JP) ................................... 4,566 116 Bank of Piraeus (JP) ..................................... 3,850 45 Commercial Bank of Greece (JP) ........................... 1,180 31 Cosmote Mobile Telephone (J2) ............................ 2,658 41 Duty Free Shops (JD) ..................................... 340 6 EFG Eurobank (JP) ........................................ 4,330 94 Folli-Folie (BY) ......................................... 270 9 Germanos SA (JE) ......................................... 556 16 Hellenic Bottling Co. SA (JH) ............................ 1,900 44 Hellenic Petroleum SA (BB) ............................... 2,460 21 Hellenic Technodomiki Tev SA (BJ) ........................ 1,170 5 Hellenic Telecommunication Organization SA * (J1) ........ 5,770 75 Hyatt Regency Hotel (BZ) ................................. 975 10 Intracom SA (JW) ......................................... 1,970 9 National Bank of Greece SA (JP) .......................... 5,687 123 OPAP SA (BZ) ............................................. 3,653 69 Public Power Corp. (J3) .................................. 2,392 57 Technical Olympic SA (BJ) ................................ 1,330 6 Titan Cement Co. (BI) .................................... 1,320 31 Viohalco (BF) ............................................ 2,530 18 ------- 826 Hong Kong - 2.1% Aluminum Corp. of China, Ltd. * (BF) ..................... 76,000 41 Angang Steel (BF) ........................................ 28,000 10 Anhui Conch Cement Co., Ltd. (BD) ........................ 12,000 13 ASM Pacific Technology, Ltd. (J0) ........................ 4,500 17 Avichina Industry * (BV) ................................. 48,000 6 Bank of East Asia, Ltd. (JP) ............................. 31,400 90 Beijing Capital International (BT) ....................... 32,000 10 Beijing Datang Power Generation Co., Ltd. (J3) ........... 44,990 35 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Hong Kong - Continued Beijing Enterprise (BL) ................................. 8,000 $ 10 BOC Hong Kong Holdings, Ltd. (JP) ....................... 88,500 151 Brilliance China Automotive Holdings, Ltd. (BV) ......... 68,000 20 BYD Co., Ltd. * (BL) .................................... 4,500 13 Cathay Pacific Airways (BQ) ............................. 24,000 45 Cheung Kong Holdings, Ltd. * (JS) ....................... 36,000 265 Cheung Kong Infrastructure Holdings, Ltd. (BD) .......... 12,000 29 China East Airline * (BQ) ............................... 50,000 10 China Everbright, Ltd. (JQ) ............................. 12,000 5 China Life Insurance Co., Ltd. * (JR) ................... 208,000 124 China Merchants Holdings International Co., Ltd. * (BL) ................................................. 34,000 46 China Overseas and Land Invest (JS) ..................... 98,000 17 China Petroleum (BB) .................................... 416,000 152 China Pharma Group * (JO) ............................... 22,000 6 China Resources Enterprise, Ltd. * (JB) ................. 26,000 31 China Shipping Development * (BR) ....................... 40,620 24 China Southern Airlines Co. Ltd * (BQ) .................. 36,300 14 China Telecom Corp. * (J1) .............................. 408,000 143 China Telecom, Ltd. * (J2) .............................. 152,699 462 China Travel International (BZ) ......................... 60,000 10 Citic Pacific, Ltd. * (BL) .............................. 34,000 83 CLP Holdings, Ltd. (J3) ................................. 42,900 235 CNOOC, Ltd. (BB) ........................................ 382,000 162 Cofco International, Ltd. (JH) .......................... 18,000 9 Cosco Pacific, Ltd. (BR) ................................ 34,000 47 Denway Motors, Ltd. * (BV) .............................. 130,000 47 Esprit Holdings, Ltd. (JE) .............................. 17,000 76 Fujian Zijin Minin (BF) ................................. 26,000 9 Giordano International Ltd. (JE) ........................ 38,000 24 Guangshen Railway Co., Ltd. * (BS) ...................... 28,990 8 Guangzhou Investment Co., Ltd. (BL) ..................... 96,000 8 Hang Lung Properties (JS) ............................... 28,000 36 Hang Seng Bank, Ltd. * (JP) ............................. 18,300 235 Henderson Land Development Co., Ltd. * (JS) ............. 18,000 78 Hong Kong & China Gas Co., Ltd. (J4) .................... 87,490 143 Hong Kong Electric Holding, Ltd. (J3) ................... 33,000 137 Hong Kong Exchange & Clearing, Ltd. (JQ) ................ 26,000 53 Hopewell Holdings, Ltd. (BL) ............................ 14,000 28 Huadian Power International Corp. * (J3) ................ 44,000 15 Huaneng Power International * (J3) ...................... 94,000 84 Hutchison Whampoa, Ltd. * (BL) .......................... 50,800 347 Hysan Development Co., Ltd. (JS) ........................ 15,266 23 Jiangxi Copper Co., Ltd. * (BF) ......................... 22,000 10 Jianssu Expressway Company, Ltd. (BT) ................... 38,000 18 Johnson Electric Holdings, Ltd. * (BK) .................. 35,000 35 Kerry Properties, Ltd. (JS) ............................. 11,000 17 Kingboard Chemical Holding Co., Ltd. * (JY) ............. 10,000 $ 17 Legend Holdings * (JX) .................................. 104,899 29 Li & Fung, Ltd. * (JB) .................................. 38,000 56 Maanshan Iron & Steel Co., Ltd. (BF) .................... 50,000 16 MTR Corp. * (BS) ........................................ 31,500 48 New World Development Co., Ltd. (JS) .................... 53,000 39 Orient Overseas International, Ltd. (BR) ................ 5,000 15 PCCW, Ltd. (J1) ......................................... 82,860 56 PetroChina Company, Ltd. (BB) ........................... 490,000 226 PICC Property & Casualty (JR) ........................... 66,000 25 Semiconductor Manufacturing (J0) ........................ 171,000 37 Shanghai Industrial Holdings, Ltd. (BL) ................. 12,000 22 Shanghai Petrochemical Co., Ltd. (BC) ................... 72,000 24 Shangri-La Asia, Ltd. (BZ) .............................. 28,000 27 Shenzhen Expressway Co., Ltd. (BT) ...................... 24,000 8 Sino Landco (JS) ........................................ 22,257 12 Sinopec Beijing Yanhua Petrochemical Co., Ltd. (BC) ..... 32,000 10 Sinotrans, Ltd. * (BT) .................................. 44,000 16 Smartone Telecommunication Holdings, Ltd. (J2) .......... 7,500 8 South China MP Group Ltd. (JA) .......................... 24,000 10 Sun Hung Kai Properties, Ltd. * (JS) .................... 32,000 263 Swire Pacific, Ltd. - Cl. A * (JQ) ...................... 22,000 142 TCL International Holdings, Ltd. * (BW) ................. 24,000 7 Techtronic Industrials (BM) ............................. 20,000 32 Television Broadcasts (JA) .............................. 7,000 30 Texwinca Holdings * (BY) ................................ 14,000 11 Travelesky Technology, Ltd. (BO) ........................ 10,000 7 Tsingtao Brewery - Ser. H (JG) .......................... 10,000 9 Weiqiao Textile Co., Ltd. * (BY) ........................ 8,500 12 Wharf Holdings, Ltd. (JS) ............................... 29,000 83 Yanzhou Coal Mining * (BF) .............................. 32,000 35 Yizheng Chemical Fibre Co., Ltd. - Cl. A (BC) ........... 44,000 8 Yue Yuen Industrial Holdings, Ltd. (JE) ................. 11,500 28 Zhejiang Expressway Co., Ltd (BT) ....................... 44,000 31 ------ 5,165 Hungary - 0.1% Gedeon Richter * (JO) ................................... 386 39 Magyar Tavkozlesi * (J1) ................................ 12,959 52 Mol Magyar Olaj-es Gazipari (BB) ........................ 2,093 83 OTP Bank (JP) ........................................... 6,957 142 ------ 316 India - 0.5% ABB, Ltd. (BK) .......................................... 277 4 Ashok Leyland, Ltd. * (BU) .............................. 11,340 6 Asian Paints, Ltd. * (BC) ............................... 784 5 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued India - Continued Associated Cement Companies, Ltd. * (BD) ................ 1,118 $ 6 Bajaj Auto, Ltd. (BV) ................................... 800 15 Bank of Baroda (JP) ..................................... 1,258 4 Bharat Heavy Electricals, Ltd. (BK) ..................... 1,601 17 Bharat Petroleum Corp., Ltd. (BB) ....................... 1,635 13 Britannia Industries, Ltd. (JH) ......................... 164 2 Castrol, Ltd. (BB) ...................................... 809 3 Cipla (JO) .............................................. 1,529 7 Colgate Palmolive Co. * (JJ) ............................ 889 2 Dr. Reddys Labs (JO) .................................... 1,355 22 Flex Solutions (BL) ..................................... 1,018 13 Gail LD (J4) ............................................ 6,914 26 GlaxoSmithKline Pharmaceuticals (JO) .................... 380 5 Grasim Industries, Ltd. (BL) ............................ 924 20 Gujarat Ambuja Cements Ltd. (BD) ........................ 1,221 8 HDFC Bank Ltd. (JP) ..................................... 4,269 34 Hero Honda Motors, Ltd. (BV) ............................ 2,177 24 Hindlaco Industries (BF) ................................ 1,008 22 Hindustan Lever Ltd. (JJ) ............................... 20,996 58 Hindustan Petroleum Corp., Ltd. (BB) .................... 2,219 16 Housing Development Financing Corp., Ltd. (JQ) .......... 4,683 53 Icici Banking (JP) ...................................... 12,848 68 Indian Hotels Co., Ltd. (BZ) ............................ 443 3 Indian Petrochemical (BC) ............................... 2,097 7 Infosys Technologies, Ltd. * (JU) ....................... 1,177 141 ITC, Ltd. (JI) .......................................... 1,889 37 Larsen & Toubro (BJ) .................................... 1,004 15 Mahanagar Telephone Nigam, Ltd. (J1) .................... 5,151 15 Mahindra & Mahindra (BV) ................................ 1,107 11 Maruti Udyog (BV) ....................................... 1,890 17 Moser Baer (JX) ......................................... 912 4 Nestle India, Ltd. (JH) ................................. 492 6 Oil & Natural Gas (BB) .................................. 4,663 64 Punjab Tractors, Ltd. (BM) .............................. 497 2 Ranbaxy Laboratories, Ltd. (JO) ......................... 1,922 38 Reliance Industries, Inc. * (BC) ........................ 17,125 160 Satyam Computer Services, Ltd. (JU) ..................... 6,117 41 State Bank of India (JP) ................................ 2,237 22 Sun Pharmaceutical (JO) ................................. 1,264 10 Tata Ironsteel (BF) ..................................... 2,413 16 Tata Engineering and Locomotive Co., Ltd. (BM) .......... 4,410 36 Tata Power Co. (J3) ..................................... 1,051 5 Tata Tea Ltd. (JH) ...................................... 582 5 Ultratech Cemco, Ltd. (BI) .............................. 803 10 Videsh Sanchar Nigam, Ltd. (J1) ......................... 1,553 5 Wipro Ltd. * (JU) ....................................... 2,472 29 Zee Telefilms Ltd. (JA) ................................. 5,509 15 1,167 ------ Indonesia - 0.1% Astra International (BV) ................................ 47,000 27 Bank Central Asia (JP) .................................. 104,000 $ 21 Bank Danamon (JP) ....................................... 31,500 9 Bank Mandiri (JP) ....................................... 149,500 19 Bank Rakyat * (JP) ...................................... 100,000 18 Bumi Resources Tbk (BF) ................................. 290,000 18 HM Sampoerna (JI) ....................................... 73,000 39 Indofood Suskes Mak Tbk (JH) ............................ 90,500 7 PT Gudang Garam Tbk (JI) ................................ 14,500 21 PT Telekomunikasi Indonesia - ADR (J1) .................. 8,229 128 ------ 307 Ireland - 0.6% Allied Irish Banks Plc * (JP) ........................... 22,340 346 Bank of Ireland (JP) .................................... 25,586 342 CRH plc * (BD) .......................................... 13,920 294 DCC plc (BL) ............................................ 1,787 33 Eircom Group plc * (J1) ................................. 2,400 4 Elan Corp. (JO) ......................................... 10,191 252 Fyffes plc (JF) ......................................... 8,095 17 Grafton Group * (99) .................................... 5,146 41 Greencore Group plc (JH) ................................ 3,727 14 Independent Newspapers, Ltd. (JA) ....................... 10,062 24 Irish Life & Permanent plc (JR) ......................... 7,219 111 Kerry Group plc (JH) .................................... 2,683 57 Kingspan Group plc (BI) ................................. 579 4 Waterford Wedgewood plc (BW) ............................ 14,503 3 ------ 1,542 Israel - 0.4% AudioCodes, Ltd. * (JW) ................................. 612 7 Bank Hapoalim (JP) ...................................... 20,565 55 Bank Leumi Le-Israel * (JP) ............................. 17,471 34 Bezeq Israeli Telecommunication Corp., Ltd. (J1) ........ 25,030 25 CLAL Industries (BL) .................................... 1,333 6 CLAL Insurance Enterprises * (JR) ....................... 428 7 Discount Investor Corp. (JQ) ............................ 504 13 Elbit Systems, Ltd. (BH) ................................ 419 8 ICL Israel Chemicals, Ltd. (BC) ......................... 13,243 26 IDB Development Corp, Ltd. (JQ) ......................... 631 16 Israel Discount Bank - Ser. A (JP) ...................... 12,114 13 Koor Industries, Ltd. * (BL) ............................ 303 14 Makteshim-Agan Industries, Ltd. (BC) .................... 5,706 27 Migdal Insurance (JR) ................................... 4,413 6 Nice Systems, Ltd. (JW) ................................. 286 7 Osem Investment, Ltd. (JH) .............................. 796 8 Partner Communications * (J2) ........................... 1,754 14 Retalix, Ltd. (JV) ...................................... 416 9 Strauss Elite, Ltd. - Ser. A * (JH) ..................... 676 7 Supersol, Ltd. * (JF) ................................... 2,619 6 Teva pharmaceutical Industries, Ltd. *(JO) .............. 15,958 542 The Israel Corp., Ltd. (JQ) ............................. 47 9 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Israel - Continued United Mizrahi Bank (JP) ................................ 2,090 $ 7 ------ 866 Italy - 3.1% Alleanza Assicurazioni * (JR) ........................... 12,142 139 Assicurazioni Generali * (JR) ........................... 25,047 676 Autogrill SpA (BZ) ...................................... 2,959 42 Autostrade Spa * (BT) ................................... 4,460 88 Banca Antonveneta Spa (BL) .............................. 6,234 128 Banca Fideuram (JQ) ..................................... 7,686 43 Banca Intesa SpA (JP) ................................... 85,109 333 Banca Intesa SpA (JP) ................................... 24,140 73 Banca Nazionale del Lavoro (JP) ......................... 31,748 74 Banca Popolare di Milano (JP) ........................... 9,953 64 BCA Di Roma * (JP) ...................................... 37,324 117 BCE Pop Unite (JI) ...................................... 8,645 143 BCP Pop Veron (JP) ...................................... 9,662 166 Benetton Group SPA * (BY) ............................... 1,441 16 Bulgari SpA (BY) ........................................ 3,421 35 Edison International (J3) ............................... 21,263 37 Enel SpA * (J3) ......................................... 63,477 510 ENI * (BB) .............................................. 68,141 1,355 Fiat SpA * (BV) ......................................... 13,520 113 FinecoGroup (JP) ........................................ 4,168 26 Finmeccanica SA (BH) .................................... 159,498 127 GR Education L Espresso (JA) ............................ 4,435 27 Italcementi SpA (BD) .................................... 2,135 29 Luxottica Group (JL) .................................... 3,589 60 Mediaset SpA * (JA) ..................................... 15,446 176 Mediobanca SpA (JP) ..................................... 12,168 148 Mediolanum SpA * (JQ) ................................... 6,564 42 Mondadori Editore SpA (JA) .............................. 3,396 32 Monte Paschi Siena (JP) ................................. 29,845 96 Pirelli & Co. Spa (BL) .................................. 47,334 49 Riunione Adriatica di Sicorta SpA (JR) .................. 8,105 147 San Paolo-IMI SpA * (JP) ................................ 24,633 297 Seat Pagine Gialle * (JA) ............................... 87,872 37 Snam Rete Gas (J4) ...................................... 23,683 102 Sorin Spa * (JL) ........................................ 669 2 Telecom Italia (J1) ..................................... 367,311 1,006 Telecom Italia Media (JA) ............................... 32,454 13 Telecom Italia Mobile SpA (J2) .......................... 99,187 563 Tiscali SPA (JT) ........................................ 4,811 22 UniCredito Italiano SpA * (JP) .......................... 115,317 570 ------ 7,723 Japan - 19.8% Acom Co., Ltd. (JQ) ..................................... 1,860 121 Aderans Co., Ltd. (JK) .................................. 900 19 Advantest (J0) .......................................... 1,700 114 Aeon Credit Service Co., Ltd. (JQ) ...................... 600 40 Aiful Corp. * (JQ) ...................................... 1,150 120 Aisin Seiki Co. (BU) .................................... 4,100 85 Ajinomoto Co., Inc. (JH) ................................ 15,000 180 Alfresa Holdings Corp. * (JL) ........................... 500 $ 28 All Nippon Airways Co., Ltd. (BQ) ....................... 12,000 39 Alps Electric Co. (JY) .................................. 5,000 71 Amada Co., Ltd (BM) ..................................... 9,000 59 Amano Corp. (BO) ........................................ 1,000 9 Anritsu Corp. (JY) ...................................... 2,000 13 Aoyama Trading Co. (JE) ................................. 1,300 35 Ariake Japan Co., Ltd. (JH) ............................. 450 13 Asahi Breweries, Ltd. (JG) .............................. 9,800 108 Asahi Chemical Industry Co., Ltd. (BC) .................. 31,000 160 Asahi Glass Co., Ltd. (BI) .............................. 21,000 218 Asatsu DK (JA) .......................................... 1,000 26 Autobacs Seven Co. (JE) ................................. 700 23 Bandai Co. * (BX) ....................................... 1,600 43 Bank of Yokohama, Ltd. * (JP) ........................... 26,000 162 Bellsystem24, Inc. (BO) ................................. 80 17 Benesse Corp. (BO) ...................................... 1,600 52 Bridgestone Corp. (BU) .................................. 17,000 319 Canon, Inc. * (JZ) ...................................... 21,800 1,146 CAPCOM Co. (JV) ......................................... 1,100 12 Casio Computer Co. (BW) ................................. 4,000 60 Central Glass Co. (BI) .................................. 4,000 34 Central Japan Railway Co. (BS) .......................... 26 221 Chiba Bank, Ltd. (JP) ................................... 18,000 110 Chubu Electric Power (J3) ............................... 17,000 358 Chugai Pharmaceutical Co., Ltd. * (JO) .................. 7,100 111 Circle K Japan Co., Ltd. (JF) ........................... 1,100 29 Citizen Watch Co., Ltd. (JY) ............................ 7,000 79 Coca Cola West Japan Co., Ltd. (JG) ..................... 1,200 30 Comsys Holdings * (BJ) .................................. 3,000 24 Credit Saison Co., Ltd. (JQ) ............................ 3,600 108 CSK Corp. * (JU) ........................................ 1,700 82 Dai-Ichi Pharmaceutical Co., Ltd. * (JO) ................ 6,600 117 Dai-Nippon Ink & Chemicals, Inc. (BC) ................... 17,000 44 Dai-Nippon Printng Co., Ltd. (BO) ....................... 16,000 255 Daicel Chemical Industries, Ltd. (BC) ................... 7,000 37 Daikin Industries, Ltd. (BM) ............................ 5,000 134 Daimaru, Inc. (JD) ...................................... 6,000 54 Dainippon Screen Manufacturing Co., Ltd. (JY) ........... 5,000 29 Daito Trust Construction Co., Ltd. (BW) ................. 2,200 85 Daiwa Bank Holdings (JP) ................................ 123,000 218 Daiwa House Industry Co., Ltd. (BW) ..................... 12,000 139 Daiwa Securities Group, Inc. (JQ) ....................... 30,900 222 Denki Kagaku Kogyo (BC) ................................. 10,000 35 Denso Corp. (BU) ........................................ 13,400 311 Dentsu, Inc. (JA) ....................................... 45 116 Dowa Mining Co. (BF) .................................... 7,000 41 East Japan Railway Co. (BS) ............................. 88 493 Ebara Corp. (BM) ........................................ 7,000 34 Eisai Co. Ltd. * (JO) ................................... 6,200 178 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued FamilyMart Co., Ltd. (JF) ............................... 1,600 $ 52 Fanuc, Ltd. * (BK) ...................................... 3,800 226 Fast Retailing Co. (JE) ................................. 1,400 113 Fuji Electric Holdings Co. (BK) ......................... 13,000 35 Fuji Photo Film * (BX) .................................. 12,000 375 Fuji Soft ABC, Inc. (JV) ................................ 800 31 Fuji Television Network, Inc. (JA) ...................... 18 41 Fujikura (BK) ........................................... 10,000 56 Fujisawa Pharmeceutical Co., Ltd. * (JO) ................ 7,200 170 Fujitsu, Ltd. * (JX) .................................... 44,000 309 Furukawa Electric Co. (BK) .............................. 14,000 60 Goodwill Group, Inc. (BO) ............................... 9 23 Gunze, Ltd. (BY) ........................................ 5,000 26 Hankyu Department Stores (JD) ........................... 4,000 35 Hino Motors, Ltd. (BM) .................................. 6,000 43 Hirose Electric Co., Ltd. * (JY) ........................ 700 77 Hitachi Cable, Ltd. (BK) ................................ 4,000 19 Hitachi Chemical * (JY) ................................. 2,600 43 Hitachi Construction Macinery Co., Ltd. (BM) ............ 1,000 12 Hitachi Credit Corp. (JQ) ............................... 1,400 26 Hitachi Software (JV) ................................... 700 16 Hitachi, Ltd. (JY) ...................................... 83,000 570 Hogukin Financial Group, Inc. (JQ) ...................... 20,000 51 Hokkaido Electric Power Co., Inc. (J3) .................. 4,600 82 Honda Motor Co. * (BV) .................................. 20,300 977 House Foods Corp. (JH) .................................. 1,700 24 Hoya Corp. * (JY) ....................................... 3,000 313 Isetan Co., Ltd. (JD) ................................... 4,200 60 Ishihara Sangyo Kaisha * (BC) ........................... 7,000 15 Ishikawajima-Harima Heavy Industries Co., Ltd. (BM) ..... 28,000 46 Ito En, Ltd. (JG) ....................................... 700 33 Ito-Yokado Co., Ltd. * (JD) ............................. 9,000 384 Itochu Corp. (BN) ....................................... 35,000 157 Itochu Techno-Sciences Corp. (JU) ....................... 1,000 43 JAFCO Co., Ltd. (JQ) .................................... 700 53 Japan Airlines (BQ) ..................................... 16,000 51 Japan Real Estate (JS) .................................. 6 42 Japan Retail Fund Investment Corp. (99) ................. 5 34 Japan Tobacco, Inc. (JI) ................................ 18 140 JFE Holdings, Inc. * (BF) ............................... 13,700 335 JGC Corp. (BJ) .......................................... 5,000 48 Joyo Bank, Ltd. (JP) .................................... 17,000 75 JSR Corp. (BC) .......................................... 4,700 88 Jusco Co., Ltd. * (JD) .................................. 6,700 268 Kajima Corp. (BJ) ....................................... 22,000 82 Kamigumi Co., Ltd. (BR) ................................. 6,000 44 Kanebo, Ltd. * (JK) ..................................... 11,000 10 Kaneka Corp. (BC) ....................................... 7,000 66 Kansai Electric Power Co., Inc. (J3) .................... 19,100 347 Kansai Paint Co., Ltd. (BC) ............................. 5,000 30 KAO Corp. (JJ) .......................................... 15,000 $ 361 Karen Pharmaceuticals Co., Ltd. (JO) .................... 1,000 6 Katokichi Co., Ltd. (JH) ................................ 1,100 22 Kawasaki Heavy Industry, Ltd. (BM) ...................... 30,000 48 Kawasaki Kisen (BR) ..................................... 12,000 61 Keihin Electric Express Railway Co., Ltd. (BS) .......... 10,000 63 Keio Teito Electric Railway (BS) ........................ 15,000 86 Keyence Corp. (JY) ...................................... 900 205 Kikkoman Corp. (JH) ..................................... 5,000 43 Kinden Corp. (BJ) ....................................... 4,000 25 Kinki Nippon Railway (BS) ............................... 42,000 159 Kirin Brewery Co. * (JG) ................................ 17,000 168 Kobe Steel International * (BF) ......................... 62,000 92 Kokuyo Co. (BO) ......................................... 1,900 24 Komatsu, Ltd. (BM) ...................................... 27,000 163 Komori Corp. (BM) ....................................... 1,000 17 Konami Co., Ltd. (JV) ................................... 2,100 53 Konica Corp. (BX) ....................................... 10,500 145 Koyo Seiko Co., Ltd. (BM) ............................... 2,000 24 Kubota Corp. * (BM) ..................................... 25,000 133 Kuraray Co., Ltd. (BC) .................................. 9,000 74 Kuraya Sanseido, Inc. (JM) .............................. 2,300 35 Kurita Water Industries, Ltd. (BJ) ...................... 2,500 34 Kyocera Corp. * (JY) .................................... 4,200 356 Kyowa Hakko Kogyo Co., Ltd. (JO) ........................ 10,000 72 Kyushu Electric Power (J3) .............................. 10,900 203 Lawson (JF) ............................................. 1,500 62 LeoPalace21 Corp. (JS) .................................. 2,600 49 Mabuchi Motor Co. * (JY) ................................ 800 59 Makita Corp. * (BW) ..................................... 3,000 45 Marubeni Corp. (BN) ..................................... 33,000 81 Marui Co., Ltd. * (JD) .................................. 8,900 120 Matsumotokiyoshi Co., Ltd. (JF) ......................... 1,000 30 Matsushita Electric Industrial Co. * (BW) ............... 58,000 822 Matsushita Electric Works (BK) .......................... 8,000 72 Meiji Diaries Corp. (JH) ................................ 6,000 33 Meiji Seika Kaisha, Ltd. (JH) ........................... 7,000 31 Meitic Corp. (JU) ....................................... 900 36 Millea Holdings, Inc. * (JR) ............................ 38 563 Minebea Co., Ltd. (BM) .................................. 10,000 47 Mitsubishi Chemical Corp. (BC) .......................... 42,000 111 Mitsubishi Corp. (BN) ................................... 28,000 271 Mitsubishi Electric Corp. (BK) .......................... 46,000 226 Mitsubishi Estate Co., Ltd. * (JS) ...................... 26,000 322 Mitsubishi Gas Co. (BC) ................................. 9,000 37 Mitsubishi Heavy Industries, Ltd. * (BM) ................ 76,000 206 Mitsubishi Logistcs Corp. (BR) .......................... 3,000 28 Mitsubishi Materials Corp. (BF) ......................... 23,000 52 Mitsubishi Rayon Co., Ltd. (BC) ......................... 12,000 47 Mitsubishi Tokyo Finance (JP) ........................... 118 1,090 Mitsui & Co., Ltd. (BN) ................................. 33,000 247 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------ (000's) COMMON STOCK - Continued Japan - Continued Mitsui Engineering & Shipbuilding Co., Ltd. (BM) ......... 16,000 $ 28 Mitsui Fudosan Co., Ltd. * (JS) .......................... 18,000 215 Mitsui Marine & Fire Insurance Co., Ltd. * (JR) .......... 33,000 309 Mitsui Mining & Smelting Co., Ltd. (BF) .................. 14,000 65 Mitsui OSK Lines, Ltd. (BR) .............................. 25,000 131 Mitsui Petrochemical Co. (BC) ............................ 14,000 70 Mitsui Trust Holdings (JQ) ............................... 14,000 102 Mitsukoshi, Ltd. (JD) .................................... 9,000 50 Mitsumi Electric (JX) .................................... 1,700 20 Mizuho Financial GB * (JP) ............................... 197 892 Murata Manufacturing Co., Ltd. * (J0) .................... 5,900 336 Namco, Ltd. (BZ) ......................................... 1,000 28 NEC Corp. * (JX) ......................................... 43,000 302 NEC Electronics Corp. (J0) ............................... 1,000 61 Net One Systems Co., Ltd. (JU) ........................... 14 54 NGK Insulators (BM) ...................................... 7,000 56 NGK Spark Plug Co. (BU) .................................. 5,000 48 Nichii Gakkan Co. (BO) ................................... 500 23 Nichirei Corp. (JH) ...................................... 7,000 25 Nidec Corp. * (JY) ....................................... 1,100 113 Nikko Securities Co., Ltd. * (JQ) ........................ 36,000 174 Nikon Corp. (J0) ......................................... 7,000 79 Nintendo Corp., Ltd. (BW) ................................ 2,600 301 Nippon Building Fund (JS) ................................ 6 43 Nippon Express Co., Ltd. (BS) ............................ 22,000 129 Nippon Kayaku Co., Ltd. (BC) ............................. 4,000 22 Nippon Light Metal, Inc. (BF) ............................ 11,000 26 Nippon Meat Packers, Inc. (JH) ........................... 5,000 62 Nippon Mining & Holding * (BB) ........................... 13,500 67 Nippon Mitsubishi Oil Co., Ltd. (BB) ..................... 35,000 220 Nippon Sanso Corp. (BC) .................................. 4,000 21 Nippon Sheet Glass Co., Ltd. (BI) ........................ 9,000 36 Nippon Shokubai Co., Ltd. (BC) ........................... 4,000 32 Nippon Steel Co. (BF) .................................... 160,000 335 Nippon Telegraph & Telephone Corp. * (J1) ................ 137 730 Nippon Unipac Holding, Co. (BG) .......................... 22 115 Nippon Yusen Kabushiki Kaisha (BR) ....................... 25,000 115 Nippon Zeon Co., Ltd. (BC) ............................... 4,000 29 Nishimatsu Construction Co., Ltd. (BJ) ................... 6,000 21 Nissan Chemical Industries (BC) .......................... 5,000 40 Nissan Motor Acceptance Corp. (BV) ....................... 64,600 717 Nisshin Seifun Group, Inc. (JH) .......................... 4,000 41 Nisshin Steel Co. (BF) ................................... 20,000 40 Nisshinbo Industries, Inc. (BY) .......................... 4,000 30 Nissho Iwai Nichimen Holdings Corp. * (BN) ............... 4,800 24 Nissin Food Products Co., Ltd. (JH) ...................... 2,100 54 Nitori Co., Ltd. (JE) .................................... 450 28 Nitto Denko Corp. * (BK) ................................. 4,300 219 NOK Corp. (BU) ........................................... 2,500 93 Nomura Research Institute, Ltd. (JU) ..................... 600 $ 64 Nomura Securities Co., Ltd. * (JQ) ....................... 48,000 709 NSK, Ltd. (BM) ........................................... 11,000 55 NTN Corp. (BM) ........................................... 12,000 61 NTT Data Corp. (JU) ...................................... 33 106 NTT Mobile Communications Network, Inc. * (J2) ........... 522 931 Obayashi Corp. (BJ) ...................................... 16,000 86 OBIC, Co. * (JU) ......................................... 100 21 Odakyu Electric Railway (BS) ............................. 17,000 92 Oji Paper Co. (BG) ....................................... 21,000 134 Oki Electric Industry Co. * (JY) ......................... 13,000 52 Okumura Corp. (BJ) ....................................... 4,000 21 Olympus Optical Co. * (JL) ............................... 6,000 113 Omron Corp. (JY) ......................................... 5,400 126 Onward Kashiyama Co., Ltd. (BY) .......................... 4,000 64 Oracle Corp. (JV) ........................................ 1,000 55 Oriental Land Co., Ltd. (BZ) ............................. 1,200 79 Orix Corp. * (JQ) ........................................ 2,100 240 Osaka Gas Co. (J4) ....................................... 51,000 141 Pioneer Corp. * (BW) ..................................... 3,900 101 Promise Co., Ltd. * (JQ) ................................. 2,300 153 QP Corp. (JH) ............................................ 2,800 24 Rakuten, Inc. (JC) ....................................... 10 76 Ricoh Co., Ltd. (JZ) ..................................... 17,000 361 Rinnai Corp. (BW) ........................................ 1,000 30 Rohm Co., Ltd. * (JY) .................................... 2,800 334 Ryohin Keikaku Co., Ltd. (JD) ............................ 600 31 Saizyeria Co., Ltd. (BZ) ................................. 700 10 Sammy Corp. * (BX) ....................................... 1,000 48 Sanden Corp. (BU) ........................................ 3,000 19 Sanken Electric Co., Ltd. (J0) ........................... 3,000 39 Sankyo Co. (BX) .......................................... 1,200 49 Sankyo Co., Ltd. * (JO) .................................. 9,700 210 Sanwa Shutter Corp. (BI) ................................. 5,000 27 Sanyo Electric Co. * (BW) ................................ 39,000 160 Sapporo Holdings (JG) .................................... 7,000 26 Secom Co. * (BO) ......................................... 5,500 233 Sega Corp. (BW) .......................................... 3,000 38 Seiko Epson Corp. (J0) ................................... 2,600 94 Seino Transportion (BS) .................................. 4,000 41 Sekisui Chemical Co. (BW) ................................ 10,000 84 Sekisui House, Ltd. * (BW) ............................... 13,000 144 Seven-Eleven Japan * (JF) ................................ 10,000 326 Sharp Corp. (BW) ......................................... 25,000 399 Shimacu Co. (JE) ......................................... 1,200 33 Shimamura Co., Ltd. * (JE) ............................... 500 43 Shimano, Inc. (BX) ....................................... 1,900 45 Shimizu Corp. (BJ) ....................................... 13,000 59 Shin-Etsu Chemical Co. * (BC) ............................ 9,600 342 Shinsei Bank, Ltd. * (JP) ................................ 14,000 89 Shionogi & Co., Ltd. * (JO) .............................. 7,000 120 Shiseido Co., Ltd. * (JK) ................................ 10,000 126 Shizuoka Bank, Ltd. (JP) ................................. 16,000 141 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Japan - Continued Showa Denko (BC) ......................................... 26,000 $ 65 Showa Shell Sekiyu KK (BB) ............................... 3,500 31 Skylark Co., Ltd. (BZ) ................................... 2,000 40 SMC Corp. * (BM) ......................................... 1,500 162 Snow Brand Milk Products Co., Ltd. * (JH) ................ 3,500 12 Softbank Corp. (JT) ...................................... 6,200 272 Sony Corp. * (BW) ........................................ 24,100 906 Stanley Electric (BU) .................................... 3,800 63 Sumitomo Bakelite Co., Ltd. (BC) ......................... 5,000 35 Sumitomo Chemical Co. (BC) ............................... 35,000 163 Sumitomo Corp. * (BN) .................................... 21,000 152 Sumitomo Electric Industries (BK) ........................ 18,000 183 Sumitomo Heavy Industry * (BM) ........................... 13,000 41 Sumitomo Metal Industries (BF) ........................... 98,000 116 Sumitomo Metal Mining Co. (BF) ........................... 15,000 98 Sumitomo Mitsui GR (JP) .................................. 105 718 Sumitomo Osaka Cement (BD) ............................... 10,000 27 Sumitomo Realty & Development (JS) ....................... 11,000 136 Sumitomo Trust & Banking (JQ) ............................ 28,000 199 Suruga Bank (JP) ......................................... 5,000 38 Suzuken Co., Ltd. (JM) ................................... 1,240 38 T&D Holdings, Inc. * (JR) ................................ 4,200 209 Taiheiyo Cement (BD) ..................................... 20,000 50 Taisei Corp. (BJ) ........................................ 20,000 75 Taisho Pharmaceutical Co., Ltd. * (JO) ................... 5,000 111 Taiyo Yuden Co., Ltd. * (JY) ............................. 3,000 42 Takara Shuzo Co., Ltd. (JG) .............................. 4,000 32 Takashimaya Co. (JD) ..................................... 8,000 92 Takeda Chemical Industries * (JO) ........................ 23,300 1,021 Takefuji Corp. * (JQ) .................................... 1,690 122 Takuma Co., Ltd. (BM) .................................... 1,000 7 TDK Corp. * (JY) ......................................... 3,100 235 Teijin, Ltd. (BC) ........................................ 20,000 75 Teikoku Oil Co., Ltd. (BB) ............................... 5,000 27 Terumo Corp. * (JL) ...................................... 4,300 108 The 77 Bank, Ltd. (JP) ................................... 10,000 68 The Bank of Fukuoka, Ltd. (JP) ........................... 14,000 83 The Gunma Bank, Ltd. (JP) ................................ 10,000 50 THK Co. (BM) ............................................. 2,500 47 TIS, Inc. (JU) ........................................... 900 38 Tobu Railway Co., Ltd. (BS) .............................. 19,000 83 Toda Corp. (BJ) .......................................... 5,000 20 Toho Co., Ltd. (JA) ...................................... 3,500 51 Tohoku Electric Power (J3) ............................... 11,500 193 Tokyo Broadcasting (JA) .................................. 1,000 18 Tokyo Electric Power (J3) ................................ 29,900 677 Tokyo Electron, Ltd. * (J0) .............................. 4,500 252 Tokyo Gas Co. (J4) ....................................... 68,000 241 Tokyo Style Co. (BY) ..................................... 1,000 11 Tokyu Corp. * (BS) ....................................... 26,000 133 Tokyu Land Corp. (JS) .................................... 9,000 29 Tonengeneral Sekiyu (BB) ................................. 7,000 60 Toppan Printing Co. * (BO) ............................... 15,000 169 Toray Industries, Inc. * (BC) ............................ 31,000 $ 146 Toshiba Corp. * (JX) ..................................... 74,000 297 Tosoh Corp. ADR (BC) ..................................... 12,000 43 Tostem Corp. (BI) ........................................ 6,000 129 Toto, Ltd. (BI) .......................................... 7,000 74 Toyo Seikan Kaisha, Ltd. (BE) ............................ 4,000 69 Toyo Suisan Kaisha (JH) .................................. 2,000 26 Toyobo Co. (BY) .......................................... 14,000 35 Toyoda Gosei (BU) ........................................ 1,100 26 Toyota Industries (BU) ................................... 5,300 127 Toyota Motor Corp. * (BV) ................................ 75,500 3,052 Trend Micro, Inc. (JV) ................................... 2,500 111 Ube Industries (BC) ...................................... 19,000 30 UFJ Holdings, Inc. * (JP) ................................ 99 436 Uni-Charm Corp. (JJ) ..................................... 1,300 65 Uniden Corp. * (JW) ...................................... 1,000 22 UNY Co., Ltd. (JD) ....................................... 4,000 51 Ushio, Inc. (BK) ......................................... 3,000 54 USS Co., Ltd. (JE) ....................................... 540 46 Wacoal Corp. * (BY) ...................................... 2,000 21 West Japan Railway (BS) .................................. 42 169 World Co., Ltd. (BY) ..................................... 1,100 33 Yahoo Japan Corp. (JT) ................................... 25 242 Yakult Honsha Co. (JH) ................................... 3,000 43 Yamada Denki Co. (JE) .................................... 2,000 74 Yamaha Corp. (BX) ........................................ 4,000 66 Yamaha Motor Co. (BV) .................................... 4,000 62 Yamanouchi Pharmaceutical Co., Ltd. * (JO) ............... 8,200 275 Yamato Transport Co., Ltd. (BP) .......................... 10,000 163 Yamazaki Baking Co., Ltd. (JH) ........................... 4,000 39 Yasuda F & M Insurance (JR) .............................. 21,000 214 Yokogawa Electric (JY) ................................... 6,000 80 ------- 48,855 Malaysia - 0.4% AMMB Holdings (JQ) ....................................... 25,400 22 Astro All Asia Network plc * (JA) ........................ 15,300 19 Bandar Raya Developments Berhad (BL) ..................... 6,000 4 Berjaya Sports Toto Berhad (BZ) .......................... 10,800 11 British American Tobacco Berhad (JI) ..................... 3,600 48 Cimb Berhad (JP) ......................................... 5,000 7 Commerce Asset Holdings * (JP) ........................... 39,800 51 DRB-Hicom Berhad * (BV) .................................. 11,000 5 Edaren Otomobil (JE) ..................................... 2,000 5 Gamuda Berhad (BJ) ....................................... 15,100 22 Genting Berhad (BZ) ...................................... 10,000 40 Golden Hope Plants (JH) .................................. 6,000 5 Guiness Anchor Berhad (JG) ............................... 4,000 5 Highlands & Lowlands Bhd (JH) ............................ 4,000 3 Hong Leong Bank Berhad (JP) .............................. 12,700 16 Hong Leong Credit (JQ) ................................... 6,000 6 Hong Leong Industries Berhad (BL) ........................ 2,000 2 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Malaysia - Continued IGB Corp. Berhad (JS) .................................... 16,000 $ 5 IJM Corporation Berhad (BJ) .............................. 6,000 8 IOI Corp. (JH) ........................................... 17,300 37 IOI Properties (JS) ...................................... 2,000 4 Kuala Lumpur Kepong Berhad (JH) .......................... 7,000 12 LaFarge Malayan Cement Berhad (BD) ....................... 25,000 5 MAA Holdings Berhad (JR) ................................. 3,000 4 Magnum Corp. Berhad * (BZ) ............................... 20,000 13 Malakoff Berhad (J3) ..................................... 14,000 22 Malay Airline Systems (BQ) ............................... 5,000 6 Malayan Banking Berhad * (JP) ............................ 44,800 119 Malaysia Airport Holdings, Berhad (BT) ................... 8,000 3 Malaysia International Shipping Berhad (BR) .............. 12,800 40 Malaysian Bulk Carriers Berhad (BR) ...................... 7,000 4 Malaysian Oxygen Berhad (BC) ............................. 2,000 6 Malaysian Pacific Industries (J0) ........................ 2,000 8 Maxis Communications Bhd (J2) ............................ 17,300 40 MK Land Holdings Berhad (JS) ............................. 8,000 5 MMC Corp. (BF) ........................................... 8,000 4 Mulpha International Berhad * (JQ) ....................... 23,000 4 Multi-Purpose Holdings Berhad * (JQ) ..................... 16,000 5 Nestle Berhad (JH) ....................................... 2,000 12 New Straits Times Press Berhad (JA) ...................... 3,000 3 Oriental Holdings Berhad (BV) ............................ 4,000 4 OSK Holdings Berhad (JQ) ................................. 7,000 3 OYL Industries Berhad (BI) ............................... 2,300 22 Petronas Dagangan Berhad (BB) ............................ 3,000 5 Petronas Gas Berhad (J4) ................................. 11,300 20 Plus Expressways Berhad (BT) ............................. 36,100 21 PPB Group Berhad (JH) .................................... 4,000 7 Proton Holdings Berhad * (BU) ............................ 7,000 15 Public Bank Berhad (JQ) .................................. 26,775 47 Resorts World Berhad * (BZ) .............................. 13,100 31 RHB Capital Berhad (JP) .................................. 17,000 8 Road Builder, Inc. (BJ) .................................. 8,000 6 Sime Darby Berhad * (BL) ................................. 30,800 45 SP Setia (JS) ............................................ 12,000 13 Star Publications (JA) ................................... 4,000 7 TA Enterprise Berhad (JQ) ................................ 18,000 3 Tan Chong Motor Holdings (BV) ............................ 9,000 3 Tanjong plc (BZ) ......................................... 5,000 17 Telekom Malaysia Berhad (J1) ............................. 22,800 62 Tenaga Nasional Berhad (J3) .............................. 21,800 58 Transmile Group Berhad (BP) .............................. 3,000 5 UMW Holdings Berhad (BU) ................................. 4,000 5 Unisem Berhad (J0) ....................................... 2,000 4 YTL Corp., Berhad (J3) ................................... 12,060 15 ------ 1,066 Mexico - 0.6% Alfa, S.A. * (BL) ........................................ 6,338 21 America Movil SA de CV - Ser L * (J2) .................... 188,993 343 Cemex SA de CV * (BD) .................................... 32,576 $ 188 Cifra SA de CV - Ser. V * (JD) ........................... 48,314 143 Coca-Cola Femsa, SA - Ser. L NPV (JG) .................... 5,412 12 Consoricoara SA (BW) ..................................... 2,800 8 Control Common Mexico (JD) ............................... 6,800 8 Corp. GEO SA De CV - Ser. B * (BW) ....................... 9,700 13 Corporacion Interamericana de Entretenimiento SA * (JA) .. 6,763 14 Fomento Economico Mexicano SA de CV * (JG) ............... 17,440 80 GPO Continental (JG) ..................................... 4,100 6 Grupo Aeroportuario del Sureste SA de CV * (BT) .......... 4,222 8 Grupo Carso SA de CV - Ser. A1 * (BL) .................... 6,330 26 Grupo Financiero Banorte SA (JP) ......................... 5,456 19 Grupo Modelo SA de CV - Ser. C * (JG) .................... 14,825 37 Grupo SA de CV - Ser. A (JH) ............................. 7,946 17 Grupo Televisa SA * (JA) ................................. 57,826 130 Industrias Penoles SA * (BF) ............................. 1,948 7 Kimberly-Clark de Mexico SA de CV * (JJ) ................. 13,426 37 Nuevo Grupo Mexico (BF) .................................. 6,330 20 Telephonos de Mexico SA - Ser. L (J1) .................... 186,343 310 TV Azteca (JA) ........................................... 33,398 18 Vitro Sa de CV - Ser. A (BE) ............................. 4,500 4 ------ 1,469 Monacco - 0.0% BQE Maroccomm (JP) ....................................... 118 6 ONA (BL) ................................................. 111 11 ------ 17 Netherlands - 4.2% ABN Amro Holding NV * (JP) ............................... 42,658 934 Aegon NV * (JR) .......................................... 36,480 440 Akzo Nobel NV * (BC) ..................................... 7,418 273 ASM Lithography Holding NV (J0) .......................... 12,638 214 Corio NV (JS) ............................................ 1,149 49 DSM NV (BC) .............................................. 2,137 105 Elsevier NV * (JA) ....................................... 18,764 264 Getronics NV (JU) ........................................ 13,351 37 Hagemeyer NV (BN) ........................................ 13,276 28 Heineken NV (JG) ......................................... 6,686 220 IHC Caland NV * (BM) ..................................... 841 39 ING Groep NV (JQ) ........................................ 47,836 1,130 Koninklijke * (Royal) Philips Electronics NV (BW) ........ 35,262 951 Koninklijke Ahold NV * (JF) .............................. 41,522 326 Koninklijke KPN NV * (J1) ................................ 53,331 407 Koninklijke Numica NV * (JH) ............................. 4,017 129 Koninklijke Vendex KBB NV (JE) ........................... 457 8 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Netherlands - Continued Oce NV (JZ) .............................................. 2,107 $ 34 Randstad Holdings NV * (BO) .............................. 1,208 33 Rodamco Europe NV (JS) ................................... 1,203 73 Royal Dutch Petroleum Co. * (BB) ......................... 55,855 2,870 TNT Post Group NV (BP) ................................... 8,335 191 Unilever NV * (JH) ....................................... 15,315 1,047 Vedior * (BO) ............................................ 4,384 64 VNU NV * (JA) ............................................ 6,187 180 Wereldhave NV (JS) ....................................... 555 46 Wolters Kluwer NV * (JA) ................................. 7,651 139 ------- 10,231 New Zealand - 0.2% Auckland International (BT) .............................. 6,406 27 Carter Holt Harvey, Ltd. (BG) ............................ 23,251 30 Contact Energy Limited (J3) .............................. 7,747 29 Fisher & Paykel AP (BW) .................................. 6,188 18 Fisher & Paykel Industries, Inc. (JL) .................... 2,447 20 Fletcher Building (BD) ................................... 11,497 33 Fletcher Challenge Forests (BG) .......................... 543 1 Indpendent Newspapers, Ltd. (JA) ......................... 2,928 9 NGC Holdings, Ltd. (J4) .................................. 3,744 7 Sky City Entertainment Group, Ltd.(BZ) ................... 10,903 33 Sky Network Television, Ltd. * (JA) ...................... 2,653 8 Telecom Corp. of New Zealand, Ltd. (J1) .................. 50,497 188 The Warehouse Group, Ltd. (JD) ........................... 3,629 10 Tower, Ltd. * (JR) ....................................... 7,494 8 Waste Management, Inc. (BO) .............................. 2,576 8 ------- 429 Norway - 0.4% Aker Kvaerner - Notes (BB) ............................... 650 10 Den Norske Bank (JP) ..................................... 16,600 113 Frontlinel, Ltd. (BR) .................................... 1,050 36 Norsk Hydro ASA (BB) ..................................... 3,740 243 Norske Skogindustrier ASA - Cl. A * (BG) ................. 2,850 51 Orkla ASA * (JG) ......................................... 4,900 123 Petroleum Geo-Services SA * (BB) ......................... 464 19 Schibsted ASA (JA) ....................................... 1,300 23 Smedvig * (BA) ........................................... 850 10 Statoil ASA * (BB) ....................................... 11,200 142 Storebrand ASA (JR) ...................................... 5,600 38 Tandberg ASA (JY) ........................................ 3,475 37 Telenor AS * (J1) ........................................ 19,800 138 Tomra Systems ASA (BM) ................................... 4,700 22 Yara International (BC) .................................. 5,303 43 ------- 1,048 Peru - 0.0% Credicorp, Ltd. (JP) ..................................... 1,076 14 Minas Buenaventura SA (BF) ............................... 1,722 37 Southern Peru Copper Corp. (BF) .......................... 272 $ 11 ------- 62 Philippines - 0.0% Ayala Corp (JQ) .......................................... 90,000 9 Ayala Land, Inc. * (JS) .................................. 91,000 9 Bank of the Philippine Islands (JP) ...................... 15,141 11 Globe Telecom, Inc. (J2) ................................. 586 9 Philippine Long Distance Telephone Co. * (J1) ............ 816 17 San Miguel Corp. - Cl. B (JG) ............................ 6,500 9 SM Prime Holdings, Inc. (JS) ............................. 63,000 7 ------- 71 Poland - 0.1% AGORA (JA) ............................................... 480 6 Bank Pekao SA (JP) ....................................... 1,873 62 Bank Przemyslowo-Handlowy (JP) ........................... 243 28 Bank Zachodni (JP) ....................................... 620 15 BRE Bank SA (JP) ......................................... 245 7 Budimex SA - Ser. B * (BJ) ............................... 325 4 Celuloza Swiecie (BG) .................................... 355 6 Computerland SA * (JX) ................................... 170 5 DEBICA - Ser. A * (BU) ................................... 175 6 Grupa Kety SA (BF) ....................................... 165 6 KGHM Polska Miedz (BF) ................................... 3,102 24 Orbis SA * (BZ) .......................................... 715 5 Polska Groupa Farmaceutyczna (JM) ........................ 260 4 Polski Koncern Nafto * (BB) .............................. 8,450 68 Prokom Software SA (JU) .................................. 272 12 Telekomunikacja * (J1) ................................... 19,753 82 ------- 340 Portugal - 0.3% Banco Comercial Portgues SA (JP) ......................... 48,762 114 Banco Espirito Santo SA * (JP) ........................... 2,782 46 BPI-SGPS SA (JQ) ......................................... 9,900 36 Brisa-Auto Estradas de Portugal SA (BT) .................. 9,798 71 Cimpor-Cimentos de Portugal (BD) ......................... 5,487 27 Electricidade de Portugal SA (J3) ........................ 48,264 135 Jeronimo Martins SA (JF) ................................. 240 3 Jeronimo Martins SGPS SA * (JF) .......................... 767 8 Part Multimedia SGPS (JA) ................................ 1,267 28 Portugal Telecom SA * (J1) ............................... 23,897 258 Sonae SGPS SA (BL) ....................................... 26,406 29 ------- 755 Singapore - 0.7% Allgreen Properties, Ltd. (JS) ........................... 13,000 7 Ascendas Real Estate Investment Trust (JS) ............... 13,000 11 Capital Commercial (99) .................................. 3,600 2 Capitaland, Ltd. (JS) .................................... 26,000 21 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Singapore - Continued CapitaMall Trust (JS) ................................... 15,000 $ 15 Chartered Semiconductor Manufacturing (J0) .............. 25,000 20 City Developments, Ltd. (JS) ............................ 12,000 38 Comfort DelGro Corp., Ltd. (BS) ......................... 47,000 34 Creative Technology, Ltd. (JX) .......................... 1,400 15 Cycle & Carriage, Ltd. (JB) ............................. 3,000 11 Datacraft Asia, Ltd. (JW) ............................... 6,000 6 DBS Group Holdings, Ltd. (JP) ........................... 29,000 243 Fraser and Neave, Ltd. (JG) ............................. 4,620 38 Haw Par Value Corp., Ltd. (BL) .......................... 2,490 7 Keppel Corp., Ltd. - Cl. A (JQ) ......................... 15,000 61 Keppel Land, Ltd. (JS) .................................. 9,000 8 Neptune Orient Lines, Ltd. (BR) ......................... 28,000 38 Oversea-Chinese Banking Corp., Ltd. (JP) ................ 26,000 183 Overseas Union Enterprise, Ltd. (BZ) .................... 1,000 4 Parkway Holdings, Ltd. (JM) ............................. 15,000 10 Saint Assembly Test Service * (J0) ...................... 10,000 8 Sembcorp Industries, Ltd. (BL) .......................... 25,000 19 Sembcorp Logistics, Ltd. (BT) ........................... 8,000 9 Sembcorp Marine (BM) .................................... 13,000 7 Singapore Airlines (BQ) ................................. 15,000 98 Singapore Exchange, Ltd. (JQ) ........................... 19,000 19 Singapore Land, Ltd. (JS) ............................... 4,000 10 Singapore Post, Ltd. (BP) ............................... 36,000 18 Singapore Press (JA) .................................... 42,500 103 Singapore Technology Engineering, Ltd. * (BH) ........... 36,000 43 Singapore Telecommunications, Ltd. * (J1) ............... 167,000 218 SMRT Corp. (BS) ......................................... 17,000 7 United Overseas Bank, Ltd. * (JP) ....................... 32,000 249 United Overseas Land, Ltd. (BZ) ......................... 10,000 14 Venture Manufacturing, Ltd. * (JY) ...................... 6,000 63 Wing Tai Holdings, Ltd. (JS) ............................ 12,000 6 ------ 1,663 South Africa - 1.3% African Bank Investments, Ltd. * (JQ) ................... 12,310 23 Alexander Forbes, Ltd. (JQ) ............................. 9,096 15 Anglo American Platinum Corp., Ltd. *(BF) .............. 1,744 66 Anglo American plc * (BF) ............................... 38,023 777 Anglogold * (BF) ........................................ 3,574 116 Aveng, Ltd. (BJ) ........................................ 8,700 10 AVI, Ltd. (BL) .......................................... 8,722 25 Barlow, Ltd. * (BL) ..................................... 5,533 59 Bidvest Group, Ltd. (BL) ................................ 6,766 57 Edgars Consolidated Stores * (JE) ....................... 700 17 FirstRand, Ltd. (JP) .................................... 81,374 133 Foschini, Ltd. (JE) ..................................... 4,044 14 Gold Fields Mining * (BF) ............................... 10,658 112 Harmony Gold Mining * (BF) .............................. 6,944 73 Impala Platinum Holdings, Ltd. (BF) ..................... 1,741 $ 132 Imperial Holdings, Ltd. (JE) ............................ 5,307 59 Investec Ltd. (JQ) ...................................... 622 12 Iscor, Ltd. (BF) ........................................ 5,433 34 JD Group, Ltd. (JE) ..................................... 4,381 30 Liberty Life Association of Africa, Ltd. (JR) ........... 3,689 30 M-Cell, Ltd. (J2) ....................................... 35,908 165 Massmart Holdings, Ltd. * (JF) .......................... 4,100 22 Metro Cash and Carry (JF) ............................... 46,981 18 Metropolitan Holdings, Ltd. (JR) ........................ 15,632 18 Murray & Roberts Holdings, Ltd. (BL) .................... 7,300 15 Nampak, Ltd. (BE) ....................................... 15,580 36 Naspers, Ltd. - N Shares (JA) ........................... 7,666 57 Nedcor, Ltd. * (JP) ..................................... 5,226 52 Network Healthcare Holdings, Ltd. (JM) .................. 31,257 22 Old Mutual plc * (JR) ................................... 103,966 195 Pick'n Pay Stores, Ltd. (JF) ............................ 4,044 11 Reunert, Ltd. (JY) ...................................... 4,300 17 Sanlam, Ltd. (JR) ....................................... 71,246 101 Sappi, Ltd. * (BG) ...................................... 5,840 89 Sasol, Ltd. * (BB) ...................................... 15,473 239 Shoprite Holdings, Ltd. (JF) ............................ 11,051 17 Standard Bank Investment Corp., Ltd. (JP) ............... 36,301 251 Steinhoff International Holdings (BW) ................... 22,957 31 Telkom Group, Ltd. (J1) ................................. 4,510 58 Tiger Brands Ltd. (JH) .................................. 4,510 64 Tongaat Hulett Group (JH) ............................... 1,500 10 Truworths International, Ltd. (JE) ...................... 12,417 20 Woolworth's Holdings, Ltd. (JD) ......................... 22,783 26 ------ 3,328 South Korea - 1.7% Amorepacific Corp. (JK) ................................. 130 24 Cheil Communications, Inc. (JA) ......................... 60 8 Cheil Industries (BY) ................................... 1,210 14 CJ Corp. (JH) ........................................... 450 24 Dae Duck Electronic (JY) ................................ 1,010 8 Daegu Bank (JP) ......................................... 3,420 18 Daelim Industrial Co., Ltd. (BJ) ........................ 680 21 Daewoo Engineering & Construction (BL) .................. 4,050 14 Daewoo Heavy Industries, Ltd. (BM) ...................... 1,800 12 Daewoo Securities Co. (JQ) .............................. 2,610 8 Daewoo Shipbuilding & Marine * (BM) ..................... 2,600 31 Daishin Securities * (JQ) ............................... 750 9 Daum Communications Corp. (JT) .......................... 280 13 Hana Bank * (JP) ........................................ 3,370 71 Hanjin Shipping Co., Ltd. (BR) .......................... 1,260 19 Hankook Tire Co., Ltd. (BU) ............................. 2,630 23 Hanwha Chemical * (BC) .................................. 1,480 9 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued South Korea - Continued Hite Brewery Co. (JG) ................................... 230 $ 16 Honam Petrochemical (BC) ................................ 260 9 Hyosung (BC) ............................................ 620 5 Hyundai Department Store * (JD) ......................... 260 6 Hyundai Heavy Industries Co., Ltd. (BM) ................. 1,230 29 Hyundai Industrial & Development (BJ) ................... 1,720 16 Hyundai Mobis (BU) ...................................... 1,490 66 Hyundai Motor Co., Ltd. (BV) ............................ 4,142 159 Hyundai Securities Co. (JQ) ............................. 2,140 8 Kangwon Land, Inc. (BZ) ................................. 2,890 32 KIA Motors Corp. (BV) ................................... 4,364 37 Kookmin Bank * (JP) ..................................... 8,173 254 Korea Electric Power Corp. * (J3) ....................... 6,921 111 Korea Exchange Bank * (JP) .............................. 3,310 17 Korea Telecom Corp. (J1) ................................ 3,770 126 Korean Air Lines (BQ) ................................... 640 8 KT & G Corp. * (JI) ..................................... 2,650 61 Kumgang Korea Che (BI) .................................. 140 14 LG Cable & Machinery, Ltd. (BK) ......................... 570 8 LG Chemical (BC) ........................................ 1,212 41 LG Electronics, Inc. (BW) ............................... 2,446 116 LG Engineering & Construction Co. (BJ) .................. 960 16 LG Household & health (JJ) .............................. 300 9 LG Investment & Securities Co., Ltd. * (JQ) ............. 2,635 19 LG Petrochemical (BC) ................................... 730 15 NCsoft Corp. * (JT) ..................................... 330 27 NHN Corp. (JT) .......................................... 302 30 Nong Shimco Co., Ltd. (JH) .............................. 90 21 Pohang Iron & Steel Co., Ltd. (BF) ...................... 1,920 248 Poongsan Corp. (BF) ..................................... 610 5 Pusan Bank (JP) ......................................... 3,240 18 S-Oil Corp. (BB) ........................................ 1,220 51 S1 Corp. (BO) ........................................... 370 9 Samsung Corp. (BN) ...................................... 3,981 49 Samsung Display Devices Co. (JY) ........................ 940 99 Samsung Electro-Mechanics Co. (JY) ...................... 1,616 46 Samsung Electronics * (J0) .............................. 3,619 1,494 Samsung Fine Chemicals Co., Ltd. (BC) ................... 450 7 Samsung Fire & Marine Insurance (JR) .................... 990 63 Samsung Heavy Industries (BM) ........................... 4,670 21 Samsung Securities Co., Ltd. (JQ) ....................... 1,444 24 Shinhan Financial (JP) .................................. 5,963 87 Shinsegaeco, Ltd. (JD) .................................. 280 67 SK Corp. (BB) ........................................... 2,400 95 SK Telecom Co., Ltd. * (J2) ............................. 1,091 179 Yuhan Corp. (JO) ........................................ 170 11 ------ 4,175 Soviet Union - 0.0% Rostelecom - ADR * (J1) ................................. 2,660 $ 34 Spain - 3.0% Abertis Infrastructuras SA (BT) ......................... 6,122 107 Acciona SA (BJ) ......................................... 779 48 Acerinox SA (BF) ........................................ 1,331 76 ACS Actividades de Construccion y Servicos SA (BJ) ...... 7,089 120 Altadis SA -Ser. A (JI) ................................. 7,498 232 Amadeus Global Travel - Ser. A (BO) ..................... 8,926 59 Antena 3 TV * (JA) ...................................... 442 23 Banco Bilbao Vizcaya SA * (JP) .......................... 86,019 1,150 Banco Popular Espanol SA (JP) ........................... 4,318 244 Banco Santander Central Hispano SA * (JP) ............... 114,769 1,192 Corp. Mapfre SA (JR) .................................... 2,943 36 Endesa SA * (J3) ........................................ 25,426 491 Fomento de Construcciones y Contratas SA (BJ) ........... 1,400 52 Gamesa Corp. Tecnologica, SA (BA) ....................... 2,883 42 Gas Natural SDG SA * (J4) ............................... 4,163 100 Grupo Ferrovial SA * (BJ) ............................... 1,726 72 Iberdrola SA (J3) ....................................... 20,444 432 Iberia Lineas Aereas de Espana SA (BQ) .................. 11,781 34 Inditex (JE) ............................................ 5,934 136 Indra Sistemas SA (JU) .................................. 3,278 42 Metrovacesa SA (JS) ..................................... 951 36 NH Hoteles SA * (BZ) .................................... 2,106 23 Promotora de Informaciones SA (JA) ...................... 1,976 35 Repsol SA * (BB) ........................................ 24,434 536 Sociedad General de Aguas de Barcelona SA (J6) .......... 1,488 25 Soge Cable (JA) ......................................... 995 40 Telefonica Publicidad e Informacion SA * (JA) ........... 4,312 29 Telefonica SA * (J1) .................................... 125,745 1,861 Union Electrica Fenosa SA (J3) .......................... 5,473 117 Vallehermoso SA (JS) .................................... 2,542 35 Zeltia SA * (JN) ........................................ 3,894 27 ------ 7,452 Sweden - 2.1% Ainax AB * (FB) ......................................... 471 15 Alfa Laval AB (BM) ...................................... 1,818 29 Assa Abloy * (BI) ....................................... 8,000 102 Atlas Copco AB (BM) ..................................... 1,800 62 Atlas Copco AB - Ser. A (BM) ............................ 3,100 115 Axfood AB (JF) .......................................... 686 18 Billerud (BE) ........................................... 1,400 23 Bostads Ab Drott * (JS) ................................. 50 1 Capio AB * (JM) ......................................... 1,963 19 Carnegie & Co. (JQ) ..................................... 1,496 14 Castellumab (JS) ........................................ 1,043 25 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Sweden - Continued Drott AB (JS) ........................................... 1,000 $ 13 Electrolux AB - Ser. B * (BW) ........................... 7,500 144 Elekta AB - Ser. B * (JL) ............................... 798 18 Eniro AB Seki (JA) ...................................... 4,444 34 Gambro - Ser. A * (JM) .................................. 5,200 50 Gambro - Ser. B (JM) .................................... 2,300 22 Getinge AB - Ser. B (JL) ................................ 4,112 49 Hennes & Mauritz AB * (JE) .............................. 12,650 327 Hoganas AB - Cl. B (BF) ................................. 700 17 Holmen AB - Ser. B (BG) ................................. 1,300 38 Lundlin Petroleum AB * (BB) ............................. 4,477 24 Modern Times Group (JA) ................................. 1,350 26 NetCom Systems, Inc. - Cl. B (J1) ....................... 2,600 114 Nobel Biocare AG * (JL) ................................. 370 58 Nordic Baltic Holding AB (JP) ........................... 58,500 422 Omhex AB (JQ) ........................................... 1,600 19 Sandvik AB (BM) ......................................... 5,900 201 SAS AB (BQ) ............................................. 2,400 18 Scania AB - Ser. B (BM) ................................. 2,600 88 Securitas AB * (BO) ..................................... 8,000 100 Skand Enskilda Banken - Cl. A (JP) ...................... 12,600 182 Skandia Forsakrings AB (JR) ............................. 27,000 112 Skanska AB - Ser. B (BJ) ................................ 9,900 87 SKF AB - Ser. A (BM) .................................... 100 4 SKF AB - Ser. B (BM) .................................... 2,500 92 SSAB Svensktal AB - Ser. A (BF) ......................... 1,600 27 SSAB Svensktal AB - Ser. B (BF) ......................... 800 13 Svenska Cellulosa AB - Cl. B (BG) ....................... 5,200 198 Svenska Handelsbanken - Ser. B (JP) ..................... 300 6 Svenska Handelsbanken, Inc. (JP) ........................ 14,800 297 Swedish Match (JI) ...................................... 9,000 92 Telefonaktiebolaget LM Ericsson AB (JW) ................. 393,200 1,160 Telia AB (J1) ........................................... 50,100 212 Trelleborg AB - Ser. B (BU) ............................. 2,000 35 Volvo AB * (BM) ......................................... 6,000 209 Volvo AB - Ser. A (BM) .................................. 2,700 91 Wihlborgs Fastigheter AB (JS) ........................... 1,119 15 WM Data AB - Ser. B * (JU) .............................. 10,000 22 ------- 5,059 Switzerland - 6.1% ABB, Ltd. (BK) .......................................... 50,405 276 Adecco SA * (BO) ........................................ 3,570 178 Ciba Specialty Chemicals AG * (BC) ...................... 1,833 132 Clariant AG (BC) ........................................ 6,226 91 Credit Suisse Group * (JP) .............................. 30,709 1,092 Geberit AG (BI) ......................................... 96 64 Givaudan (BC) ........................................... 193 112 Holcim * (BD) ........................................... 4,975 271 Kudelski SA * (JY) ...................................... 879 25 Kuoni Reisen Holding AG - Ser. B (BZ) ................... 80 35 Logitech International SA (JX) .......................... 1,158 53 Lonza Group AG (BC) ..................................... 1,010 $ 51 Micronas Semiconductor Holdings AG * (JO) ............... 860 39 Nestle SA * (JH) ........................................ 10,916 2,912 Nobel Biocare AG (JL) ................................... 235 37 Novartis AG (JO) ........................................ 64,415 2,843 Phonak Holdings AG (JL) ................................. 1,150 36 Richemont (JE) .......................................... 14,210 371 Rieter Holdings AG (BM) ................................. 124 33 Roche Holdings AG (JO) .................................. 118 16 Roche Holdings AG * (JO) ................................ 19,005 1,882 Serono SA (JN) .......................................... 184 116 SGS Holdings (BO) ....................................... 116 63 Straumann Holdings (JL) ................................. 210 42 Sulzer AG (BM) .......................................... 93 26 Swatch Group (BY) ....................................... 904 118 Swatch Group AG * (BY) .................................. 1,460 39 Swiss Reinsurance Co. * (JR) ............................ 8,756 569 Swisscom AG * (J1) ...................................... 723 239 Syngenta AG (BC) ........................................ 2,913 244 Synthes, Inc. * (JL) .................................... 1,190 136 UBS AG * (JP) ........................................... 30,402 2,143 Unaxis Holding AG * (JO) ................................ 276 31 Valora Holding AG (JE) .................................. 105 24 Zurich Finance (JR) ..................................... 3,915 618 ------- 14,957 Taiwan - 1.3% Accton Technollogies, Inc. (JW) ......................... 10,000 6 Acer Communicaton (JX) .................................. 32,279 36 Acer, Inc. * (JX) ....................................... 32,589 46 Advanced Semiconductor Engineering, Inc. (JO) ........... 44,805 35 Advantech Co., Ltd. (JX) ................................ 2,000 4 Arima Computer (JX) ..................................... 14,000 4 Asia Cement Corp. (BD) .................................. 19,000 11 Asia Optical Co., Inc. (BX) ............................. 2,000 12 Asustek Computer * (JX) ................................. 31,557 72 AU Optronics Corp. * (JY) ............................... 65,088 99 BES Engineering Corp. (BJ) .............................. 22,000 4 Cathay Construction * (JS) .............................. 15,000 8 Cathay Financial Holding Co., Ltd. (JR) ................. 77,000 139 Chang Hwa Commercial Bank (JP) .......................... 60,000 34 Cheng Shin Indiana (BU) ................................. 9,000 12 Chi Mei Optoelectronics Corp. (JX) ...................... 30,000 48 China Airlines (BQ) ..................................... 13,000 7 China Dev Fin Holding (JP) .............................. 156,787 80 China Motor Corp. (BV) .................................. 10,000 14 China Steel Corp. (BF) .................................. 117,000 111 China Trust Finance (JP) ................................ 76,363 85 Chungwa Picture Tubes, Ltd. (JY) ........................ 60,217 31 Chungwa Telecom Co., Ltd. (J1) .......................... 33,000 57 CMC Magnetics Corp. (JX) ................................ 44,775 23 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Taiwan - Continued Compal Electronics, Inc. * (JX) ......................... 44,775 $ 49 Compeq Manufacturing Co., Ltd. * (JX) ................... 12,000 4 DD Link (JW) ............................................ 8,000 9 Delta Electronics Inc. (JY) ............................. 16,500 21 E. Sun Financial * (JP) ................................. 27,000 16 Eternal Chemical Co., Ltd. * (BC) ....................... 7,000 4 Eva Airways (BQ) ........................................ 17,000 7 Evergreen Marine Corp. (BR) ............................. 13,000 11 Far East Textile (BL) ................................... 33,000 19 First Financial Holding, Co., Ltd. * (JQ) ............... 69,000 50 Formosa Chemical & Fibre (BC) ........................... 32,867 51 Formosa Plastic * (BC) .................................. 63,395 90 Formosa Taffeta Co., Ltd. (BY) .......................... 12,000 5 Fu Sheng Industrail Co., Ltd. (BL) ...................... 10,000 16 Fubon Financial Holding Co. (JQ) ........................ 64,000 56 Giant Manufacturing Co., Ltd. (BX) ...................... 3,000 4 Gigabyte Technology Co. (JX) ............................ 8,000 12 Hon Hai Precision Industry Co., Ltd. - Cl. G * (JY) ..... 34,557 128 Hua Nan Financial Holding Co. (JP) ...................... 44,000 36 International Bank of Taipei (JP) ....................... 30,000 20 Inventec Co., Ltd. (JX) ................................. 22,000 14 Kinpo Electronics (JZ) .................................. 16,200 8 Largan Precision Co. (BL) ............................... 1,000 10 Lite on Technology (JX) ................................. 31,557 33 Macronix International Co., Ltd. (J0) ................... 85,177 27 MediaTek, Inc. (J0) ..................................... 9,000 72 Mega Financial Holding Co., Ltd. (JP) ................... 159,000 105 Micro Star International (JX) ........................... 5,155 6 Nan Ya Plastic Corp. (BC) ............................... 86,723 114 Nien Hsing Textile Co., Ltd. (BY) ....................... 6,000 5 Nien Made Enterprises Co., Ltd. (JH) .................... 3,840 6 Optimax Technology Corp. (JY) ........................... 4,000 13 Oriental Union Chemical Corp. (BC) ...................... 8,000 7 Phoenixtec Power (BK) ................................... 7,000 7 Polaris Securities (JQ) ................................. 17,000 9 Pou Chen Corp. (BY) ..................................... 23,000 21 Premier Image Technology (BX) ........................... 6,000 7 President Chain Store Corp. (JF) ........................ 9,000 17 Prodisc Technology, Inc. * (JX) ......................... 9,000 6 Quanta Computer, Inc. (JX) .............................. 26,445 56 Quanta Display, Inc. * (JY) ............................. 30,000 21 Realtek Semiconductor Corp. * (J0) ...................... 9,186 12 Ritek Corp. (JX) ........................................ 35,651 16 Sampo Corp. (BW) ........................................ 18,000 5 Shihlin Electric (BK) ................................... 6,000 4 Shin Kong Financial Holding Co., Ltd. (JR) .............. 30,000 25 Siliconware Precision (J0) .............................. 26,465 21 Sinopac Holding (JP) .................................... 52,000 27 Synnex Technology International Corp. (JY) .............. 9,000 15 SYSTEX Corp. (JU) ....................................... 14,000 $ 6 Taishin Financial Holding Co., Ltd. (JP) ................ 46,000 38 Taiwan Cellular Corp. (J2) .............................. 36,000 34 Taiwan Cement (BD) ...................................... 24,000 11 Taiwan Glass Industrial Corp. (BI) ...................... 7,560 6 Taiwan Secom Co. (BO) ................................... 5,000 5 Taiwan Semiconductor * (J0) ............................. 288,527 415 Taiwan Styrene Monomer Corp. (BC) ....................... 8,000 6 Tatung (BL) ............................................. 59,146 23 Teco Electric & Machine (BK) ............................ 28,000 9 Uni-President Enterprises Co. (JH) ...................... 34,000 15 United Microelectronics Corp. * (J0) .................... 250,525 186 Via Technologies Inc. * (J0) ............................ 15,310 13 Walshin Lihwa W&C (BK) .................................. 34,000 15 Wan Hai Lines, Ltd. (BR) ................................ 12,000 11 Winbond Electronic (J0) ................................. 62,084 28 WUS Printed Circuit (JY) ................................ 7,000 4 Ya Hsing Indiana Co. * (JY) ............................. 9,000 11 Yageo Corp. (JY) ........................................ 38,000 20 Yang Ming Marine (BR) ................................... 17,000 16 Yieh Phuients Co. (BD) .................................. 14,000 9 Yue Loong Motor Co. (BV) ................................ 14,000 15 Yuen Foong Yu Manufacturing Co., Ltd. (BG) .............. 18,000 9 Zyxel Communication (JW) ................................ 4,000 8 ------ 3,188 Thailand - 0.3% Advanced Info Service Public Co., Ltd. (J2) ............. 7,800 17 Advanced Information Services (J2) ...................... 16,900 38 Airports of Thailand (BT) ............................... 2,600 3 Airports of Thailand * (BT) ............................. 9,100 12 Bangkok Bank (JP) ....................................... 7,500 17 Bangkok Bank Co., Ltd. * (JP) ........................... 26,200 63 Bangkok Expressway Public Co., Ltd. (BT) ................ 9,700 6 Banpu Co. (BF) .......................................... 2,700 9 Bec World (JA) .......................................... 17,300 7 Bec World Public Co., Ltd. (JA) ......................... 7,900 3 Charoen Polcphand Foods Public Co., Ltd. (JH) ........... 64,100 6 Delta Electronics (JY) .................................. 10,000 6 Electricity Generating Public Co., Ltd. (J3) ............ 3,400 6 GMM Grammy Public Co., Ltd. (JA) ........................ 6,900 3 Hana Micorelectronic Public Co., Ltd. (JY) .............. 11,500 8 Italian Thai Development Public Co., Ltd. (BJ) .......... 33,500 8 ITV Public Co., Ltd. * (BL) ............................. 8,400 3 Kasikornbank Public Co., Ltd. * (JP) .................... 5,900 7 Kiatnakin Finance Public Co., Ltd. (JQ) ................. 5,600 5 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ---------- ------- (000's) COMMON STOCK - Continued Thailand - Continued Kim England Securities, Ltd. * (FB) .................. 3,100 $ 3 Krung Thai Bank Public Co., Ltd. (JP) ................ 78,300 21 Land & Houses (BJ) ................................... 65,300 16 Land & Houses Public Co., Ltd. (JS) .................. 30,500 7 National Finance Public Co., Ltd. * (JQ) ............. 18,300 7 National Petrochemical Public Co., Ltd. (BC) ......... 2,100 5 PTT Exploration & Production Public Co., Ltd. (BB) ... 4,900 30 PTT Public Co. (BB) .................................. 17,800 68 PTT Public Co., Ltd. (BB) ............................ 5,700 21 Ratchaburi Electric (J3) ............................. 6,200 3 Sahavirya Steel Industries Public Co., Ltd. * (BD) ... 11,100 8 Seven Eleven (JF) .................................... 2,500 4 Shin Corp. (J2) ...................................... 28,800 25 Siam Cement Co. * (BD) ............................... 8,437 51 Siam City Cement Public Co., Ltd. (BD) ............... 1,300 8 Siam Commercial Bank * (JP) .......................... 4,800 5 Siam Commercial Bank Public Co. * (JP) ............... 10,700 12 Siam Makro Public Co., Ltd. * (JD) ................... 2,400 3 Sino Thai Engineering & Construction * (BJ) .......... 13,800 4 Telecomasia * (J1) ................................... 37,800 5 Thai Airways International plc (BQ) .................. 14,200 19 Thai Farmers Bank Public Co., Ltd. * (JP) ............ 32,300 41 Thai Olefins Public Co., Ltd. * (BC) ................. 5,500 8 Thai Union Frozen Products Public Co., Ltd. (JH) ..... 8,400 4 The Siam Cement Public Co., Ltd.. (BI) ............... 3,700 21 Tisco Finance plc (JQ) ............................... 8,500 5 ------ 631 Turkey - 0.2% Akbank TAS * (JP) .................................... 14,899,355 55 Akrilik Kimya Sanayii SA (BY) ........................ 308,000 2 Aksigorta * (JR) ..................................... 1,520,000 4 Alarko Holdings (JQ) ................................. 137,000 3 Anadolu Efes Biracilik ve Malt Sanayii AS * (JG) ..... 1,601,883 19 Arcelik AS (BW) ...................................... 2,270,521 11 Aygaz AZ (J4) ........................................ 1,848,000 4 CIMSA (BD) ........................................... 1,377,000 3 Dogan Holdings * (BO) ................................ 1,460,750 2 Dogan Sirketler Grubu Holding AS (JQ) ................ 5,843,000 8 Dogan Yayin Holding Corp. * (JA) ..................... 2,232,000 7 Eregli Demir ve Celik Fabrikalari TAS (BF) ........... 10,343,184 26 Ford Otomotiv Sanayi AS (BV) ......................... 1,659,934 12 Haci Omer Sabanci Holding AG (JQ) .................... 6,811,211 $ 20 Hurriyet Gazete * (JA) ............................... 2,435,000 7 Koc Holding AS (JQ) .................................. 4,482,155 20 Migros Turk T.A.S. (JF) .............................. 1,463,000 7 T Sise Co. (BW) ...................................... 4,003,000 7 Tofas Otomobil (BV) .................................. 3,193,000 6 Trakya * (BI) ........................................ 2,261,000 5 Tupras-Turkiye Petrol Rafinerileri AS (BB) ........... 2,487,737 16 Turkcell Iletisim Hizmetleri AS (J2) ................. 1,986,841 25 Turkiye Garanti Bankasi AS * (JP) .................... 8,165,662 24 Turkiye Is Bankasi - Cl. C * (JP) .................... 12,146,756 44 Vestel Elektronik Sanayi ve Ticaret AS (BW) .......... 2,258,000 7 Yapi ve Kredi Bankasi AS * (JP) ...................... 9,608,380 23 ------ 367 United Kingdom - 20.6% 3I GROUP (JQ) ........................................ 15,710 174 Aegis Group plc (JA) ................................. 28,822 47 Aggreko plc (BO) ..................................... 6,663 20 Alliance Unichem (JM) ................................ 6,310 75 AMEC plc (BJ) ........................................ 7,702 38 Amvescap plc * (JQ) .................................. 17,666 120 ARM Holdings plc (J0) ................................ 26,334 57 Arriva plc (BS) ...................................... 4,475 33 Association British Ports (BT) ....................... 8,519 62 AstraZeneca Group plc * (JO) ......................... 43,892 1,969 Balfour Beatty plc (BJ) .............................. 10,767 52 Barclays (JP) ........................................ 170,484 1,452 Barratt Developments plc (BW) ........................ 6,152 66 BBA Group plc (BT) ................................... 11,712 58 Bellway plc (BW) ..................................... 2,588 36 BG Group plc * (BB) .................................. 90,882 560 Billiton plc (BF) .................................... 63,528 551 BOC Group plc * (BC) ................................. 13,417 225 Boots Group (JF) ..................................... 21,232 265 BP Amoco plc (BB) .................................... 574,420 5,071 BPB (BD) ............................................. 12,676 94 Brambles Industries * (BO) ........................... 18,705 72 British Aerospace plc (BH) ........................... 82,266 327 British Airport Authority plc (BT) ................... 28,893 290 British Airways plc * (BQ) ........................... 13,903 69 British American Tobacco plc * (JI) .................. 39,996 620 British Land Co. plc (JS) ............................ 12,543 158 British Sky Broadcast plc (JA) ....................... 33,809 381 BT Group (J1) ........................................ 222,167 800 Bunzl (BO) ........................................... 11,735 98 Cable & Wireless plc * (J1) .......................... 61,386 144 Cadbury Schweppes plc * (JH) ......................... 53,027 457 Capita Group plc (BO) ................................ 17,224 99 Carnival plc (BZ) .................................... 4,528 220 Cattles plc (JQ) ..................................... 8,424 48 Celltech Group plc * (JN) ............................ 7,152 71 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued United Kingdom - Continued Centrica plc (J4) ....................................... 109,584 $ 446 CGU plc (JR) ............................................ 58,104 599 Close Brothers Group plc (JQ) ........................... 3,596 51 Cobham plc (BH) ......................................... 2,834 72 Compass Group plc * (BZ) ................................ 55,329 338 Cookson Group plc * (BL) ................................ 43,751 33 Corus Group plc * (BF) .................................. 111,904 81 Daily Mail & General Trust (JA) ......................... 7,843 104 Davis Service (BO) ...................................... 5,245 37 DCC plc (BL) ............................................ 400 7 De La Rue plc (BO) ...................................... 4,733 30 Diageo plc * (JG) ....................................... 80,069 1,079 Dixons Group plc (JE) ................................... 50,051 150 Eircom Group plc * (J1) ................................. 10,156 18 Electrocomponents plc * (BN) ............................ 11,177 72 EMAP plc * (JA) ......................................... 6,597 89 EMI Group plc (JA) ...................................... 20,296 90 Enterprise Inns (BZ) .................................... 4,171 43 Exel * (BP) ............................................. 7,708 107 Firstgroup (BS) ......................................... 10,517 53 FKI plc (BL) ............................................ 14,956 33 Friends Provident plc * (JR) ............................ 42,398 113 George Wimpey plc (BW) .................................. 9,843 66 GKN * (BU) .............................................. 18,806 85 GlaxoSmithKline plc * (JO) .............................. 154,763 3,131 Great Portland Estates plc (JS) ......................... 4,133 19 Hammerson plc (JS) ...................................... 7,096 90 Hanson Building Materials * (BD) ........................ 18,525 127 Hays plc * (BO) ......................................... 43,002 96 HBOS * (JP) ............................................. 100,721 1,246 Hilton Group plc * (BZ) ................................. 42,775 214 HMV Group plc * (JE) .................................... 8,986 39 HSBC Holdings plc (JP) .................................. 286,609 4,261 ICAP (JQ) ............................................... 11,141 55 IMI (BM) ................................................ 9,010 61 Imperial Chemical Industries plc * (BC) ................. 30,641 128 Imperial Tobacco Group plc (JI) ......................... 18,731 403 Inchcape plc (JB) ....................................... 1,803 57 Independent News (JA) ................................... 6,417 15 Intercontinental Hampshire (BZ) ......................... 18,971 200 Intertek Group plc (BL) ................................. 3,579 37 Invensys plc (BM) ....................................... 146,432 48 ITV (JA) ................................................ 110,294 231 J Sainsbury plc * (JF) .................................. 39,782 205 Johnson Matthey (BF) .................................... 5,628 94 Kelda Group plc (J6) .................................... 9,945 90 Kerry Group (JH) ........................................ 800 17 Kesa Electricals (JE) ................................... 13,591 71 Kidde plc (BK) .......................................... 21,333 46 Kingfisher * (JE) ....................................... 62,350 324 Kingspan Group plc * (BI) ............................... 2,435 15 Land Securities SGP (JS) ................................ 12,564 264 Legal & General Group plc (JR) .......................... 174,723 301 Liberty National (JP) ................................... 6,369 $ 88 Lloyds TSB Group plc (JP) ............................... 146,196 1,144 Logica plc * (JU) ....................................... 19,306 64 London Stock Exchange plc (JQ) .......................... 7,120 47 Manitoba Group (JQ) ..................................... 7,541 195 Marconi Group plc * (JW) ................................ 4,815 60 Marks & Spencer * (JD) .................................. 60,809 400 Meggitt plc (BH) ........................................ 6,755 32 MFI Furniture Group (BW) ................................ 15,783 43 Misys plc (JV) .......................................... 14,419 52 Mitchells & Butler (BZ) ................................. 13,419 68 National Express Group (BS) ............................. 3,230 39 National Grid Group * (J3) .............................. 79,313 612 National Power plc (J5) ................................. 28,586 73 Next Group (JD) ......................................... 7,039 182 Novar plc (BI) .......................................... 11,031 25 Pearson plc * (JA) ...................................... 21,624 263 Peninsular & Oriental Steam Navigation Co. (BR) ......... 19,050 76 Persimmon plc (BW) ...................................... 6,918 79 Pilkington plc (BI) ..................................... 26,149 46 Premier Farnell plc (JY) ................................ 8,500 38 Provident Financial (JQ) ................................ 6,532 71 Prudential Corp. (JR) ................................... 51,581 444 Punch Taverns plc (BZ) .................................. 5,992 55 Rank Group plc * (BZ) ................................... 15,289 83 Reckitt Benckiser * (JJ) ................................ 15,344 434 Reed International plc (JA) ............................. 34,135 332 Rentokil Initial plc (BO) ............................... 47,252 124 Reuters Group plc * (JA) ................................ 38,619 259 Rexam (BE) .............................................. 14,051 114 Rio Tinto plc * (BF) .................................... 27,489 661 RMC Group plc * (BD) .................................... 6,811 75 Rolls Royce Group * (BH) ................................ 39,313 179 Rolls Royce Group - Cl. B * (BV) ........................ 959,000 2 Royal & Sun Alliance Insurance Group * (JR) ............. 74,055 111 Royal Bank of Scotland Group * (JP) ..................... 77,447 2,230 Ryanair Holdings (BQ) ................................... 1,624 9 Schroders (JQ) .......................................... 3,199 36 Scottish & Newcastle (JG) ............................... 20,596 162 Scottish and Southern Energy (J3) ....................... 23,115 286 Scottish Power plc * (J3) ............................... 49,934 361 Securicor plc (BO) ...................................... 13,768 32 Serco Group plc (BO) .................................... 11,270 44 Severn Trent (J6) ....................................... 8,874 128 Shell Transport & Trading Co. plc * (BB) ................ 252,322 1,850 Signet Group (JE) ....................................... 44,166 92 Slough Estates Finance plc (JS) ......................... 10,753 87 Smith & Nephew (JL) ..................................... 25,078 270 Smiths Group (BL) ....................................... 15,172 205 South African Breweries plc * (JG) ...................... 21,561 279 SSL International plc (JL) .............................. 4,886 25 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued United Kingdom - Continued Stagecoach Holdings plc (BS) ......................... 26,928 $ 44 Tate & Lyle (JH) ..................................... 10,539 63 Taylor Woodrow (BW) .................................. 15,208 71 Tesco plc * (JF) ..................................... 198,207 957 The Berkeley Group plc (BW) .......................... 2,816 63 The Great Universal Stores plc (JC) .................. 27,156 416 The Sage Group plc (JV) .............................. 31,670 107 Tomkins plc (BL) ..................................... 19,882 99 Trinity Mirror plc (JA) .............................. 7,207 85 Unilever plc * (JH) .................................. 71,289 699 United Business Media (JA) ........................... 8,633 79 United Utilites - Cl. A (J6) ......................... 7,960 48 United Utilities plc * (J5) .......................... 14,287 134 Vodafone AirTouch plc (J2) ........................... 1,764,375 3,862 Waterford Wedgewood (BW) ............................. 9,080 2 Whitbread * (BZ) ..................................... 7,613 114 William Hill (BZ) .................................... 10,830 109 Wolseley (BN) ........................................ 15,683 243 WPP Group plc * (JA) ................................. 27,081 275 Yell Group plc (JA) .................................. 17,910 112 -------- 50,808 United States - 1.3% Alvarion, Ltd. (JW) .................................. 998 13 AO Mosenergo - ADR (J3) .............................. 2,476 19 Banco Bradesco SA - ADR (JP) ......................... 2,429 112 Banco Santander Chile - ADR (JP) ..................... 2,767 74 Brasil Telecom Participacoes S.A. (J1) ............... 966 30 Braskem SA - ADR (BC) ................................ 7,493 138 Centrais Electricas Brasileirias SA - ADR Cl. B * (J3) .................................. 2,207 11 Check Point Software Technologies, Ltd. * (JT) ....... 5,126 138 Companhia De Bebidas ADR (JG) ........................ 4,804 96 Companhia Energetica de Minas Gerias - ADR (J3) ..... 1,994 30 Companhia Siderurgica Nacional - SA - ADR * (BF) .... 3,152 38 Companhia Vale do Rio Doce - ADR (BF) ................ 5,046 215 Compania Anonima Nacional Telefonos De Venezuela - ADR (J1) ................. 2,697 54 Compania Brasileira de Distribuicao Grupo Pao de Acucar - ADR (JF) .................... 485 8 Compania Cervecerias Unidas SA - ADR * (JG) .......... 470 10 Compania de Telecomunicaciones de Chile SA * (J1) .... 8,006 98 Distribucion y Servicio D&S SA - ADR (JF) ............ 849 13 ECI Telecommunications, Ltd. * (JW) .................. 1,334 9 Embotelladora Andina SA - ADR * (JG) ................. 935 11 Embotelladora Andina SA - Ser. B ADR (JG) ............ 1,052 $ 12 Embratel Participacoes SA - ADR (J1) ................. 3,384 47 Empresa Brasileira de Aeronautica SA * (BH) .......... 1,584 45 Empresa Nacional de Electricidad SA - ADR * (J3) ..... 6,680 83 Enersis SA - ADR * (J3) .............................. 15,963 95 Gerdeau SA - ADR (BF) ................................ 2,792 34 Given Imaging, Ltd. * (JL) ........................... 316 11 JSC Norilsk Nickel - ADR (BL) ........................ 1,861 102 Lukoil Holding - ADR * (BB) .......................... 2,907 306 M-Systems Flash Disk Pioneers, Ltd. * (JX) ........... 602 9 Orbotech, Ltd. * (JY) ................................ 835 17 Petrobas Energia Participacoes SA - ADR Cl. B (JQ) ... 2,541 25 Petroleo Brasileiro SA * (BB) ........................ 6,036 168 Petroleo Brasileiro SA - ADR (BB) .................... 8,385 208 PT Indonesian Satellite Corp. - ADR (J1) ............. 1,984 42 Radware, Ltd. * (JT) ................................. 401 7 Ryanair Holdings plc - ADR * (BQ) .................... 581 19 Ship Finance International, Ltd. * (BR) .............. 262 4 Surgutneftegaz - ADR (BB) ............................ 16,177 561 Tele Centro Oeste Celular Participacoes - ADR (J2) ... 1,301 12 Tele Norte Leste Participacoes SA - ADR (J1) ......... 5,501 70 Telesp Celular Participacoes SA - ADR * (J2) ......... 3,624 28 Tenaris SA - ADR (BA) ................................ 1,125 37 Unibanco - Uniao de Bancos Brasileiros SA - GDR * (JP) .......................... 1,735 34 Unified Energy Systems Russia - ADR (J3) ............. 3,060 81 Vina Concha y Toro SA - ADR (JG) ..................... 371 18 Votorantim Celulose e Papel SA - ADR (BG) ............ 530 17 -------- 3,209 -------- TOTAL COMMON STOCK- (Cost $219,363) 97.2% 239,968 PREFERRED STOCK Australia - 0.2% News Corp., Ltd. (JA) ................................ 70 571 Brazil - 0.2% BCO Itau Holdings Financeira (JP) .................... 1,440 134 Caemi Mieracao e Metalurgia SA (BF) .................. 40 15 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) PREFERRED STOCK - Continued Brazil - Continued Compahnia de Bebidas das Americas (JG) ................. 120 $ 24 Companhia Vale do Rio Doce (BF) ........................ 8 31 Empresa Bras De Aerona (BH) ............................ 3 23 Klabin SA (BG) ......................................... 11 15 Petroleo Brasileiro SA - Petrobras (BB) ................ 2 55 Sadia SA (JH) .......................................... 11 14 Tele Norte Leste Participacoes SA (J1) ................. 1,500 19 Usinas Siderurgicas de Minas SA (BF) ................... 1 12 Votorantim Papel (BG) .................................. 200 13 -------- 354 Germany - 0.2% Fresenius Medical Care AG (JM) ......................... 7 36 Henkel KGAA (JJ) ....................................... 2 138 Porsche AG (BV) ........................................ 2 135 Prosiebebensati Medi (JA) .............................. 2 36 RWE AG (J5) ............................................ 1 40 Volkswagen AG (BV) ..................................... 3 78 Wella AG (JK) .......................................... 1 5 -------- 469 New Zealand - 0.0% Tenon, Ltd. (BG) ....................................... 1 2 South Korea - 0.1% Hyundai Motor Co. (BV) ................................. 1 21 LG Electronics, Inc. (BW) .............................. 1 14 Samsung Electronics, Inc. (BL) ......................... 6 156 -------- 191 Switzerland - 0.0% Schindler Holding AG (BM) .............................. 147 42 Thailand - 0.0% PTT Exploration & Production Public Co. (BB) ........... 2 16 Siam Commercial Bank Public Co. (JP) ................... 6 6 -------- 22 -------- TOTAL PREFERRED STOCK- (Cost $1,514) 0.7% 1,651 WARRANTS Mexico - 0.0% Cemex SA (BI) expires 12/21/04 ......................... 137 0 Singapore - 0.0% City Developments (JS) expires 05/10/06 ................ 1,300 2 -------- TOTAL WARRANTS- (Cost $0) 0.0% 2 RIGHTS Thailand - 0.0% True Corporation (J1) expires 04/30/08 ................. 35,747 $ 0 Turkey - 0.0% Eregli Demir ve Fabrikalari TAS (BF) expires 07/13/04 .................................... 427,576 1 -------- TOTAL RIGHTS- (Cost $0) 0.0% 1 ------- -------- TOTAL LONG-TERM INVESTMENTS- (Cost $220,877) 97.9% 241,622 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 18.6% State Street Navigator Securities Lending Portfolio .................................. $46,017 46,017 SHORT-TERM INVESTMENTS Investment in joint trading account 1.344% due 07/01/04 ................................ 1,885 1,885 U.S. Treasury - Bills (a) 0.95% due 07/29/04 ................................. 10 10 ------- -------- TOTAL SHORT-TERM INVESTMENTS- (Cost $1,895) 0.8% 1,895 ------- -------- TOTAL INVESTMENTS- (Cost $268,789) 117.3% 289,534 Payables, less cash and receivables- (17.3)% (42,731) ------- -------- NET ASSETS- 100.0% $246,803 ------- -------- * Non-income producing security. ADR-American Depository Receipt. GDR-Global Depository Receipt. (a) Security segregated to cover initial margin requirements on open financial futures. See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------- ----------- Banks ................................... JP $40,278 16.7% Oil & Gas ............................... BB 21,142 8.8% Pharmaceuticals ......................... JO 16,329 6.8% Diversified Telecommunication Services .. J1 10,885 4.5% Insurance ............................... JR 10,839 4.5% Metals & Mining ......................... BF 8,668 3.6% Automobiles ............................. BV 7,490 3.1% Electric Utilities ...................... J3 7,446 3.1% SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ -------- ----------- Food Products .......................... JH $ 7,105 2.9% Wireless Telecommunications Services ... J2 6,972 2.9% Diversified Financials ................. JQ 6,919 2.9% Media .................................. JA 6,680 2.8% Chemicals .............................. BC 6,343 2.6% Household Durables ..................... BW 5,213 2.2% Communications Equipment ............... JW 4,308 1.8% Semiconductor Equipment & Products ..... J0 4,280 1.8% Food & Drug Retailing .................. JF 4,147 1.7% Electronic Equipment & Instruments ..... JY 3,736 1.5% Electrical Equipment ................... BK 3,592 1.5% Beverages .............................. JG 3,430 1.4% Machinery .............................. BM 3,167 1.3% Real Estate Operations ................. JS 3,074 1.3% Hotels Restaurants & Leisure ........... BZ 2,645 1.1% Multiline Retail ....................... JD 2,506 1.0% Road & Rail ............................ BS 2,377 1.0% Industrial Conglomerates ............... BL 2,268 0.9% Commercial Services & Supplies ......... BO 2,257 0.9% Specialty Retail ....................... JE 2,253 0.9% Construction Materials ................. BD 2,145 0.9% Auto Components ........................ BU 2,042 0.8% Gas Utilities .......................... J4 1,725 0.7% Tobacco ................................ JI 1,724 0.7% Computers & Peripherals ................ JX 1,588 0.7% Office Electronics ..................... JZ 1,549 0.6% Software ............................... JV 1,505 0.6% Building Products ...................... BI 1,497 0.6% Health Care Equipment & Supplies ....... JL 1,438 0.6% Multi-Utilities ........................ J5 1,438 0.6% Paper & Forest Products ................ BG 1,408 0.6% Construction & Engineering ............. BJ 1,392 0.6% Trading Companies & Distributors ....... BN 1,324 0.5% Textiles & Apparel ..................... BY 1,300 0.5% Aerospace & Defense .................... BH 1,281 0.5% IT Consulting & Services ............... JU 1,168 0.5% Transportation Infrastructure .......... BT 1,166 0.5% Household Products ..................... JJ 1,103 0.5% Marine ................................. BR 972 0.4% Leisure Equipment & Products ........... BX 886 0.4% Personal Products ...................... JK 874 0.4% Air Freight & Couriers ................. BP 821 0.3% Internet Software & Services ........... JT 784 0.3% Real Estate Development ................ JS 742 0.3% Airlines ............................... BQ 588 0.2% Health Care Providers & Services ....... JM 520 0.2% Internet & Catalog Retail .............. JC 492 0.2% Containers & Packaging ................. BE 369 0.2% Water Utilities ........................ J6 292 0.1% Biotechnology .......................... JN $ 250 0.1% Real Estate Investment Trust ........... JS 223 0.1% Energy Equipment & Services ............ BA 222 0.1% Distributors ........................... JB 172 0.1% Diversified Telecommunication Services ............................ JI 144 0.1% Commingled Fund ........................ 99 78 0.0% Finance ................................ FB 51 0.0% -------- ----- $241,622 100.0% ======== ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock International Equity Index Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of December 31, 2003. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Multi-Class Operations: All income, expenses (except class specific expenses) and realized and unrealized gains (losses) are allocated to each class based upon the relative net assets of each class. Dividends from net investment income are determined at a class level and distributions from capital gains are determined at a Fund level. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Currency translation: All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 5:00 p.m., London time, on the date of any determination of the net asset value of the Fund. Unrealized exchange adjustments are included in unrealized appreciation (depreciation) of investments. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of transactions. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between trade and settlement dates of security transactions, and the difference between the amounts of net investment income accrued and the U.S. dollar amount actually received. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Securities lending: The Fund has entered into an agreement with State Street Bank and Trust Company ("SSBT") to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $43,874 $46,017 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 June 30, 2004, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ CAC 40 10 Euro Index Futures 7 Long September 04 $(2) TOPIX Index Futures 13 Long September 04 39 Share Price Index Futures 5 Long September 04 4
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ S&P Canada 60 Index Futures 6 Long September 04 $12 DAX Index Futures 4 Long September 04 13 IBEX 35 Index Futures 1 Long September 04 1 MIB 30 Index Futures 1 Long September 04 3 Hang Seng Stock Index Futures 2 Long July 04 1 FTSE 100 Index Futures 20 Long September 04 3 --- $74 ===
Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. As of June 30, 2004, the Fund had open forward foreign currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: Unrealized Principal Amount Appreciation/ Covered by Contract Expiration Month (Depreciation) ------------------- ---------------- -------------- Currency Purchased Australian Dollar 173 September 04 $ (1) Canadian Dollar 403 September 04 2 Euro 452 September 04 1 Pound Sterling 1,352 September 04 (6) Hong Kong Dollar 172 September 04 - Japanese Yen 1,081 September 04 (20) ---- $(24) ==== Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $6,989, $7,680 and $7,444 which expire in 2009, 2010 and 2011, respectively. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $337. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $100 Million and Excess Over First $100 Million $200 Million $200 Million ------------------ ---------------- ------------ 0.18% 0.15% 0.11% For the period from January 1, 2004 to April 30, 2004, John Hancock and JVLICO agreed to reimburse the Fund for normal operating expenses, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses that exceed 0.10% of the Fund's daily net asset value. Accordingly, for the period from January 1, 2004 to April 30, 2004 the Fund was reimbursed $16 by John Hancock and JVLICO. On March 18, 2004, the Fund's Shareholders approved the removal of John Hancock and JVLICO's respective obligations to reimburse the Fund for excess operating expenses effective May 1, 2004. John Hancock has entered into a Sub-Advisory Agreement with State Street Global Advisers Funds Managment, Inc., and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. Distribution Plan: In accordance with Rule 12b-1 of the Invesment Company Act of 1940, the Board of Trustees have approved a Distribution Plan ("the Plan") for NAV Series, Series I and Series II. Series I shares of the Fund are subject to a Rule 12b-1 fee of up to .40% of Series I shares' average daily net assets. Series II shares of the Fund are subject to a Rule 12b-1 fee of up to .60% of Series II shares' average daily net assets. The distributor may use Rule 12b-1 fees only for any distribution expenses relating to the class. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $112,278 $37,309 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $155,390 $23,775 $(11,984) $11,791 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in passive foreign investment companies and to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $22,113 $11,791 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $3,685 $-- $479 2002 2,052 -- -- NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION On June 18, 2004, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund -------------- ----------- VST International Equity Index MIT International Index Trust These combinations provided for the transfer of substantially all of the assets and liabilities of the target funds to the acquiring funds in exchange solely for the fund shares of the acquiring funds. The acquisitions were accounted for as tax-free exchanges as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination --------------------- -------------- ----------- ------------ ---------------- -------------------- VST International Equity Index Series I vs. MIT International Index Trust Series I 1,750 $24,566 $ 621 $33,341 $57,907 VST International Equity Index Series II vs. MIT International Index Trust Series II 1,462 $20,531 $(6,020) $ 536 $21,067
NOTE F--OTHER MATTERS Section 30 and Rule 30e-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish in their annual reports, information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters:
For Against Abstain --- ------- ------- To approve, as to the International Equity Index Fund, an amendment to the current investment mangement agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses. 88% 7% 5%
Inception: March 29, 1986 -------------------------------------------------------------------------------- Large Cap Growth Fund Independence Investment LLC Paul F. McManus -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 0.30% underperforming its benchmark, the Russell 1000 Growth Index. Relative to Morningstar peers, the Fund has an average rating of 3 with a below average risk profile. . The Fund underperformed its benchmark primarily due to unfavorable stock selection decisions broadly especially within the information technology and consumer discretionary sectors, with sector allocation exposures also detracting. . The largest absolute performance contributors were exposures to companies in the industrials sector, while exposures to information technology companies were the largest detractors. . The manager uses both fundamental equity research and quantitative portfolio construction to identify stocks having both favorable valuations and improving earnings growth prospects. The Fund is broadly diversified across sectors with sector weights similar to the benchmark -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Microsoft Corp. 4.6% Intel Corp. 4.0% Pfizer, Inc. 4.0% Cisco Systems, Inc. 3.5% American International Group, Inc. 2.7% Standard and Poor's Depositary Receipts 2.5% Procter & Gamble Co. 2.5% Johnson & Johnson 2.5% Home Depot, Inc. 2.2% 3M Co. 2.1% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Large Cap Russell 1000(R) Growth Fund Growth Index ----------- --------------- YTD/3/ 0.30% 2.74% 1 Year 15.20 17.89 3 Years -4.79 -3.74 5 Years -7.18 -6.48 10 Years 8.32 6.53 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Growth MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 30% Health Care 18% Financials 14% Consumer Discretionary 12% Industrials 12% Consumer Staples 10% Energy 3% Materials 1% Telecommunication Services 0% Utilities 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 1,143 VL/VUL subaccounts and 2,144 VA subaccounts in the Morningstar Large Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are additional risks associated with a nondiversified fund, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $18,882 of securities loaned (Note B)) .................................... $ 578,201 Net unrealized appreciation of investments ........................ 31,572 Short-term investments at value ................................... 30,580 --------- Total investments ........................................... 640,353 Receivable for: Investments sold ............................................... 15,924 Dividends ...................................................... 526 --------- Total assets ...................................................... 656,803 --------- LIABILITIES Payables for: Investments purchased .......................................... 21,610 Collateral for securities on loan .............................. 19,238 Accrued operating expenses ..................................... 262 Other payables ................................................. 9 --------- Total liabilities ................................................. 41,119 --------- Net assets ........................................................ $ 615,684 ========= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ............................................. 44,026 --------- Net asset value per share ......................................... $ 13.98 ========= Composition of net assets: Capital paid-in ................................................ $ 935,990 Accumulated net realized loss on investments, futures and foreign currency transactions ................... (351,894) Undistributed net investment income ............................ 16 Net unrealized appreciation of investments ..................... 31,572 --------- Net assets ........................................................ $ 615,684 ========= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted) INVESTMENT INCOME Interest .................................................... $ 202 Dividends ................................................... 2,943 Securities lending .......................................... 12 -------- Total investment income ........................................... 3,157 -------- EXPENSES Investment advisory fee ..................................... 2,438 Auditors fees ............................................... 39 Custodian fees .............................................. 74 Fidelity Bond fees .......................................... 1 Legal fees .................................................. 38 Printing & mailing fees ..................................... 49 Trustees' fees............................................... 9 Other fees .................................................. 10 -------- Total expenses .................................................... 2,658 Less custodian expense reduction offset by commission recapture arrangement (Note C) ................ (173) -------- Net expenses ...................................................... 2,485 -------- Net investment income ............................................. 672 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ............................... 11,756 Change in unrealized depreciation on investments ................................................. (10,840) -------- Net realized and unrealized gain .................................. 916 -------- Net increase in net assets resulting from operations ..................................................... $ 1,588 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ................................................ $ 672 $ 2,810 Net realized gain (loss) ............................................. 11,756 (28,345) Change in net unrealized appreciation (depreciation) ................. (10,840) 144,822 -------- -------- Net increase in net assets resulting from operations .............. 1,588 119,287 Distributions to shareholders from: Net investment income ................................................ (656) (2,834) Realized gains ....................................................... (830) Decrease in net assets resulting from distributions ............... (656) (3,664) -------- -------- Capital contributions From fund share transactions: Proceeds from shares sold ............................................ 57,313 78,014 Shares issued in reorganization ...................................... 12,462 Distributions reinvested ............................................. 656 3,664 Payment for shares redeemed .......................................... (67,618) (81,990) -------- -------- Increase (decrease) in net assets from fund share transactions .... (9,649) 12,150 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ................................... (8,717) 127,773 NET ASSETS Beginning of Period .................................................. 624,401 496,628 -------- -------- End of Period (including undistributed net investment income of $16 and $0, respectively) ............................... $615,684 $624,401 ======== ======== Analysis of fund share transactions: Sold ................................................................. 4,093 5,685 Issued in reorganization ............................................. 1,083 Reinvested ........................................................... 47 285 Redeemed ............................................................. (4,850) (6,731) -------- -------- Net increase (decrease) in fund shares outstanding ...................... (710) 322 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Large Cap Growth Fund ----------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------ 2004 2003 2002 2001 2000 -------------- -------- -------- -------- ---------- Net Assets Value at Beginning of Period ....... $ 13.96 $ 11.18 $ 15.54 $ 18.89 $ 27.33 Income from Investment Operations: Net Investment Income ...................... 0.02 0.06 0.04 0.04 0.03 Net Realized and Unrealized Gain (Loss) on Investment(a) ........................... 0.02 2.80 (4.36) (3.36) (4.89) -------- -------- -------- -------- ---------- Total From Investment Operations ........... 0.04 2.86 (4.32) (3.32) (4.86) Less Distributions: Distribution from Net Investment Income .... (0.02) (0.06) (0.04) (0.03) (0.04) Distribution from Net Realized Gains on Investments ............................. (0.02) (2.69) Distribution from Excess of Net Investment Income/Gains ............................ (0.78) Distribution from Capital Paid-in .......... (0.07) -------- -------- -------- -------- ---------- Total Distributions ........................ (0.02) (0.08) (0.04) (0.03) (3.58) -------- -------- -------- -------- ---------- Net Assets Value at End of Period ............. $ 13.98 $ 13.96 $ 11.18 $ 15.54 $ 18.89 ======== ======== ======== ======== ========== Total Investment Return(b) .................... 0.30%(e) 25.62% (27.82)% (17.54)% (17.89)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .................................. 0.87%(d)(f) 0.86%(d) 0.55% 0.41% 0.46% Ratio of Net Investment Income to Average Net Assets .............................. 0.22%(f) 0.51% 0.33% 0.23% 0.10% Portfolio Turnover Rate .................... 70.97%(e) 99.47%(c) 95.04% 63.96% 89.30% Net Assets End of Period (000s Omitted) ....... $615,684 $624,401 $496,628 $770,915 $1,146,787
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Excludes merger activity. (d) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (e) Not annualized. (f) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 0.9% Boeing Co. * ............................................ 111,300 $ 5,686 Air Freight & Couriers - 0.5% Fedex Corp. ............................................. 41,100 3,358 Airlines - 0.4% JetBlue Airways Corp. * ................................. 85,100 2,500 Automobiles - 0.5% Harley-Davidson, Inc. * ................................. 50,000 3,097 Beverages - 4.0% Anheuser-Busch Cos., Inc. ............................... 45,200 2,441 Coca-Cola Co. * ......................................... 238,200 12,025 PepsiCo, Inc. * ......................................... 190,800 10,280 ------- 24,746 Biotechnology - 3.1% Amgen, Inc. * ........................................... 134,900 7,362 Biogen IDEC, Inc. * ..................................... 129,300 8,178 Sepracor, Inc. * ........................................ 62,700 3,317 ------- 18,857 Commercial Services & Supplies - 1.7% Apollo Group, Inc. - Cl. A * ............................ 27,500 2,428 Automatic Data Processing, Inc. ......................... 103,100 4,318 Ecolab, Inc. * .......................................... 119,100 3,775 ------- 10,521 Communications Equipment - 5.9% Cisco Systems, Inc. * ................................... 900,000 21,330 Motorola, Inc. .......................................... 341,600 6,234 Qualcomm, Inc. * ........................................ 120,700 8,809 ------- 36,373 Computers & Peripherals - 7.2% Dell, Inc. * ............................................ 327,600 11,734 EMC Corp. * ............................................. 262,600 2,994 Intel Corp. ............................................. 890,100 24,567 International Business Machines Corp. ................... 60,700 5,351 ------- 44,646 Construction & Engineering - 1.0% American Standard Cos., Inc. * .......................... 154,100 6,212 Credit Card - 2.2% American Express Co. * .................................. 167,600 8,611 MBNA Corp. * ............................................ 181,600 4,684 ------- 13,295 Diversified Financials - 7.4% Bear Stearns Cos., Inc. * ............................... 25,500 2,150 Capital One Financial Corp. ............................. 65,100 4,452 Chicago Mercantile Exchange * ........................... 21,300 3,075 Citigroup, Inc. * ....................................... 136,900 6,366 Goldman Sachs Group, Inc. ............................... 78,900 7,429 Merrill Lynch & Co., Inc. * ............................. 128,500 6,936 Diversified Financials - Continued Standard and Poor's Depositary Receipts ................. 134,300 $15,381 ------- 45,789 Electrical Equipment - 1.1% United Technologies Corp. * ............................. 74,400 6,806 Electronic Equipment & Instruments - 0.4% Sanmina Corp. * ......................................... 273,200 2,486 Food & Drug Retailing - 0.3% Whole Foods Market, Inc. * .............................. 20,100 1,919 Health Care Equipment & Supplies - 2.9% Boston Scientific Corp. * ............................... 117,300 5,020 Guidant Corp. ........................................... 65,000 3,632 St. Jude Medical, Inc. * ................................ 81,000 6,128 Zimmer Holdings, Inc. * ................................. 37,300 3,290 ------- 18,070 Health Care Providers & Services - 2.2% Cardinal Health, Inc. * ................................. 70,000 4,904 DaVita, Inc. * .......................................... 58,200 1,794 UnitedHealth Group, Inc. * .............................. 65,900 4,102 Wellpoint Health Networks, Inc. * ....................... 22,600 2,532 ------- 13,332 Household Products - 2.5% Procter & Gamble Co. * .................................. 278,200 15,145 Industrial Conglomerates - 5.1% 3M Co. .................................................. 140,000 12,601 General Electric Co. * .................................. 276,600 8,962 Tyco International, Ltd. * .............................. 299,700 9,932 ------- 31,495 Insurance - 4.5% AFLAC, Inc. * ........................................... 120,100 4,901 American International Group, Inc. * .................... 227,400 16,209 Hartford Financial Services Group, Inc. * ............... 100,000 6,874 ------- 27,984 Internet & Catalog Retail - 1.1% eBay, Inc. * ............................................ 71,000 6,529 Internet Software & Services - 1.4% Yahoo, Inc. * ........................................... 233,800 8,494 Machinery - 3.3% Danaher Corp. * ......................................... 86,600 4,490 Grant Prideco, Inc. * ................................... 317,700 5,865 Illinois Tool Works, Inc. * ............................. 45,200 4,334 Oshkosh Truck Corp. ..................................... 62,800 3,599 Pall Corp. * ............................................ 73,600 1,928 ------- 20,216 Media - 4.5% Comcast Corp. - Cl. A ................................... 52,800 1,480 E.W. Scripps Co. - Cl. A ................................ 39,800 4,179 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Media - Continued Interactive Corp. ...................................... 113,800 $ 3,430 Lamar Advertising Co. * ................................ 72,100 3,125 Pixar, Inc. * .......................................... 53,000 3,684 The Walt Disney Co. * .................................. 178,800 4,558 Time Warner, Inc. * .................................... 399,900 7,030 -------- 27,486 Multiline Retail - 2.2% Target Corp. * ......................................... 134,000 5,691 Wal-Mart Stores, Inc. * ................................ 155,400 8,199 -------- 13,890 Oil & Gas - 1.6% Devon Energy Corp. * ................................... 49,400 3,260 Murphy Oil Corp. ....................................... 61,000 4,496 Newfield Exploration Co. * ............................. 41,000 2,285 -------- 10,041 Personal Products - 0.7% Avon Products, Inc. .................................... 87,600 4,042 Pharmaceuticals - 9.4% Abbott Laboratories * .................................. 149,400 6,090 Johnson & Johnson ...................................... 270,300 15,056 Medicinesco ............................................ 199,800 6,096 Merck & Co., Inc. * .................................... 130,300 6,189 Pfizer, Inc. * ......................................... 706,600 24,222 -------- 57,653 Semiconductor Equipment & Products - 3.4% Analog Devices, Inc. * ................................. 124,300 5,852 Applied Materials, Inc. * .............................. 419,200 8,225 RF Micro Devices, Inc. * ............................... 279,500 2,096 Texas Instruments, Inc. * .............................. 193,400 4,676 -------- 20,849 Software - 8.8% Electronic Arts, Inc. * ................................ 142,300 7,762 Microsoft Corp. * ...................................... 990,900 28,300 Oracle Corp. * ......................................... 827,700 9,875 Take Two Interactive Software * ........................ 140,800 4,314 Veritas Software Corp. * ............................... 140,400 3,889 -------- 54,140 Specialty Retail - 4.1% Advanced Auto Parts * .................................. 79,600 3,517 Best Buy Co., Inc. * ................................... 82,800 4,201 Home Depot, Inc. * ..................................... 382,800 13,475 TJX Cos., Inc. * ....................................... 175,000 4,224 -------- 25,417 Textiles & Apparel - 0.6% Coach, Inc. * .......................................... 83,700 3,782 Tobacco - 1.0% Altria Group, Inc. ..................................... 126,300 6,321 Trading Companies & Distributors - 1.4% CDW Corp. .............................................. 131,500 $ 8,384 U.S. Government Agencies - 1.7% Federal National Mortgage Assoc. * ..................... 143,100 10,212 -------- TOTAL COMMON STOCK- (Cost $578,201) 99.0% 609,773 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 3.1% State Street Navigator Securities Lending Portfolio ......................................... $19,238 19,238 SHORT-TERM INVESTMENTS - 1.9% Investment in joint trading account 1.344% due 07/01/04 (Cost $11,342) .................................... 11,342 11,342 ------- -------- TOTAL INVESTMENTS- (Cost $608,781) 104.0% 640,353 Payables, less cash and receivables- (4.0)% (24,669) ------- -------- NET ASSETS- 100.0% $615,684 ======= ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Large Cap Growth Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactons are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $4,604 1.50% $2 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $18,882 $19,238 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $197,757, $128,244 and $35,226 which expire in 2009, 2010 and 2011, respectively. Certain of the above losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $500 Million and Excess Over First $500 Million $1 Billion $1 Billion ------------------ ---------------- ----------- 0.80% 0.75% 0.70% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $173. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, with respect to the Fund. Independence Investment LLC is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $341,100 $352,021 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $611,816 $66,331 $(26,341) $39,990 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $361,227 $39,990 In addition, the tax character of distributions paid by the Fund are summarized as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $1,489 $-- $2,175 2002 2,023 -- -- NOTE E--COMBINATION On April 25, 2003, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund -------------------- ------------- VST Large Cap Growth VA Technology These combinations provided for the transfer of substantially all of the assets and liabilities of the target funds to the acquiring funds in exchange solely for the fund shares of the acquiring funds. The acquisitions were accounted for as tax-free exchanges as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination --------------- -------------- ----------- ------------ ---------------- -------------------- VST Large Cap Growth vs. VA Technology 1,083 $12,462 $(8,081) $504,397 $516,859
Inception: August 31, 1999 -------------------------------------------------------------------------------- Large Cap Growth B Fund (FORMERLY LARGE CAP AGGRESSIVE GROWTH FUND) Independence Investment LLC Paul F. McManus -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 0.22% underperforming its benchmark, the Russell 1000 Growth Index. Relative to Morningstar peers, the Fund has an above average rating of 4 with a below average risk profile. . Independence assumed management of the Fund in December 2003. . The Fund underperformed its benchmark primarily due to unfavorable stock selection decisions broadly especially within the information technology and consumer discretionary sectors, with sector allocation exposures also detracting. . The largest absolute performance contributors were exposures to companies in the industrials sector, while exposures to information technology companies were the largest detractors. . The manager uses both fundamental equity research and quantitative portfolio construction to identify stocks having both favorable valuations and improving earnings growth prospects. The Fund is broadly diversified across sectors with sector weights similar to the benchmark. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Microsoft Corp. 4.6% Intel Corp. 4.1% Pfizer, Inc. 4.0% Cisco Systems, Inc. 3.6% American International Group, Inc. 2.6% Procter & Gamble Co. 2.5% Johnson & Johnson 2.5% Home Depot, Inc. 2.2% 3M Co. 2.1% Coca-Cola Co. 2.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Large Cap Russell 1000(R) Growth B Fund Growth Index ------------- --------------- YTD/3/ 0.22% 2.74% 1 Year 18.63 17.89 3 Years -3.95 -3.74 Since Inception (8/31/99) -5.65 -6.38 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Growth MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . **** (VL/VUL) . **** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 31% Health Care 18% Financials 14% Consumer Discretionary 12% Industrials 12% Consumer Staples 10% Energy 3% Materials 1% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 1143 VL/VUL subaccounts and 2144 VA subaccounts in the Morningstar Large Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. There are additional risks associated with a nondiversified fund, as outlined in the current prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Growth B Fund (000's Omitted) ASSETS Long term investments at cost (including $704 of securities loaned (Note B)) ....................................................... $ 28,515 Net unrealized appreciation of investments ......................... 1,809 Short-term investments at value .................................... 1,249 -------- Total investments ............................................ 31,573 Receivable for: Investments sold ................................................ 753 Dividends ....................................................... 27 -------- Total assets ....................................................... 32,353 -------- LIABILITIES Payables for: Investments purchased ........................................... 1,019 Collateral for securities on loan ............................... 715 Accrued operating expenses ...................................... 4 Other liabilities ............................................... 1 -------- Total liabilities .................................................. 1,739 -------- Net assets ......................................................... $ 30,614 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 4,807 -------- Net asset value per share .......................................... $ 6.37 ======== Composition of net assets: Capital paid-in ................................................. $ 43,825 Accumulated net realized loss on investments, futures and foreign currency transactions ................................ (15,020) Net unrealized appreciation of: Investments .................................................. 1,809 Translation of assets and liabilities in foreign currencies .. -- -------- Net assets ......................................................... $ 30,614 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Growth B Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 1 Dividends ....................................................... 148 ----- Total investment income ............................................... 149 ----- EXPENSES Investment advisory fee ......................................... 130 Auditors fees ................................................... 2 Custodian fees .................................................. 11 Legal fees ...................................................... 2 Printing & mailing fees ......................................... 5 Other fees ...................................................... 1 ----- Total expenses ........................................................ 151 Less expenses reimbursed ........................................ (10) Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................... (8) ----- Net expenses .......................................................... 133 ----- Net investment gain ................................................... 16 ----- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments ..................................................... 208 Foreign currency transactions ................................... 4 Change in unrealized depreciation on: Investments ..................................................... (176) Translation of assets and liabilities in foreign currencies ..... (4) ----- Net realized and unrealized gain ...................................... 32 ----- Net increase in net assets resulting from operations .................. $ 48 ===== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Large Cap Growth B Fund (000's Omitted) Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income (loss) .................. $ 16 $ (20) Net realized gain ............................. 212 2,092 Change in net unrealized appreciation (depreciation) ............................. (180) 5,303 ------- ------- Net increase in net assets resulting from operations .............................. 48 7,375 Distributions to shareholders from: Net investment income ......................... (16) Realized gains ................................ (4,077) ------- ------- Decrease in net assets resulting from distributions ........................... (16) (4,077) From fund share transactions: Proceeds from shares sold ..................... 2,678 6,187 Distributions reinvested ...................... 16 4,077 Payment for shares redeemed ................... (3,031) (6,892) ------- ------- Increase (decrease) in net assets from fund share transactions ................. (337) 3,372 ------- ------- NET INCREASE (DECREASE) IN NET ASSETS ............ (305) 6,670 NET ASSETS Beginning of Period ........................... 30,919 24,249 ------- ------- End of Period (including undistributed net investment income of $0 and $0, respectively) .............................. $30,614 $30,919 ======= ======= Analysis of fund share transactions: Sold .......................................... 420 991 Reinvested .................................... 3 649 Redeemed ...................................... (479) (1,129) ------- ------- Net increase (decrease) in fund shares outstanding ................................... (56) 511 ======= ======= See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Large Cap Growth B Fund -------------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ---------------------------------------------- 2004 2003(g) 2002 2001 2000 ------------ ------- ------- ------- ------- Net Assets Value at Beginning of Period ........ $ 6.36 $ 5.57 $ 8.12 $ 9.52 $ 11.94 Income from Investment Operations: Net Investment Income (Loss) ................ (h) (h) (0.01) 0.01 (0.03) Net Realized and Unrealized Gain (Loss) on Investment(a) ............................ 0.01 1.76 (2.54) (1.41) (2.21) ------- ------- ------- ------- ------- Total From Investment Operations ............ 0.01 1.76 (2.55) (1.40) (2.24) Less Distributions: Distribution from Net Realized Gains on Investments .............................. (0.97) (0.01) Distribution from Excess of Net Investment Income/Gains ............................. (0.06) Distribution from Capital Paid-in ........... (0.11) -------- Total Distributions ......................... (0.18) ------- ------- ------- ------- ------- Net Assets Value at End of Period .............. $ 6.37 $ 6.36 $ 5.57 $ 8.12 $ 9.52 ======= ======= ======= ======= ======= Total Investment Return(b) ..................... 0.22%(c) 31.72% (31.36)% (14.69)% (18.77)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................... 0.92%(d)(e)(f) 0.99%(e) 0.97%(e) 0.97%(e) 1.00%(e) Ratio of Net Investment Income (Loss) to Average Net Assets ....................... 0.10%(d) (0.08)% (0.14)% (0.06)% (0.37)% Portfolio Turnover Rate ..................... 52.21%(c) 220.12% 61.67% 87.90% 75.97% Net Assets End of Period (000s Omitted) ........ $30,614 $30,919 $24,249 $39,738 $26,244
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .99% for the period ending June 30, 2004, and .99%, .98%, 1.06%, and 1.05% for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (f) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (g) The Fund entered into a new sub-advisory agreement with Independence Investment LLC during the period shown. (h) Amount is less than $0.01. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP GROWTH B FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Aerospace & Defense - 2.3% Boeing Co. * ............................................. 7,000 $ 358 United Technologies Corp. * .............................. 3,600 329 ------ 687 Air Freight & Couriers - 0.5% Fedex Corp. .............................................. 1,700 139 Airlines - 0.4% JetBlue Airways Corp. * .................................. 4,200 123 Automobiles - 0.5% Harley-Davidson, Inc. * .................................. 2,500 155 Beverages - 4.2% Anheuser-Busch Cos., Inc. ................................ 2,300 124 Coca-Cola Co. * .......................................... 11,900 601 PepsiCo, Inc. * .......................................... 10,200 550 ------ 1,275 Biotechnology - 2.5% Amgen, Inc. * ............................................ 6,700 366 Biogen IDEC, Inc. * ...................................... 6,500 411 ------ 777 Building Products - 1.0% American Standard Cos., Inc. * ........................... 7,700 310 Chemicals - 0.6% Ecolab, Inc. * ........................................... 5,900 187 Commercial Services & Supplies - 1.1% Apollo Group, Inc. - Cl. A * ............................. 1,400 123 Automatic Data Processing, Inc. .......................... 5,200 218 ------ 341 Commingled Fund - 1.6% Standard and Poor's Depositary Receipts .................. 4,300 493 Communications Equipment - 6.2% Cisco Systems, Inc. * .................................... 45,600 1,081 Motorola, Inc. ........................................... 17,400 317 Qualcomm, Inc. * ......................................... 6,700 489 ------ 1,887 Computers & Peripherals - 3.4% Dell, Inc. * ............................................. 16,300 584 EMC Corp. * .............................................. 13,200 150 International Business Machines Corp. .................... 3,500 309 ------ 1,043 Diversified Financials - 8.7% American Express Co. * ................................... 8,300 426 Bear Stearns Cos., Inc. * ................................ 1,300 110 Capital One Financial Corp. .............................. 2,600 178 Chicago Mercantile Exchange * ............................ 1,000 144 Citigroup, Inc. * ........................................ 7,000 326 Federal National Mortgage Assoc. * ....................... 7,200 514 Goldman Sachs Group, Inc. ................................ 4,100 386 MBNA Corp. * ............................................. 9,200 $ 237 Merrill Lynch & Co., Inc. * .............................. 6,100 329 ------ 2,650 Electronic Equipment & Instruments - 0.4% Sanmina Corp. * .......................................... 14,000 127 Energy Equipment & Services - 1.0% Grant Prideco, Inc. * .................................... 15,900 294 Food & Drug Retailing - 0.3% Whole Foods Market, Inc. * ............................... 1,000 96 Health Care Equipment & Supplies - 2.9% Boston Scientific Corp. * ................................ 5,800 248 Guidant Corp. ............................................ 3,200 179 St. Jude Medical, Inc. * ................................. 4,000 303 Zimmer Holdings, Inc. * .................................. 1,900 167 ------ 897 Health Care Providers & Services - 2.4% Cardinal Health, Inc. * .................................. 3,500 245 DaVita, Inc. * ........................................... 5,550 171 UnitedHealth Group, Inc. * ............................... 3,300 206 Wellpoint Health Networks, Inc. * ........................ 1,100 123 ------ 745 Household Products - 2.4% Procter & Gamble Co. * ................................... 13,700 746 Industrial Conglomerates - 5.1% 3M Co. ................................................... 7,000 630 General Electric Co. * ................................... 13,800 447 Tyco International, Ltd. * ............................... 14,600 484 ------ 1,561 Insurance - 4.5% AFLAC, Inc. * ............................................ 6,000 245 American International Group, Inc. * ..................... 11,300 805 Hartford Financial Services Group, Inc. * ................ 4,900 337 ------ 1,387 Internet & Catalog Retail - 1.6% eBay, Inc. * ............................................. 3,600 331 Interactive Corp. ........................................ 5,500 166 ------ 497 Internet Software & Services - 1.4% Yahoo, Inc. * ............................................ 11,600 421 Machinery - 2.4% Danaher Corp. * .......................................... 5,200 270 Illinois Tool Works, Inc. * .............................. 2,100 201 Oshkosh Truck Corp. ...................................... 3,100 178 Pall Corp. * ............................................. 3,700 97 ------ 746 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP GROWTH B FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Media - 3.8% Comcast Corp. - Cl. A .................................... 2,700 $ 76 E.W. Scripps Co. - Cl. A ................................. 1,800 189 Lamar Advertising Co. * .................................. 3,600 156 Pixar, Inc. * ............................................ 2,600 181 The Walt Disney Co. * .................................... 9,000 229 Time Warner, Inc. * ...................................... 18,900 332 ------- 1,163 Multiline Retail - 2.3% Target Corp. * ........................................... 6,700 285 Wal-Mart Stores, Inc. * .................................. 7,800 411 ------- 696 Oil & Gas - 1.6% Devon Energy Corp. * ..................................... 2,500 165 Murphy Oil Corp. ......................................... 2,900 214 Newfield Exploration Co. * ............................... 2,000 111 ------- 490 Personal Products - 0.7% Avon Products, Inc. ...................................... 4,400 203 Pharmaceuticals - 9.8% Abbott Laboratories * .................................... 7,400 301 Johnson & Johnson ........................................ 13,400 746 Medicinesco .............................................. 9,100 278 Merck & Co., Inc. * ...................................... 6,400 304 Pfizer, Inc. * ........................................... 35,200 1,207 Sepracor, Inc. * ......................................... 3,100 164 ------- 3,000 Semiconductor Equipment & Products - 7.4% Analog Devices, Inc. * ................................... 6,200 292 Applied Materials, Inc. * ................................ 19,400 381 Intel Corp. .............................................. 44,800 1,236 RF Micro Devices, Inc. * ................................. 14,200 106 Texas Instruments, Inc. * ................................ 9,700 235 ------- 2,250 Software - 8.8% Electronic Arts, Inc. * .................................. 7,200 393 Microsoft Corp. * ........................................ 49,200 1,405 Oracle Corp. * ........................................... 41,200 492 Take Two Interactive Software * .......................... 7,000 214 Veritas Software Corp. * ................................. 7,000 194 ------- 2,698 Specialty Retail - 5.6% Advanced Auto Parts * .................................... 4,000 177 Best Buy Co., Inc. * ..................................... 4,200 213 CDW Corp. ................................................ 7,200 459 Home Depot, Inc. * ....................................... 18,700 658 TJX Cos., Inc. * ......................................... 8,600 208 ------- 1,715 Textiles & Apparel - 0.6% Coach, Inc. * ............................................ 4,200 $ 190 Tobacco - 1.1% Altria Group, Inc. ....................................... 6,700 335 ------- TOTAL COMMON STOCK- (Cost $28,515) 99.1% 30,324 Par Value (000's) ------- INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 2.3% State Street Navigator Securities Lending Portfolio .... $ 715 715 SHORT-TERM INVESTMENTS - 1.7% Investment in joint trading account 1.344% due 07/01/04 (Cost $534) .......................................... 534 534 ------ ------- TOTAL INVESTMENTS- (Cost $29,764) 103.1% 31,573 Payables, less cash and receivables- (3.1)% (959) ------ ------- NET ASSETS- 100.0% $30,614 ====== ======= * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Large Cap Growth B Fund, (formerly Large Cap Aggressive Growth), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $704 $715 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $70 1.53% $- 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $5,580 and $9,628 which expire in 2009 and 2010, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $500 Million and Excess Over First $500 Million $1 Billion $1 Billion ------------------ ---------------- ----------- 0.80% 0.75% 0.70% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $10 to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $8. As of December 15, 2003, John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, with respect to the Fund. Independence Investment LLC, is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. 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 period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $16,024 $16,310 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $28,642 $2,005 $(44) $1,961 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term- Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- -------------- ------------- -------------- $-- $-- $15,208 $1,961 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $822 $-- $3,255 2002 -- -- -- Included in the Fund's 2003 distributions from ordinary income is $822 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. NOTE E-OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Large Cap Growth B Fund, a new 90% 5% 5% Sub-Management Agreement among the Trust, John Hancock and Independence Investment LLC ("Independence Investment") to replace the sub-manager and to decrease the sub-investment managment fee paid by John Hancock for management of this Fund. Inception: May 1, 1996 -------------------------------------------------------------------------------- Large Cap Value Fund T. Rowe Price Associates, Inc. Brian C. Rogers -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 4.51%, outperforming its benchmark, the Russell 1000 Value Index. Relative to Morningstar peers, the Fund has an above average rating of 5 with a below average risk profile. . The Fund outperformed its benchmark primarily due to stock selection decisions broadly across sectors, while sector allocation exposures detracted slightly. . The Fund's exposure to the energy sector was the largest contributor to absolute performance. . The Fund employs a bottom-up, value-oriented investment approach, focusing on companies with an above-average dividend yield and low P/E ratios. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- General Electric Co. 2.2% Exxon Mobil Corp. 2.1% ChevronTexaco Corp. 1.9% Bank of America Corp. 1.8% Honeywell International, Inc. 1.8% Amerada Hess Corp. 1.8% Merck & Co., Inc. 1.8% Bristol-Myers Squibb Co. 1.5% Royal Dutch Petroleum Co. 1.5% Bank One Corp. 1.5% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Large Cap Russell 1000(R) Value Fund Value Index ---------- --------------- YTD/3/ 4.51% 3.93% 1 Year 19.68 21.13 3 Years 4.03 2.96 5 Years 3.70 1.87 Since Inception (5/1/96) 9.82 10.26 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Large Value MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . ***** (VL/VUL) . ***** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 19% Consumer Discretionary 18% Industrials 14% Energy 11% Health Care 10% Consumer Staples 6% Materials 7% Telecommunication Services 5% Utilities 4% Information Technology 4% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 594 VL/VUL subaccounts and 1,129 VA subaccounts in the Morningstar Large Value category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted) ASSETS Long term investments at cost (including $10,347 of securities loaned (Note B)) ................................................. $355,623 Net unrealized appreciation of investments .......................... 36,960 Short-term investments at value ..................................... 26,956 -------- Total investments ............................................. 419,539 Receivable for: Investments sold ................................................. 668 Interest ......................................................... 51 Dividends ........................................................ 587 Foreign dividend tax withholdings reclaim ........................ 13 -------- Total assets ........................................................ 420,858 -------- LIABILITIES Payables for: Investments purchased ............................................ 43 Collateral for securities on loan ................................ 10,519 Accrued operating expenses ....................................... 110 -------- Total liabilities ................................................... 10,672 -------- Net assets .......................................................... $410,186 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 27,320 -------- Net asset value per share ........................................... $ 15.01 ======== Composition of net assets: Capital paid-in .................................................. $367,857 Accumulated net realized gain on investments, futures and foreign currency transactions ................................. 5,181 Undistributed net investment income .............................. 188 Net unrealized appreciation of investments ....................... 36,960 -------- Net assets .......................................................... $410,186 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 162 Dividends (net of foreign withholding tax of $43) ................ 4,168 Securities lending ............................................... 13 ------- Total investment income ............................................. 4,343 ------- EXPENSES Investment advisory fee .......................................... 1,474 Auditors fees .................................................... 23 Custodian fees ................................................... 55 Fidelity Bond fees ............................................... 1 Legal fees ....................................................... 23 Printing & mailing fees .......................................... 31 Trustees' fees ................................................... 6 Other fees ....................................................... 7 ------- Total expenses ...................................................... 1,620 Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (27) ------- Net expenses ........................................................ 1,593 ------- Net investment income ............................................... 2,750 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 5,716 Foreign currency transactions ................................. (28) Change in unrealized appreciation on: Investments ................................................... 8,422 ------- Net realized and unrealized gain .................................... 14,110 ------- Net increase in net assets resulting from operations ................ $16,860 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE IN NET ASSETS From operations Net investment income ............................................................ $ 2,750 $ 5,467 Net realized gain ................................................................ 5,688 5,115 Change in net unrealized appreciation ............................................ 8,422 61,944 -------- -------- Net increase in net assets resulting from operations .......................... 16,860 72,526 Distributions to shareholders from: Net investment income ............................................................ (2,685) (5,790) Realized gains ................................................................... (5,006) -------- -------- Decrease in net assets resulting from distributions ........................... (2,685) (10,796) From fund share transactions: Proceeds from shares sold ........................................................ 79,633 120,218 Distributions reinvested ......................................................... 2,685 10,796 Payment for shares redeemed ...................................................... (51,870) (87,322) -------- -------- Increase in net assets from fund share transactions ........................... 30,448 43,692 -------- -------- NET INCREASE IN NET ASSETS .......................................................... 44,623 105,422 NET ASSETS Beginning of Period .............................................................. 365,563 260,141 -------- -------- End of Period (including undistributed net investment income of $188 and $123, respectively) ................................................................. $410,186 $365,563 ======== ======== Analysis of fund share transactions: Sold ............................................................................. 5,414 9,472 Reinvested ....................................................................... 182 801 Redeemed ......................................................................... (3,553) (6,839) -------- -------- Net increase in fund shares outstanding ............................................. 2,043 3,434 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each fund share of beneficial interest outstanding throughout the year end indicated:
Large Cap Value Fund -------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, --------------------------------------------- 2004 2003 2002 2001 2000 ------------ -------- -------- -------- -------- Net Assets Value at Beginning of Period .................. $ 14.46 $ 11.91 $ 14.15 $ 14.38 $ 13.49 Income from Investment Operations: Net Investment Income ................................. 0.10 0.23 0.22 0.22 0.27 Net Realized and Unrealized Gain (Loss) on Investment(a) ...................................... 0.55 2.76 (2.07) (0.05) 1.45 -------- -------- -------- -------- -------- Total From Investment Operations ...................... 0.65 2.99 (1.85) 0.17 1.72 Less Distributions: Distribution from Net Investment Income ............... (0.10) (0.24) (0.22) (0.22) (0.28) Distribution from Net Realized Gains on Investments ........................................ (0.20) (0.17) (0.18) (0.53) Distribution from Excess of Net Investment Income/ Gains .............................................. (0.01) Distribution from Capital Paid-in ..................... (0.01) -------- -------- -------- -------- -------- Total Distributions ................................... (0.10) (0.44) (0.39) (0.40) (0.83) -------- -------- -------- -------- -------- Net Assets Value at End of Period ........................ $ 15.01 $ 14.46 $ 11.91 $ 14.15 $ 14.38 ======== ======== ======== ======== ======== Total Investment Return(b) ............................... 4.51%(d) 25.51% (13.24)% 1.25% 12.97% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................................. 0.83%(c)(e) 0.82%(c) 0.83% 0.82% 0.78% Ratio of Net Investment Income to Average Net Assets ............................................. 1.41%(e) 1.83% 1.67% 1.54% 2.04% Portfolio Turnover Rate ............................... 11.84%(d) 17.73% 16.04% 18.19% 42.12% Net Assets End of Period (000s Omitted) .................. $410,186 $365,563 $260,141 $260,646 $204,535
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (d) Not annualized. (e) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.9% Lockheed Martin Corp. ................................... 77,700 $ 4,047 Raytheon Co. * .......................................... 115,100 4,117 Rockwell Collins, Inc. * ................................ 113,300 3,775 ------- 11,939 Automobiles - 0.4% Ford Motor Co. .......................................... 93,000 1,455 Banks - 7.1% Bank of America Corp. * ................................. 83,962 7,105 Bank of Ireland * ....................................... 40,900 546 Bank One Corp. * ........................................ 113,300 5,778 Mellon Financial Corp. * ................................ 108,200 3,174 Mercantile Bankshares Corp. ............................. 48,000 2,247 National City Corp. * ................................... 56,200 1,968 Northern Trust Corp. .................................... 40,800 1,725 Suntrust Banks, Inc. * .................................. 52,200 3,392 Wells Fargo & Co. * ..................................... 35,200 2,014 Wilmington Trust Corp. * ................................ 27,100 1,009 ------- 28,958 Biotechnology - 0.6% MedImmune, Inc. * ....................................... 102,200 2,391 Chemicals - 3.2% Dow Chemical Co. * ...................................... 97,100 3,952 E.I. du Pont de Nemours & Co. * ......................... 79,100 3,514 Great Lakes Chemical Corp. .............................. 71,700 1,940 Hercules, Inc. * ........................................ 123,300 1,503 International Flavors & Fragrances, Inc. * .............. 63,700 2,382 ------- 13,291 Commercial Services & Supplies - 1.4% Dun & Bradstreet Corp. .................................. 33,700 1,817 Waste Management, Inc. * ................................ 122,090 3,742 ------- 5,559 Communications Equipment - 1.7% Lucent Technologies, Inc. * ............................. 305,600 1,155 Motorola, Inc. .......................................... 210,500 3,842 Nokia Oyj - ADR ......................................... 133,700 1,944 ------- 6,941 Computers & Peripherals - 1.0% Hewlett-Packard Co. * ................................... 192,788 4,068 Construction Materials - 0.2% Vulcan Materials Co. * .................................. 13,400 637 Diversified Financials - 4.9% American Express Co. * .................................. 80,400 4,131 Charles Schwab Corp. * .................................. 120,500 1,158 Citigroup, Inc. * ....................................... 60,466 2,812 Federal National Mortgage Assoc. * ...................... 42,900 3,061 Federated Investments, Inc. - Cl. B ..................... 26,900 816 Janus Capgroup, Inc. .................................... 39,900 658 JP Morgan Chase & Co. ................................... 86,930 3,370 Morgan Stanley, Dean Witter, Discover & Co. ............. 80,300 $ 4,238 ------- 20,244 Diversified Telecommunication Services - 5.2% Alltel Corp. * .......................................... 73,800 3,736 AT&T Corp. * ............................................ 101,920 1,491 Qwest Communications International, Inc. ................ 820,100 2,944 SBC Communications, Inc. * .............................. 151,155 3,666 Sprint Corp. * .......................................... 214,700 3,779 Verizon Communications * ................................ 158,616 5,740 ------- 21,356 Electric Utilities - 2.3% Constellation Energy Group, Inc. * ...................... 77,300 2,930 Firstenergy Corp. * ..................................... 67,700 2,533 Teco Energy, Inc. * ..................................... 40,400 484 TXU Corp. ............................................... 85,400 3,459 ------- 9,406 Electrical Equipment - 2.4% Cooper Industries, Ltd. - Cl. A * ....................... 80,300 4,771 Emerson Electric Co. .................................... 29,400 1,868 Hubbell, Inc. - Cl. B ................................... 13,200 617 Rockwell International Corp. * .......................... 72,500 2,719 ------- 9,975 Energy Equipment & Services - 0.9% Baker Hughes, Inc. * .................................... 31,000 1,167 Schlumberger, Ltd. * .................................... 38,200 2,426 ------- 3,593 Food & Drug Retailing - 0.0% Winn-Dixie Stores, Inc. * ............................... 12,200 88 Food Products - 2.7% Campbell Soup Co. * ..................................... 132,600 3,564 ConAgra, Inc. ........................................... 52,900 1,433 General Mills, Inc. * ................................... 66,900 3,180 Unilever NV * ........................................... 40,700 2,781 ------- 10,958 Gas Utilities - 0.2% El Paso Corp. ........................................... 119,900 945 Health Care Equipment & Supplies - 1.0% Baxter International, Inc. .............................. 120,700 4,165 Health Care Providers & Services - 0.9% CIGNA Corp. * ........................................... 52,800 3,633 Hotels Restaurants & Leisure - 2.5% Hilton Hotels Corp. * ................................... 147,700 2,756 McDonald'srp. * ......................................... 147,400 3,833 Starwood Hotels & Resorts Worldwide, Inc. * ............................................... 79,200 3,552 ------- 10,141 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Household Durables - 2.0% Fortune Brands, Inc. * .................................. 48,100 $ 3,628 Newell Rubbermaid, Inc. ................................. 187,400 4,404 ------- 8,032 Household Products - 2.1% Clorox Co. * ............................................ 43,000 2,313 Colgate-Palmolive Co. ................................... 41,000 2,396 Kimberly-Clark Corp. * .................................. 59,100 3,894 ------- 8,603 Industrial Conglomerates - 3.8% General Electric Co. * .................................. 267,400 8,664 Honeywell International, Inc. ........................... 191,700 7,022 ------- 15,686 Insurance - 5.9% Chubb Corp. * ........................................... 42,900 2,925 Lincoln National Corp. * ................................ 75,331 3,559 Marsh & McLennan Cos., Inc. * ........................... 118,900 5,396 Safeco Corp. * .......................................... 91,900 4,044 St. Paul Cos., Inc. ..................................... 105,836 4,291 UnumProvident Corp. * ................................... 190,500 3,029 Unumprovident Corp. ..................................... 39,700 979 ------- 24,223 Leisure Equipment & Products - 2.0% Eastman Kodak Co. * ..................................... 137,600 3,712 Hasbro, Inc. * .......................................... 58,400 1,110 Mattel, Inc. * .......................................... 186,700 3,407 ------- 8,229 Machinery - 0.7% Pall Corp. * ............................................ 116,400 3,049 Media - 7.7% Comcast Corp. - Cl. A ................................... 161,081 4,515 Dow Jones & Co., Inc. * ................................. 91,300 4,117 Knight-Ridder, Inc. * ................................... 46,400 3,341 New York Times Co. - Cl. A * ............................ 107,400 4,802 The Walt Disney Co. * ................................... 187,200 4,772 Time Warner, Inc. * ..................................... 292,900 5,149 Viacom, Inc. - Cl. B * .................................. 133,900 4,783 ------- 31,479 Metals & Mining - 1.2% Alcoa, Inc. * ........................................... 53,900 1,780 Nucor Corp. ............................................. 41,500 3,186 ------- 4,966 Multi-Utilities - 1.6% Duke Energy Co. ......................................... 187,300 3,800 NiSource, Inc. * ........................................ 143,200 2,953 ------- 6,753 Multiline Retail - 0.5% May Department Stores Co. * ............................. 74,650 $ 2,052 Oil & Gas - 9.4% Amerada Hess Corp. * .................................... 87,900 6,961 Anadarko Petroleum Corp. * .............................. 52,600 3,082 BP Amoco plc - ADR ...................................... 80,332 4,303 ChevronTexaco Corp. * ................................... 79,213 7,455 Exxon Mobil Corp. * ..................................... 183,234 8,137 Marathon Oil Corp. * .................................... 27,200 1,029 Royal Dutch Petroleum Co. * ............................. 114,100 5,896 Unocal Corp. * .......................................... 39,700 1,509 ------- 38,372 Paper & Forest Products - 1.8% International Paper Co. * ............................... 105,570 4,719 MeadWestvaco Corp. * .................................... 87,100 2,560 ------- 7,279 Pharmaceuticals - 7.1% Abbott Laboratories * ................................... 60,200 2,454 Bristol-Myers Squibb Co. * .............................. 241,000 5,905 Johnson & Johnson ....................................... 102,300 5,698 Merck & Co., Inc. * ..................................... 145,400 6,906 Schering-Plough Corp. * ................................. 168,400 3,112 Wyeth * ................................................. 136,500 4,936 ------- 29,011 Real Estate Investment Trust - 0.5% Simon Property Group, Inc. .............................. 40,600 2,088 Road & Rail - 2.0% Norfolk Southern Corp. * ................................ 113,600 3,012 Union Pacific Corp. ..................................... 89,500 5,321 ------- 8,333 Semiconductor Equipment & Products - 0.4% Agere Systems, Inc. - Cl. A * ........................... 46,016 106 Texas Instruments, Inc. * ............................... 68,600 1,659 ------- 1,765 Software - 1.1% Microsoft Corp. * ....................................... 160,400 4,581 Specialty Retail - 1.3% Home Depot, Inc. * ...................................... 106,100 3,735 Toys "R" Us, Inc. * ..................................... 114,100 1,817 ------- 5,552 Tobacco - 1.2% Altria Group, Inc. ...................................... 47,100 2,357 UST, Inc. * ............................................. 71,000 2,556 ------- 4,913 Trading Companies & Distributors - 1.3% Genuine Parts Co. * ..................................... 95,600 3,793 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------ -------- (000's) COMMON STOCK - Continued Trading Companies & Distributors - Continued W.W. Grainger, Inc. * ................................... 27,200 $ 1,564 ------- 5,357 ------- TOTAL COMMON STOCK- (Cost $353,611) 95.1% 390,066 PREFERRED STOCK Automobiles - 0.2% Ford Motor Co. Capital Trust II ......................... 15 794 ------- TOTAL PREFERRED STOCK- (Cost $725) 0.2% 794 Par Value ------- (000's) PUBLICLY-TRADED BONDS Communications Equipment - 0.4% Lucent Technologies, Inc. - Sub. Debs. 8.0% due 08/01/31 ................................... $ 1,535 1,723 --------- TOTAL PUBLICLY-TRADED BONDS- (Cost $1,287) 0.4% 1,723 ------- --------- TOTAL LONG-TERM INVESTMENTS- (Cost $355,623) 95.7% 392,583 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 2.6% State Street Navigator Securities Lending Portfolio ........................................ 10,519 10,519 SHORT-TERM INVESTMENTS - 4.0% Investment in joint trading account 1.344% due 07/01/04 (Cost $16,437) ..................................... 16,437 16,437 ------- --------- TOTAL INVESTMENTS- (Cost $382,579) 102.3% 419,539 Payables, less cash and receivables- (2.3)% (9,353) ------- --------- NET ASSETS- 100.0% $ 410,186 ======= ========= * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Large Cap Value Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximate market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For the period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. For the period ended June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $10,347 $10,519 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 June 30, 2004, the Fund had no open forward foreign currecny contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $43. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the rate of 0.75% on an annual basis of the Fund's net assets. In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $27. John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price Associates, Inc., and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $68,820 $44,681 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $349,030 $46,828 $(19,785) $27,043 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and to certain distributions received from investments in Real Estate Investment Trusts. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed ordinary net long-term Capital Loss Net Unrealized Income capital gain carryforwards Appreciation ------------- ------------- ------------- -------------- $733 $467 $-- $27,043 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $8,294 $2,502 $-- 2002 4,351 3,600 -- Inception: March 29, 1986 -------------------------------------------------------------------------------- Managed Fund Independence Investment LLC J. Forelli/J. Shallcross Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- . The Fund employs a multi-manager approach with two sub-advisers independently managing a portion of the Fund and each using distinct investment strategies. . At quarter-end, Independence managed 79% and Capital Guardian managed 21% of the Fund's assets. Fund Commentary . Year-to-date, the Fund returned 1.77%, underperforming its custom benchmark. Relative to Morningstar peers, the Fund has a below average rating of 2 with an above average risk profile. Independence . Underperformed its custom benchmark primarily due to unfavorable stock selection decisions. Within bonds, security selection and duration / curve exposures benefited performance. . Manager has a target mix of 60% stocks and 40% bonds and selects securities using fundamental research and quantitative portfolio construction. Capital Guardian . Outperformed its custom benchmark primarily due to an overweight to equities and favorable stock selection. Within bonds, strong security selection decisions and duration / curve exposures benefited performance. . Manager has a target mix of 70% stocks and 30% bonds and selects securities using fundamental research and a multiple-manager system with the fund managed by several portfolio managers and analysts. Inception: March 29, 1986 -------------------------------------------------------------------------------- Managed Fund Independence Investment LLC J. Forelli/J. Shallcross Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ Federal National Mortgage Assoc. 10.3% U.S. Treasury 5.3% General Electric Co. 2.5% Microsoft Corp. 1.9% Citigroup, Inc. 1.9% Exxon Mobil Corp. 1.8% Federal Home Loan Mortgage Corp. 1.5% Intel Corp. 1.4% Pfizer, Inc. 1.2% Bank of America Corp. 1.2% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Managed Managed Fund Benchmark/4/ ------- ------------ YTD/3/ 1.77% 2.12% 1 Year 11.76 11.33 3 Years 1.28 2.49 5 Years 1.05 1.76 10 Years 8.58 9.77 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Moderate Allocation MORNINGSTAR RISK/1/: . Above Average (VL/VUL) . Above Average (VA) MORNINGSTAR RATING/1/: . ** (VL/VUL) . ** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 21% Information Technology 18% Health Care 15% Consumer Discretionary 12% Industrials 12% Consumer Staples 9% Energy 7% Materials 3% Telecommunication Services 3% Utilities 2% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 441 VL/VUL subaccounts and 740 VA subaccounts in the Morningstar Moderate Allocation category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ The Managed Benchmark represents 50% S&P 500/50% Lehman Brothers Aggregate Bond from April 1986 to December 1997, then 60% S&P 500/40% Lehman Brothers Aggregate Bond from 1998 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Managed Fund (000's Omitted) ASSETS Long term investments at cost (including $156,092 of securities loaned (Note B)) ................................ $1,884,692 Net unrealized appreciation of investments ....................... 162,062 Short-term investments at value .................................. 301,234 ---------- Total investments .......................................... 2,347,988 Cash ............................................................. 6,895 Receivable for: Investments sold .............................................. 13,986 Interest ...................................................... 6,514 Dividends ..................................................... 1,201 Other receivables ............................................. 2 ---------- Total assets ..................................................... 2,376,586 ---------- LIABILITIES Payables for: Investments purchased ......................................... 148,325 Foreign dividend tax withholding .............................. 2 Collateral for securities on loan ............................. 158,706 Accrued operating expenses .................................... 694 Directed broker commission recapture .......................... 8 Other payables ................................................ 1 ---------- Total liabilities ................................................ 307,736 ---------- Net assets ....................................................... $2,068,850 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ............................................ 160,065 ---------- Net asset value per share ........................................ $ 12.93 ========== Composition of net assets: Capital paid-in ............................................... $2,053,627 Accumulated net realized loss on investments, futures and foreign currency transactions .................. (146,975) Undistributed net investment income ........................... 136 Net unrealized appreciation of investments .................... 162,062 ---------- Net assets ....................................................... $2,068,850 ========== INVESTMENT INCOME Interest ................................................... $ 13,801 Dividends (net of foreign withholding tax of $61) ................................................. 9,645 Securities lending ......................................... 83 ---------- Total investment income .......................................... 23,529 ========== EXPENSES Investment advisory fee .................................... 7,024 Auditors fees .............................................. 135 Custodian fees ............................................. 419 Fidelity Bond fees ......................................... 2 Legal fees ................................................. 131 Printing & mailing fees .................................... 174 Trustees' fees ............................................. 51 Other fees ................................................. 29 ---------- Total expenses ................................................... 7,965 Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................... (255) ---------- Net expenses ..................................................... 7,710 ---------- Net investment income ............................................ 15,819 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................ 67,146 Financial futures contracts ................................ (198) Change in unrealized depreciation on investments ............................................. (46,400) ---------- Net realized and unrealized gain ................................. 20,548 ---------- Net increase in net assets resulting from operations .................................................... $ 36,367 ========== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Managed Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .................................... $ 15,819 $ 34,274 Net realized gain (loss) ................................. 66,948 (6,738) Change in net unrealized appreciation (depreciation) ..... (46,400) 314,071 ---------- ---------- Net increase in net assets resulting from operations .. 36,367 341,607 Distributions to shareholders from: Net investment income .................................... (15,683) (63,465) Realized gains ........................................... (8,662) ---------- ---------- Decrease in net assets resulting from distributions ... (15,683) (72,127) From fund share transactions: Proceeds from shares sold ................................ 96,222 80,229 Distributions reinvested ................................. 15,683 72,127 Payment for shares redeemed .............................. (134,484) (287,955) ---------- ---------- Decrease in net assets from fund share transactions ... (22,579) (135,599) ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ....................... (1,895) 133,881 NET ASSETS Beginning of Period ...................................... 2,070,745 1,936,864 ---------- ---------- End of Period (including undistributed net investment income of $136 and $0, respectively) .................. $2,068,850 $2,070,745 ========== ========== Analysis of fund share transactions: Sold ..................................................... 7,424 6,753 Reinvested ............................................... 1,214 5,842 Redeemed ................................................. (10,395) (24,528) ---------- ---------- Decrease in fund shares outstanding ......................... (1,757) (11,933) ========== ==========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each fund share of beneficial interest outstanding throughout the year end indicated:
Managed Fund --------------------------------------------------------------------------- Unaudited Period Year Ended December 31, Ended June 30, -------------------------------------------------------- 2004 2003 2002 2001 2000(c) ---------------- ------------- ----------- ------------- ---------- Net Assets Value at Beginning of Period .................................... $ 12.80 $ 11.15 $ 13.08 $ 13.82 $ 15.45 Income from Investment Operations: Net Investment Income .................. 0.10 0.21 0.21 0.28 0.44 Net Realized and Unrealized Gain (Loss) on Investment(a) ............. 0.13 1.89 (1.93) (0.67) (0.45) ---------- ---------- ---------- ---------- ---------- Total From Investment Operations ....... 0.23 2.10 (1.72) (0.39) (0.01) Less Distributions: Distribution from Net Investment Income .............................. (0.10) (0.39) (0.21) (0.28) (0.44) Distribution from Net Realized Gains on Investments ...................... (0.06) (0.07) (1.18) ---------- ---------- ---------- ---------- ---------- Total Distributions .................... (0.10) (0.45) (0.21) (0.35) (1.62) ---------- ---------- ---------- ---------- ---------- Net Assets Value at End of Period ............ $ 12.93 $ 12.80 $ 11.15 $ 13.08 $ 13.82 ========== ========== ========== ========== ========== Total Investment Return(b) ................... 1.77%(g) 19.00% (13.23)% (2.84)% 0.03% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .......................... 0.77%(f)(h) 0.74%(f) 0.76% 0.73% 0.46% Ratio of Net Investment Income to Average Net Assets .................. 1.54%(h) 1.75% 1.77% 2.10%(d) 2.86% Portfolio Turnover Rate ................ 145.00%(g) 216.32% 234.62% 190.73%(e) 210.35% Net Assets End of Period (000s Omitted) ...... $2,068,850 $2,070,745 $1,936,864 $2,526,703 $2,995,794
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Capital Guardian Trust Company during the period shown. (d) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 2.29% for the years ended December 31, 2001. (e) Excludes merger activity. (f) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (g) Not annualized. (h) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- -------- -------- (000's) COMMON STOCK Aerospace & Defense - 1.5% Boeing Co. (US) ....................................... $278,100 $ 14,208 Lockheed Martin Corp. (US) ............................ 24,200 1,260 Northrop Grumman Corp. (US) ........................... 35,200 1,890 Raytheon Co. (US) ..................................... 12,700 454 United Technologies Corp. (US) ........................ 136,200 12,460 -------- 30,272 Air Freight & Couriers - 0.3% Fedex Corp. (US) ...................................... 71,200 5,816 Auto Components - 0.2% Magna International, Inc. - Cl. A (US) ................ 50,400 4,293 Automobiles - 0.7% General Motors Corp. (US) ............................. 204,400 9,523 Harley-Davidson, Inc. (US) ............................ 72,700 4,503 -------- 14,026 Banks - 2.9% Bank of America Corp. (US) ............................ 235,700 19,945 Bank One Corp. (US) ................................... 367,900 18,763 Golden West Financial Corp. (US) ...................... 52,000 5,530 JP Morgan Chase & Co. (US) ............................ 302,400 11,724 SouthTrust Corp. (US) ................................. 97,200 3,772 -------- 59,734 Beverages - 2.0% Anheuser-Busch Cos., Inc. (US) ........................ 310,700 16,778 Coca-Cola Co. (US) .................................... 177,900 8,980 Pepsi Bottling Group, Inc. (US) ....................... 53,000 1,619 PepsiCo, Inc. (US) .................................... 260,800 14,052 -------- 41,429 Biotechnology - 1.0% Amgen, Inc. (US) ...................................... 170,300 9,293 Biogen IDEC, Inc. (US) ................................ 99,915 6,320 Genetech, Inc. (US) ................................... 48,700 2,737 ImClone Systems, Inc. (US) ............................ 23,000 1,973 -------- 20,323 Chemicals - 1.0% Air Products & Chemicals, Inc. (US) ................... 52,700 2,764 Dow Chemical Co. (US) ................................. 219,000 8,914 E.I. du Pont de Nemours & Co. (US) .................... 76,700 3,407 Rohm & Haas Co. (US) .................................. 114,100 4,744 -------- 19,829 Commercial Services & Supplies - 0.5% Automatic Data Processing, Inc. (US) 129,800 5,436 Checkfree Corp. (US) .................................. 28,700 861 Monster Worldwide, Inc. (US) .......................... 16,200 417 Robert Half International, Inc. (US) .................. 25,400 756 Sabre Group Holdings, Inc. (US) ....................... $ 87,800 $ 2,433 -------- 9,903 Communications Equipment - 2.2% Cisco Systems, Inc. (US) .............................. 789,500 18,711 JDS Uniphase Corp. (US) ............................... 294,000 1,114 Lucent Technologies, Inc. (US) ........................ 724,700 2,740 Motorola, Inc. (US) ................................... 613,800 11,202 Polycom, Inc. (US) .................................... 42,400 950 Qualcomm, Inc. (US) ................................... 136,200 9,940 -------- 44,657 Computers & Peripherals - 1.8% Apple Computer, Inc. (US) ............................. 14,900 485 Dell, Inc. (US) ....................................... 367,000 13,146 EMC Corp. (US) ........................................ 420,100 4,789 International Business Machines Corp. (US) ............ 185,400 16,343 Lexmark International Group, Inc. - Cl. A (US) ........ 13,500 1,303 Seagate Technology (US) ............................... 60,800 877 Sun Microsystems, Inc. (US) ........................... 184,500 801 -------- 37,744 Construction & Engineering - 0.6% American Standard Cos., Inc. (US) ..................... 190,200 7,667 Fluor Corp. (US) ...................................... 81,300 3,875 -------- 11,542 Construction Materials - 0.2% United States Steel Corp. (US) ........................ 105,300 3,698 Credit Card - 0.4% MBNA Corp. (US) ....................................... 321,300 8,286 Diversified Financials - 5.3% AmeriCredit Corp. (US) ................................ 63,900 1,248 Capital One Financial Corp. (US) ...................... 106,700 7,296 CIT Group, Inc. (US) .................................. 141,400 5,414 Citigroup, Inc. (US) .................................. 691,500 32,155 Goldman Sachs Group, Inc. (US) ........................ 109,500 10,310 Merrill Lynch & Co., Inc. (US) ........................ 149,700 8,081 Morgan Stanley, Dean Witter, Discover & Co. (US) ...... 152,600 8,053 SLM Corp. (US) ........................................ 401,900 16,257 State Street Corp. (US) ............................... 62,800 3,080 Washington Mutual, Inc. (US) .......................... 229,900 8,883 Wells Fargo & Co. (US) ................................ 143,100 8,190 -------- 108,967 Diversified Telecommunication Services - 1.5% BellSouth Corp. (US) .................................. 242,700 6,364 Sprint Corp. (US) ..................................... 669,550 11,784 Verizon Communications (US) ........................... 384,700 13,922 -------- 32,070 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- ---------- ------- (000's) COMMON STOCK - Continued Electric Utilities - 0.8% AES Corp. (US) ....................................... $ 302,100 $ 3,000 American Electric Power Co. (US) ..................... 53,700 1,718 Constellation Energy Group, Inc. (US) ................ 69,800 2,645 Edison International (US) ............................ 118,600 3,033 PG & E Corp. (US) .................................... 97,200 2,716 TXU Corp. (US) ....................................... 84,600 3,427 ------- 16,539 Electrical Equipment - 0.5% American Power Conversion (US) ....................... 150,200 2,951 Rockwell International Corp. (US) .................... 189,200 7,097 ------- 10,048 Electronic Equipment & Instruments - 0.4% Agilent Technologies, Inc. (US) ...................... 33,000 967 Avnet, Inc. (US) ..................................... 64,500 1,464 Flextronics International, Ltd. (US) ................. 37,000 590 Jabil Circuit, Inc. (US) ............................. 49,200 1,239 Sanmina Corp. (US) ................................... 460,900 4,194 ------- 8,454 Energy Equipment & Services - 0.9% Baker Hughes, Inc. (US) .............................. 81,200 3,057 BJ Services Co. (US) ................................. 63,600 2,916 National-Oilwell, Inc. (US) .......................... 88,600 2,790 Schlumberger, Ltd. (US) .............................. 81,700 5,189 Transocean Sedco Forex, Inc. (US) .................... 48,200 1,395 Weatherford Bermuda (US) ............................. 57,300 2,577 ------- 17,924 Food & Drug Retailing - 0.2% Sysco Corp. (US) ..................................... 129,800 4,656 Food Products - 0.3% Campbell Soup Co. (US) ............................... 177,700 4,777 Kraft Foods, Inc. - Cl. A (US) ....................... 47,200 1,495 ------- 6,272 Gas Utilities - 0.3% Kinder Morgan Management LLC (US) .................... 85,248 3,135 Kinder Morgan, Inc. (US) ............................. 70 4 Sempra Energy (US) ................................... 75,200 2,589 Williams Cos., Inc. (US) ............................. 109,900 1,308 ------- 7,036 Health Care Equipment & Supplies - 1.2% Applera Corporation - Applied Biosystems Group (US) ............................. 149,700 3,256 Becton, Dickinson & Co. (US) ......................... 30,800 1,595 Boston Scientific Corp. (US) ......................... 79,600 3,407 Guidant Corp. (US) ................................... 44,700 2,498 Medtronic, Inc. (US) ................................. 48,600 2,368 St. Jude Medical, Inc. (US) .......................... 71,900 5,439 Zimmer Holdings, Inc. (US) ........................... $ 84,200 $ 7,427 ------- 25,990 Health Care Providers & Services - 1.3% Amerisource Bergen Corp. (US) ........................ 53,100 3,174 Anthem, Inc. (US) .................................... 93,600 8,383 CIGNA Corp. (US) ..................................... 9,500 654 DaVita, Inc. (US) .................................... 31,500 971 HCA-The Healthcare Corp. (US) ........................ 9,000 374 Lincare Holdings, Inc. (US) .......................... 76,200 2,504 PacifiCare Health Systems, Inc. (US) ................. 29,400 1,136 Triad Hospitals, Inc. (US) ........................... 23,600 879 UnitedHealth Group, Inc. (US) ........................ 138,700 8,634 ------- 26,709 Hotels Restaurants & Leisure - 0.6% Carnival Corp. (US) .................................. 22,100 1,039 Hilton Hotels Corp. (US) ............................. 187,600 3,500 McDonald's Corp. (US) ................................ 38,300 996 Starwood Hotels & Resorts Worldwide, Inc. (US) ....... 20,400 915 Yum Brands, Inc. (US) ................................ 141,000 5,248 ------- 11,698 Household Durables - 0.5% Centex Corp. (US) .................................... 86,500 3,957 Leggett & Platt, Inc. (US) ........................... 129,800 3,467 Maytag Corp. (US) .................................... 110,300 2,704 ------- 10,128 Household Products - 0.6% Kimberly-Clark Corp. (US) ............................ 21,400 1,410 Procter & Gamble Co. (US) ............................ 221,200 12,042 ------- 13,452 Industrial Conglomerates - 3.6% 3M Co. (US) .......................................... 140,500 12,646 Canadian Pacific Railway (US) ........................ 1,100 27 General Electric Co. (US) ............................ 1,304,000 42,250 Honeywell International, Inc. (US) ................... 116,100 4,253 Siemens AG - ADR (US) ................................ 11,500 834 Tyco International, Ltd. (US) ........................ 472,300 15,652 ------- 75,662 Insurance - 3.8% Allstate Corp. (US) .................................. 168,400 7,839 American International Group, Inc. (US) .............. 303,200 21,612 Assurant, Inc. (US) .................................. 21,700 573 Chubb Corp. (US) ..................................... 19,100 1,302 Cincinnati Financial Corp. (US) ...................... 22,785 992 Everest Re Group, Ltd. (US) .......................... 42,600 3,423 Hartford Financial Services Group, Inc. (US) ......... 233,000 16,016 Lincoln National Corp. (US) .......................... 81,800 3,865 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- ---------- -------- (000's) COMMON STOCK - Continued Insurance - Continued Prudential Financial, Inc. (US) ..................... $ 259,800 $ 12,073 St. Paul Cos., Inc. (US) ............................ 125,000 5,068 The PMI Group, Inc. (US) ............................ 70,000 3,046 XL Capital, Ltd. - Cl. A (US) ....................... 34,500 2,603 -------- 78,412 Internet & Catalog Retail - 0.4% Amazon.com, Inc. (US) ............................... 16,900 920 Interactive Corp. (US) .............................. 273,800 8,252 -------- 9,172 IT Consulting & Services - 0.7% Accenture, Ltd. - Cl. A (US) ........................ 390,000 10,717 Affiliated Computer Services, Inc. - Cl. A (US) ..... 65,900 3,489 -------- 14,206 Leisure Equipment & Products - 0.1% Mattel, Inc. (US) ................................... 70,400 1,285 Machinery - 1.0% Danaher Corp. (US) .................................. 132,400 6,865 Eaton Corp. (US) .................................... 62,200 4,027 Ingersoll-Rand Co. - Cl. A (US) ..................... 64,900 4,433 ITT Industries, Inc. (US) ........................... 50,200 4,167 Navistar International Corp., Inc. - Cl. B (US) ..... 35,500 1,376 -------- 20,868 Media - 2.5% Cablevision Systems Corp. - Cl. A (US) .............. 110,361 2,169 Clear Channel Communications, Inc. (US) ............. 107,800 3,983 Comcast Corp. - Cl. A (US) .......................... 412,400 11,559 Cox Communications, Inc. - Cl. A (US) ............... 44,000 1,223 Direct TV Group, Inc. (US) .......................... 150,072 2,566 Knight-Ridder, Inc. (US) ............................ 13,600 979 Omnicom Group, Inc. (US) ............................ 73,500 5,578 Radio One, Inc. - Cl. D (US) ........................ 13,300 213 The Walt Disney Co. (US) ............................ 333,100 8,491 Time Warner, Inc. (US) .............................. 687,676 12,089 Tribune Co. (US) .................................... 73,400 3,343 -------- 52,193 Metals & Mining - 0.3% Alcoa, Inc. (US) .................................... 165,800 5,477 Newmont Mining Corp. (US) ........................... 20,800 806 -------- 6,283 Multi-Utilities - 0.0% NiSource, Inc. (US) ................................. 49,400 1,019 Multiline Retail - 1.5% Costco Wholesale Corp. (US) ......................... 63,000 2,587 Federated Department Stores, Inc. (US) .............. $ 117,600 $ 5,774 Nordstrom, Inc. (US) ................................ 138,500 5,902 Wal-Mart Stores, Inc. (US) .......................... 302,300 15,949 -------- 30,212 Office Electronics - 0.2% Xerox Corp. (US) .................................... 290,700 4,215 Oil & Gas - 3.6% BP Amoco plc - ADR (US) ............................. 42,800 2,293 Conoco Phillips (US) ................................ 177,500 13,541 Devon Energy Corp. (US) ............................. 96,100 6,343 Equitable Resources, Inc. (US) ...................... 32,900 1,701 Exxon Mobil Corp. (US) .............................. 811,800 36,052 Murphy Oil Corp. (US) ............................... 53,800 3,965 Pioneer Natural Resources Co. (US) .................. 115,700 4,059 Royal Dutch Petroleum Co. (US) ...................... 74,500 3,849 Shell Transport & Trading Co. (US) .................. 24,600 1,100 Unocal Corp. (US) ................................... 33,400 1,269 -------- 74,172 Paper & Forest Products - 0.7% Boise Cascade Corp. (US) ............................ 76,900 2,894 Georgia-Pacific Corp. (US) .......................... 122,000 4,512 International Paper Co. (US) ........................ 166,400 7,438 -------- 14,844 Personal Products - 0.7% Avon Products, Inc. (US) ............................ 133,800 6,173 Estee Lauder Cos., Inc. - Cl. A (US) ................ 79,000 3,854 Gillette Co. (US) ................................... 105,700 4,482 -------- 14,509 Pharmaceuticals - 6.0% Abbott Laboratories (US) ............................ 250,000 10,190 Allergan, Inc. (US) ................................. 124,600 11,154 AstraZeneca Group plc - ADR (US) .................... 322,400 14,715 Eli Lilly & Co. (US) ................................ 153,200 10,710 Forest Laboratories, Inc. (US) ...................... 226,200 12,810 Johnson & Johnson (US) .............................. 423,200 23,572 Merck & Co., Inc. (US) .............................. 310,700 14,758 Pfizer, Inc. (US) ................................... 742,100 25,439 -------- 123,348 Real Estate Investment Trust - 0.0% General Growth Properties (US) ...................... 39,300 1,162 Road & Rail - 0.1% Union Pacific Corp. (US) ............................ 24,700 1,468 Semiconductor Equipment & Products - 2.5% Analog Devices, Inc. (US) ........................... 144,800 6,817 Applied Materials, Inc. (US) ........................ 118,300 2,321 Intel Corp. (US) .................................... 1,003,800 27,705 KLA-Tencor Corp. (US) ............................... 24,500 1,210 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- ---------- ---------- (000's) COMMON STOCK - Continued Semiconductor Equipment & Products - Continued Lam Research Corp. (US) ........................... $ 40,200 $ 1,077 Micron Technology, Inc. (US) ...................... 62,200 952 Novellus Systems, Inc. (US) ....................... 52,900 1,663 RF Micro Devices, Inc. (US) ....................... 338,000 2,535 Teradyne, Inc. (US) ............................... 29,900 679 Texas Instruments, Inc. (US) ...................... 288,000 6,964 ---------- 51,923 Software - 2.9% Cadence Design Systems, Inc. (US) ................. 71,900 1,052 Electronic Arts, Inc. (US) ........................ 120,400 6,568 Intuit, Inc. (US) ................................. 96,100 3,707 Microsoft Corp. (US) .............................. 1,360,800 38,864 Oracle Corp. (US) ................................. 374,400 4,467 Peoplesoft, Inc. (US) ............................. 119,800 2,216 Sap Aktiengesellschaft - ADR (US) ................. 65,500 2,739 ---------- 59,613 Specialty Retail - 2.4% AutoNation, Inc. (US) ............................. 119,500 2,043 Best Buy Co., Inc. (US) ........................... 70,300 3,567 CDW Corp. (US) .................................... 142,700 9,098 Gap, Inc. (US) .................................... 234,200 5,679 Home Depot, Inc. (US) ............................. 504,000 17,741 Lowe's Cos., Inc. (US) ............................ 52,800 2,775 RadioShack Corp. (US) ............................. 81,100 2,322 TJX Cos., Inc. (US) ............................... 171,200 4,133 Williams-Sonoma, Inc. (US) ........................ 68,900 2,271 ---------- 49,629 Textiles & Apparel - 0.4% Liz Claiborne, Inc. (US) .......................... 84,200 3,029 Nike, Inc. - Cl. B (US) ........................... 68,100 5,159 ---------- 8,188 Tobacco - 0.8% Altria Group, Inc. (US) ........................... 353,200 17,678 Trading Companies & Distributors - 0.2% W.W. Grainger, Inc. (US) .......................... 63,300 3,640 U.S. Government Agencies - 1.0% Federal Home Loan Mortgage Corp. (US) ............. 132,700 8,400 Federal National Mortgage Assoc. (US) ............. 168,400 12,017 ---------- 20,417 Wireless Telecommunications Services - 0.1% Nextel Communications, Inc. - Cl. A (US) .......... 110,500 2,946 ---------- TOTAL COMMON STOCK- (Cost $1,190,339) 65.2% 1,348,559 Par Market Name of Issuer Value Value -------------- ---------- ---------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.2% Boeing Capital Corp. - Sr. Notes (US) 6.5% due 02/15/12 .............................. $ 1,797 $ 1,936 Bombadier, Inc. - Notes 144A (a) (US) 6.3% due 05/01/14 .............................. 500 425 Raytheon Co. - Debs. (US) 6.0% due 12/15/10 .............................. 125 132 Systems 2001 LLC - Cl. G 144A (a) (US) 6.664% due 09/15/13 ............................ 244 264 Systems 2001 LLC - CTF Cl. B 144A (a) (US) 7.156% due 12/15/11 ............................ 308 328 ---------- 3,085 Airlines - 0.0% Delta Air Lines, Inc. (US) 7.7% due 12/15/05 .............................. 75 50 Auto Components - 0.1% Delphi (US) 1.0% due 11/15/33 .............................. 100 100 Delphi Corp. - Notes (US) 6.5% due 08/15/13 .............................. 1,450 1,476 TRW Automotive - Sr. Sub. Notes (US) 11.0% due 02/15/13 ............................. 75 89 ---------- 1,665 Auto Loan - 0.6% Ford Motor Credit Co. - Notes (US) 6.875% due 02/01/06 ............................ 953 1,000 7.0% due 10/01/13 .............................. 1,416 1,429 7.375% due 10/28/09 ............................ 170 181 Ford Motor Credit Co. (US) 7.25% due 10/25/11 ............................. 732 765 7.875% due 06/15/10 ............................ 550 599 Ford Motor Credit Co. - Bonds (US) 7.375% due 02/01/11 ............................ 75 79 General Motors Acceptance Corp. - Sr. Notes (US) 5.625% due 05/15/09 ............................ 900 898 6.125% due 08/28/07 ............................ 150 157 7.0% due 02/01/12 .............................. 900 925 General Motors Acceptance Corp. - Notes (US) 6.125% due 09/15/06 ............................ 200 208 6.875% due 09/15/11 ............................ 250 256 8.0% due 11/01/31 .............................. 250 256 General Motors Acceptance Corp. (US) 6.875% due 08/28/12 ............................ 1,000 1,017 7.5% due 07/15/05 .............................. 1,743 1,821 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Auto Loan - Continued GMAC Commercial Mortgage Securities, Inc. - CTF Cl. H 144A (a) (US) 5.31% due 05/10/36 ................................... $3,000 $ 2,806 ------- 12,397 Automobiles - 0.4% DaimlerChrysler NA Holding Corp. - Sr. Notes (US) 6.5% due 11/15/13 .................................... 1,040 1,066 DaimlerChrysler NA (US) 1.87% due 05/24/06 ................................... 1,833 1,838 DaimlerChrysler NA - Notes (US) 3.75% due 06/04/08 ................................... 175 171 8.0% due 06/15/10 .................................... 100 112 DaimlerChrysler NA Holding Co. - Notes (US) 4.75% due 01/15/08 ................................... 275 277 8.5% due 01/18/31 .................................... 725 833 DaimlerChrysler NA Holding Co. (US) 7.2% due 09/01/09 .................................... 110 120 First Invs Auto Owner Trust - Notes Cl. A (US) 3.46% due 12/15/08 ................................... 25 25 Ford Motor Co. - Bonds (US) 6.625% due 10/01/28 .................................. 2,134 1,869 7.45% due 07/16/31 ................................... 25 24 General Motors Corp. - Sr. Notes (US) 7.2% due 01/15/11 .................................... 25 26 General Motors Corp. - Sr. Debs. (US) 8.375% due 07/15/33 .................................. 2,028 2,147 Hertz Corp. - Sr. Notes (US) 6.35% due 06/15/10 ................................... 205 207 Hertz Corp. (US) 7.625% due 08/15/07 .................................. 100 107 United Rentals North America, Inc. - Sr. Notes (US) 6.5% due 02/15/12 .................................... 50 47 ------- 8,869 Banks - 2.3% Banc America Commercial Mortgage, Inc. - CTF 144A (a) (US) 5.276% due 03/11/41 .................................. 2,000 1,904 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. F 144A (a) (US) 5.279% due 11/10/39 .................................. 1,350 1,282 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. G 144A (a) (US) 5.377% due 11/10/39 .................................. $1,350 $ 1,282 Banc America Mortgage Securities, Inc. - Ser. 2003-F Cl. 2A1 (US) 3.734% due 07/25/33 .................................. 215 212 Bank Americorp - Notes (US) 5.375% due 06/15/14 .................................. 140 139 Bank of America Corp. - Sr. Notes (US) 7.125% due 09/15/06 .................................. 250 270 Bank One Corp. - Notes (US) 6.5% due 02/01/06 .................................... 1,238 1,307 Barclays Bank plc - Notes 144A (a) (US) 6.86% due 06/15/32 ................................... 30 31 BNP Paribas - 144A (a) (US) 5.125% due 01/15/15 .................................. 60 58 Capital One Bank (US) 5.0% due 06/15/09 .................................... 170 171 5.75% due 09/15/10 ................................... 120 123 Central American Bank - 144A (a) (US) 6.75% due 04/15/13 ................................... 1,350 1,412 Corporacion Andina De Fomento - Notes (US) 5.2% due 05/21/13 .................................... 1,330 1,279 6.875% due 03/15/12 .................................. 160 172 Credit Suisse First Boston - Ser. 2003 (US) 3.727% due 03/25/35 .................................. 3,720 3,602 Credit Suisse First Boston - Ser. 2003-C3 Cl. F 144A (a) (US) 4.518% due 05/15/38 .................................. 2,000 1,825 Credit Suisse First Boston - Sr. Notes (US) 4.625% due 01/15/08 .................................. 536 546 Credit Suisse First Boston - Ser. 2004 AR1 Cl. II A1 (US) 4.832% due 02/25/34 .................................. 194 194 Credit Suisse First Boston - Notes (US) 5.75% due 04/15/07 ................................... 739 779 Credit Suisse First Boston (US) 6.5% due 01/15/12 .................................... 125 134 Credit Suisse First Boston Mortgage - CTF Cl. II A2 (US) 4.375% due 04/25/33 .................................. 68 68 Credit Suisse First Boston Mortgage - Cl. A2 (US) 5.935% due 01/15/06 .................................. 250 259 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Banks - Continued Credit Suisse First Boston Mortgage - CF2 Cl. A3 (US) 6.238% due 02/15/34 .................................. $ 250 $ 266 Credit Suisse First Boston Mortgage Securities Corp. - Cl. A1 (US) 3.801% due 06/15/06 .................................. 468 469 Credit Suisse First Boston Mortgage Securities Corp. (US) 7.545% due 04/15/10 .................................. 2,533 2,869 CS First Boston Mortgage Securities Corp. - Cl. A1 (US) 6.91% due 01/15/08 ................................... 4,242 4,510 Dresdner Bank AG - Sub. Notes (US) 7.25% due 09/15/15 ................................... 1,395 1,544 First Union Lehman Brothers Bank - Ser. 1998 C2 CTF Cl. E (US) 6.778% due 05/18/13 .................................. 2,000 2,139 First Union National Bank Commercial & Mortgage Trust - CTF Cl. A1 (US) 5.585% due 08/12/10 .................................. 416 435 FleetBoston Financial Corp. - Sr. Notes (US) 7.25% due 09/15/05 ................................... 1,248 1,315 HBOS plc - 144A (a) (US) 3.125% due 01/12/07 .................................. 250 249 5.375% due 11/29/49 .................................. 190 183 HSBC Bank USA - Sub. Notes (US) 4.625% due 04/01/14 .................................. 500 465 Independence Community Bank Corp. - Sub. Notes (US) 1.0% due 04/01/14 .................................... 80 76 JP Morgan Chase & Co. - Notes (US) 5.25% due 05/30/07 ................................... 2,739 2,859 5.35% due 03/01/07 ................................... 2,075 2,175 JP Morgan Chase & Co. - Sub. Notes (US) 6.75% due 02/01/11 ................................... 1,500 1,635 Labranche & Co., Inc. - Sr. Notes 144A (a) (US) 9.5% due 05/15/09 .................................... 25 25 MBNA Ameribank (US) 5.375% due 01/15/08 .................................. 250 260 Popular North America, Inc. (US) 4.7% due 06/30/09 .................................... 1,500 1,501 6.125% due 10/15/06 .................................. 1,439 1,518 Wachovia Bank Commercial Mortgage Trust - Ser. 2004 C10 Cl. A3 (US) 4.39% due 02/15/36 ................................... 3,000 2,886 Wachovia Bank Commercial Trust - Ser. 2003-C8 Cl. F 144A (a) (US) 5.031% due 11/15/35 .................................. 1,400 1,349 WAMU Mortgage Pass Through Cert. - CTF Cl. A1 (US) 4.39% due 06/25/33 ................................... $ 467 $ 466 Zions Bancorp - Sub. Notes (US) 6.0% due 09/15/15 .................................... 250 252 ------- 46,495 Beverages - 0.1% Anheuser Busch Cos., Inc. - Debs. (US) 6.5% due 02/01/43 .................................... 1,232 1,291 Building Products - 0.0% AMH Holdings, Inc. - Sr. Disc. Notes 144A (a) (US) 1.0% due 03/01/14 .................................... 75 50 Jacuzzi Brands, Inc. -Sr. Sec. Notes (US) 9.625% due 07/01/10 .................................. 50 54 Koppers, Inc. Pennsylvania - Sr. Sec. Notes (US) 9.875% due 10/15/13 .................................. 25 27 ------- 131 Chemicals - 0.0% ICI Wilmington, Inc. - Notes (US) 4.375% due 12/01/08 .................................. 235 231 Millenium America, Inc. - Sr. Notes (US) 9.25% due 06/15/08 ................................... 25 27 NALCO Co. - Sr. Sub. Notes 144A (a) (US) 8.875% due 11/15/13 .................................. 50 52 ------- 310 Commercial Services & Supplies - 0.2% Allied Waste North America, Inc. - Sr. Notes (US) 8.875% due 04/01/08 .................................. 100 109 Cendant Corp. - Sr. Notes (US) 6.25% due 01/15/08 ................................... 125 133 6.25% due 03/15/10 ................................... 710 755 7.125% due 03/15/15 .................................. 734 804 7.375% due 01/15/13 .................................. 1,457 1,625 Cendant Corp. - Notes (US) 6.875% due 08/15/06 .................................. 150 160 D.R. Horton, Inc. - Sr. Notes (US) 7.875% due 08/15/11 .................................. 50 55 Iron Mountain, Inc. Pennsylvania - Sr. Sub. Notes (US) 6.625% due 01/01/16 .................................. 25 23 PHH Corp. - Notes (US) 7.125% due 03/01/13 .................................. 70 77 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Commercial Services & Supplies - Continued Quintiles Transnational Corp. - Sr. Sub. Notes (US) 10.0% due 10/01/13 ................................... $ 50 $ 50 Synagro Technologies, Inc. - Sr. Sub. Notes (US) 9.5% due 04/01/09 .................................... 25 26 Waste Management, Inc. - Sr. Notes (US) 6.375% due 11/15/12 .................................. 125 132 ------ 3,949 Communications Equipment - 0.1% American Tower Corp. - Sr. Notes 144A (a) (US) 7.5% due 05/01/12 .................................... 100 97 Crown Castle International Corp. - Sr. Notes (US) 7.5% due 12/01/13 .................................... 75 75 Motorola, Inc. - Notes (US) 6.75% due 02/01/06 ................................... 1,500 1,577 Motorola, Inc. - Debs. (US) 7.5% due 05/15/25 .................................... 50 54 ------ 1,803 Construction & Engineering - 0.0% Hovnanian Enterprises, Inc. - Gtd. Sr. Notes (US) 6.5% due 01/15/14 .................................... 75 70 Lennar Corp. - Sr. Notes (US) 5.95% due 03/01/13 ................................... 30 30 9.95% due 05/01/10 ................................... 30 33 Lyon Williams Homes, Inc. - Sr. Notes (US) 10.75% due 04/01/13 .................................. 50 55 MDC Holdings, Inc. - Sr. Notes (US) 5.5% due 05/15/13 .................................... 50 49 Nortek Holdings, Inc. - Disc. Notes 144A (a) (US) 1.0% due 05/15/11 .................................... 50 40 Pulte Homes, Inc. - Sr. Notes (US) 6.25% due 02/15/13 ................................... 100 102 7.875% due 08/01/11 .................................. 90 102 8.125% due 03/01/11 .................................. 25 29 Technical Olympic USA, Inc. - Sr. Sub. Notes (US) 10.375% due 07/01/12 ................................. 50 52 ------ 562 Construction Materials - 0.0% Gerdau Ameristeel Corp. - Sr. Notes (US) 10.375% due 07/15/11 ................................. 25 28 Construction Materials - Continued Ispat Inland Upc - Sr. Sec. Notes 144A (a) (US) 9.75% due 04/01/14 ................................... $ 50 $ 52 ------ 80 Containers & Packaging - 0.0% Graphic Packaging International, Inc. - Sr. Sub. Notes (US) 9.5% due 08/15/13 .................................... 50 54 Jefferson Smurfit Corp. - Sr. Notes (US) 7.5% due 06/01/13 .................................... 100 99 Norampac, Inc. - Sr. Notes (US) 6.75% due 06/01/13 ................................... 50 49 Owens Brockway Glass Container - Sr. Notes 144A (a) (US) 8.75% due 11/15/12 ................................... 75 82 Packaging Corp. of America - Sr. Notes (US) 5.75% due 08/01/13 ................................... 100 99 ------ 383 Credit Card - 0.1% Citibank Credit Card Issuance Trust - Cl. A1 Notes (US) 4.95% due 02/09/09 ................................... 2,000 2,076 MBNA Credit Card Master Note Trust - Notes Cl. C (US) 6.8% due 07/15/14 .................................... 500 539 Nordstrom Credit Card Master Note Trust - Notes Cl. B 144A(a) (US) 2.039% due 10/13/10 .................................. 150 150 Pass Through Amortizing Credit Card Trust - CTF Cl. A3 144A(a) (US) 6.298% due 06/18/12 .................................. 62 63 Sears Credit Account Master Trust - Ser. 1998-2 Cl. A (US) 5.25% due 10/16/08 ................................... 146 147 ------ 2,975 Diversified Financials - 2.1% AXA Financial, Inc. - Sr. Notes (US) 7.75% due 08/01/10 ................................... 1,068 1,225 Bear Stearns & Co., Inc. - Notes (US) 5.7% due 11/15/14 .................................... 2,468 2,476 Bear Stearns ARM Trust - CTF Cl. II A2 (US) 4.25% due 04/25/33 ................................... 67 67 Bear Stearns ARM Trust - Ser. 2004-3 Cl. IIA (US) 4.344% due 07/25/34 .................................. 766 760 Capital One Financial Corp. - Notes (US) 7.25% due 05/01/06 ................................... 190 201 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Financials - Continued Chase Commercial Mortgage Securities Corp. - Ser. 1997-1 Cl. A2 (US) 7.37% due 02/19/07 ................................... $4,335 $ 4,630 Chase Commercial Mortgage Securities Corp. - Cl. C (US) 7.928% due 07/15/32 .................................. 1,000 1,147 CIT Group, Inc. - Sr. Notes (US) 5.75% due 09/25/07 ................................... 1,420 1,496 CIT Group, Inc. (US) 1.48% due 05/18/07 ................................... 1,100 1,099 CIT Group, Inc. - Sr. Notes (US) 4.0% due 05/08/08 .................................... 934 926 Citigroup, Inc. - Sr. Notes (US) 5.0% due 03/06/07 .................................... 3,000 3,112 Citigroup, Inc. - Notes (US) 5.5% due 08/09/06 .................................... 2,000 2,089 Citigroup, Inc. - Sub. Notes (US) 5.625% due 08/27/12 .................................. 1,260 1,295 GE Commercial Mortgage Corp. - 2003-C1 144A (a) (US) 5.948% due 01/10/38 .................................. 3,000 2,932 General Electric Capital Corp. (US) 5.875% due 02/15/12 .................................. 2,950 3,094 Goldman Sachs Group, Inc. - Sr. Notes (US) 4.125% due 01/15/08 .................................. 1,050 1,053 5.15% due 01/15/14 ................................... 190 182 5.25% due 04/01/13 ................................... 375 366 Goldman Sachs Group, Inc. (US) 6.875% due 01/15/11 .................................. 3,405 3,738 Greater Connecticut Consumer Loan Trust - Notes Cl. A 144A (a) (US) 6.25% due 02/15/20 ................................... 393 398 Green Tree Financial Corp. - Ser. 1996-8 Cl. A6 (US) 7.6% due 10/15/27 .................................... 3,070 3,274 Morgan Stanley Capital, Inc. - Ser. 2003 Cl. A 144A (a) (US) 1.0% due 07/14/08 .................................... 98 98 Morgan Stanley Group, Inc. (US) 6.75% due 04/15/11 ................................... 2,880 3,156 Nationwide Life Global Funding (US) 5.35% due 02/15/07 ................................... 60 62 Salomon Brothers Commercial and Mortgage Trust - CTF 2001-C1 Cl. A3 (US) 6.428% due 12/18/35 .................................. 925 985 SLM Corp. (US) 5.0% due 04/15/15 .................................... 625 591 Washington Mutual Mortgage Securities Corp. - Cl. A6 (US) 4.56% due 03/25/33 ................................... 40 40 Washington Mutual, Inc. (US) 5.625% due 01/15/07 .................................. $3,050 $ 3,191 Wells Fargo & Co. - Notes (US) 3.5% due 04/04/08 .................................... 500 493 ------- 44,176 Diversified Telecommunication Services - 0.7% AT&T Corp. - Sr. Notes (US) 7.8% due 11/15/11 .................................... 90 92 AT&T Corp. - Debs. (US) 8.35% due 01/15/25 ................................... 100 101 British Telecommunications plc - Notes (US) 8.875% due 12/15/30 .................................. 40 49 Deutsche Telekom International (US) 8.5% due 06/15/10 .................................... 721 843 France Telecom SA - Notes (US) 9.25% due 03/01/11 ................................... 875 1,014 10.0% due 03/01/31 ................................... 1,150 1,443 National Cable plc - Sr. Notes 144A (a) (US) 8.75% due 04/15/14 ................................... 25 26 Singapore Telecommunications - Notes 144A (a) (US) 6.375% due 12/01/11 .................................. 75 80 Sprint Capital Corp. - Sr. Notes (US) 1.0% due 08/17/06 .................................... 145 148 Sprint Capital Corp. - Notes (US) 6.125% due 11/15/08 .................................. 1,323 1,391 7.125% due 01/30/06 .................................. 100 106 8.375% due 03/15/12 .................................. 1,102 1,267 8.75% due 03/15/32 ................................... 740 862 Telecom Italia Capital Corp. - Sr. Notes Ser. A 144A (a) (US) 4.0% due 11/15/08 .................................... 1,250 1,228 Telecom Italia Capital Corp. - Sr. Notes Ser. C 144A (a) (IT) 6.375% due 11/15/33 .................................. 100 97 Telstra, Ltd. - Notes (US) 6.375% due 04/01/12 .................................. 125 134 Tritel PCS, Inc. - Sr. Sub. Notes (US) 10.375% due 01/15/11 ................................. 325 375 Verizon Global Funding Corp. - Notes (US) 6.75% due 12/01/05 ................................... 2,169 2,286 Verizon Global Funding Corp. - Global Notes (US) 7.375% due 09/01/12 .................................. 927 1,043 Verizon New York, Inc. - Debs. Ser. A (US) 6.875% due 04/01/12 .................................. 963 1,032 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Telecommunication Services - Continued Vodafone Group plc - Notes (US) 5.375% due 01/30/15 ................................. $ 110 $ 108 ------- 13,725 Electric Utilities - 0.8% American Electric Power, Inc. - Sr. Notes Ser. D (US) 5.25% due 06/01/15 .................................. 1,395 1,338 Centerpoint Energy Resources Corp. - Sr. Notes (US) 7.875% due 04/01/13 ................................. 2,000 2,242 Enersis SA - Notes 144A (a) (US) 7.375% due 01/15/14 ................................. 2,000 1,930 FirstEnergy Corp. - Notes Ser. B (US) 6.45% due 11/15/11 .................................. 1,054 1,093 FirstEnergy Corp. - Notes Ser. C (US) 7.375% due 11/15/31 ................................. 2,870 2,991 Progress Energy, Inc. - Sr. Notes (US) 6.75% due 03/01/06 .................................. 1,560 1,645 7.0% due 10/30/31 ................................... 693 713 Public Service Co. New Mexico - Sr. Unsec. Notes (US) 4.4% due 09/15/08 ................................... 1,453 1,449 TXU Australia Holdings, Ltd. - GTD Sr. Notes 144A (a) (US) 6.15% due 11/15/13 .................................. 1,750 1,823 TXU Energy Co. LLC - Sr. Notes (US) 7.0% due 03/15/13 ................................... 1,399 1,524 ------- 16,748 Electric/Gas - 0.7% AES Corp. (US) 9.375% due 09/15/10 ................................. 100 107 Dominion Resources, Inc. - Notes (US) 5.7% due 09/17/12 ................................... 200 203 Duke Energy Co. - Bonds (US) 3.75% due 03/05/08 .................................. 665 656 Duke Energy Co. - Sr. Notes (US) 6.45% due 10/15/32 .................................. 70 68 Edison Mission Energy - Sr. Notes (US) 9.875% due 04/15/11 ................................. 150 156 Empresa Nacional De Electricid - Notes (US) 8.35% due 08/01/13 .................................. 1,650 1,761 8.5% due 04/01/09 ................................... 130 142 Kansas City Power & Light Co. - Sr. Notes Ser. A (US) 6.0% due 03/15/07 ................................... 1,440 1,519 Oncor Electric Delivery Co. - Sr. Sec. Notes (US) 6.375% due 01/15/15 ................................. 1,695 1,785 7.0% due 05/01/32 ................................... $ 125 $ 134 Pacific Gas & Electric Co. - Bonds (US) 4.2% due 03/01/11 ................................... 250 238 4.8% due 03/01/14 ................................... 170 161 Pacific Gas & Electric Co. (US) 6.05% due 03/01/34 .................................. 1,960 1,843 Progress Energy, Inc. - Sr. Notes (US) 7.1% due 03/01/11 ................................... 250 274 7.75% due 03/01/31 .................................. 50 56 PSEG Power LLC - Sr. Notes (US) 5.0% due 04/01/14 ................................... 275 257 6.875% due 04/15/06 ................................. 1,760 1,867 8.625% due 04/15/31 ................................. 1,220 1,490 Sempra Energy - Notes (US) 4.75% due 05/15/09 .................................. 1,100 1,107 Southern California Edison Co. - Ser. 2004B (US) 6.0% due 01/15/34 ................................... 1,040 996 SP Power Assets, Ltd. - 144A (a) (US) 5.0% due 10/22/13 ................................... 150 146 United Energy Distribution, Ltd. - Sr. Notes 144A (a) (US) 4.7% due 04/15/11 ................................... 90 89 ------- 15,055 Electronic Equipment & Instruments - 0.0% Jabil Circuit, Inc. - Sr. Notes (US) 5.875% due 07/15/10 ................................. 210 217 ON Semiconductor Corp. - Sr. Sec. Notes (US) 12.0% due 03/15/10 .................................. 25 29 Solectron Corp. - Sr. Notes (US) 9.625% due 02/15/09 ................................. 75 82 Stoneridge, Inc. - Sr. Notes (US) 11.5% due 05/01/12 .................................. 75 88 Viasystems, Inc. - Sr. Sub. Notes 144A (a) (US) 10.5% due 01/15/11 .................................. 75 79 ------- 495 Energy Equipment & Services - 0.1% Enbridge Energy Partners LP - Notes (US) 4.75% due 06/01/13 .................................. 1,710 1,585 Luscar Coal, Ltd. - Sr. Notes (US) 9.75% due 10/15/11 .................................. 25 28 ------- 1,613 Finance - 1.6% ACE INA Holding, Inc. - GTD. Sr. Notes (US) 5.875% due 06/15/14 ................................. 420 425 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued Ahold Finance USA - Gtd. Notes (US) 8.25% due 07/15/10 ................................... $ 50 $ 53 Arch Capital Group, Ltd. - Sr. Notes (US) 7.35% due 05/01/34 ................................... 1,870 1,882 Cadbury Schweppes U.S. Finance - Sr. Notes 144A (a) (US) 5.125% due 10/01/13 .................................. 100 98 California Infras & Ecomomic - Ser. 1997-1 CTF Cl. A6 (US) 6.38% due 09/25/08 ................................... 375 392 California Infrastructure Development - Ser. 1997-1 CTF Cl. A7 (US) 6.42% due 09/25/08 ................................... 358 373 Caterpillar Financial Services Corp. - Sr. Notes (US) 4.5% due 06/15/09 .................................... 140 141 Concentra Operating Corp. - Sr. Sub. Notes 144A (a) (US) 9.125% due 06/01/12 .................................. 25 26 Cullen Frost Capital Trust II - Ser. A 144A (a) (US) 2.68% due 03/01/34 ................................... 110 112 DBS Capital Funding Corp. - Ser. A 144A (a) (US) 1.0% due 03/15/49 .................................... 90 100 Deutsche Telekom International Finance (US) 8.75% due 06/15/30 ................................... 1,046 1,273 Deutsche Telekom International Finance BV - Notes (US) 9.25% due 06/01/32 ................................... 100 132 Devon Financing Corp. United L C - Notes (US) 6.875% due 09/30/11 .................................. 90 98 Duke Capital LLC. - Sr. Notes (US) 6.75% due 02/15/32 ................................... 1,394 1,337 Equus Cayman Finance, Ltd. - Sr Notes 144A (a) (US) 5.5% due 09/12/08 .................................... 1,240 1,233 ERAC USA Finance Co. - Gtd. Notes 144A (a) (US) 6.7% due 06/01/34 .................................... 735 736 ERP Operating, Ltd. - Sr. Notes (US) 4.75% due 06/15/09 ................................... 190 190 FUJI JGB Investments - Ser. A 144A (a) (US) 9.87% due 12/31/49 ................................... 140 158 Fund American Cos, Inc. - GTD Sr Notes (US) 5.875% due 05/15/13 .................................. 1,480 1,477 General Electric Capital Corp. (US) 6.0% due 06/15/12 .................................... $ 70 $ 74 Household Financial Corp. - Global Notes (US) 4.625% due 01/15/08 .................................. 1,432 1,458 Household Financial Corp. (US) 5.75% due 01/30/07 ................................... 35 37 International Lease Finance Corp. - Notes (US) 3.5% due 04/01/09 .................................... 30 28 International Lease Finance Corp. (US) 4.55% due 10/15/09 ................................... 100 100 International Lease Finance Corp. - Sr. Notes (US) 4.75% due 07/01/09 ................................... 515 515 International Lease Finance Corp. - Notes (US) 5.875% due 05/01/13 .................................. 1,317 1,350 Mangrove Bay Trust - 144A (a) (US) 6.102% due 07/15/33 ................................. 100 99 MBNA Capital - Ser. B (US) 1.963% due 02/01/27 .................................. 275 261 Mizuho Financial Group Cayman, Ltd. - Sub. Notes 144A (a) (US) 5.79% due 04/15/14 ................................... 1,610 1,583 Monumental Global Funding - Sr Sec. Notes Ser. A 144A (a) (US) 5.2% due 01/30/07 .................................... 250 261 Monumental Global Funding II - Notes 144A (a) (US) 1.29% due 05/19/06 ................................... 630 628 National Rural Utilities Cooperative Finance - Bonds (US) 3.875% due 02/15/08 .................................. 1,698 1,693 NiSource Finance Corp. - Sr. Notes (US) 6.15% due 03/01/13 ................................... 912 945 NiSource Finance Corp. (US) 7.875% due 11/15/10 .................................. 1,440 1,651 Odyssey Re Holdings Corp. - Sr Notes (US) 7.65% due 11/01/13 ................................... 4,000 4,300 PCCW Hkt Capital, Ltd. (US) 8.0% due 11/15/11 .................................... 80 90 Pharma Services Intermediate Holding Corp. - Sr. Disc. Notes 144A (a) (US) 11.5% due 04/01/14 ................................... 75 38 RBS Capital Trust (US) 4.709% due 12/29/49 .................................. 80 74 Reliastar Financial Corp. - Notes (US) 6.5% due 11/15/08 .................................... 160 172 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------ (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued RH Donnelly Finance Corp. - Sr. Sub. Notes (US) 10.875% due 12/15/12 ................................. $ 25 $ 29 SB Treasury Co. - 144A (a) (US) 1.0% due 12/29/49 .................................... 100 112 Sprint Capital Corp. (US) 6.875% due 11/15/28 .................................. 80 77 UFJ Finance Aruba - Gtd. Notes (US) 6.75% due 07/15/13 ................................... 1,800 1,861 Vanderbilt Acquisition Loan Trust - Sr. Sub. Notes Cl. A3 (US) 5.7% due 09/07/23 .................................... 250 253 W.R. Berkley Corp. - Notes (US) 5.875% due 02/15/13 .................................. 2,310 2,357 WPP Finance UK - Notes 144A (a) (US) 5.875% due 06/15/14 .................................. 1,825 1,832 ------- 32,114 Food & Drug Retailing - 0.0% Winn Dixie Stores, Inc. - Sr. Notes (US) 8.875% due 04/01/08 .................................. 50 46 Food Products - 0.3% Burns Philip Capital Property, Ltd. - Sr. Sub. Notes (US) 10.75% due 02/15/11 .................................. 75 80 Gold Kist, Inc. - Sr. Notes 144A (a) (US) 10.25% due 03/15/14 .................................. 50 54 Kellogg Co. - Notes Ser. B (US) 6.6% due 04/01/11 .................................... 200 219 Kraft Foods, Inc. - Notes (US) 5.25% due 06/01/07 ................................... 4,757 4,947 Nabisco, Inc. - Notes (US) 7.05% due 07/15/07 ................................... 90 98 Nabisco, Inc. - Debs. (US) 7.55% due 06/15/15 ................................... 500 575 WH Holdings Cayman, Ltd. - 144A (a) (US) 9.5% due 04/01/11 .................................... 50 52 ------- 6,025 Foreign Governmental - 0.2% Republic of Chile - Notes (US) 1.5% due 01/28/08 .................................... 1,800 1,818 Republic of Chile - Bonds (US) 5.5% due 01/15/13 .................................... 70 70 United Mexican States (US) 6.375% due 01/16/13 .................................. 1,700 1,697 8.375% due 01/14/11 .................................. 40 45 United Mexican States (XU) 9.875% due 02/01/10 .................................. 95 114 United Mexican States - Bonds (US) 11.375% due 09/15/16 ................................. $ 50 $ 70 ------- 3,814 Gas Utilities - 0.1% Kinder Morgan Energy Partners - Sr. Notes (US) 7.3% due 08/15/33 .................................... 1,480 1,561 Michigan Consolidated Gas Co. - Sr. Notes (US) 5.7% due 03/15/33 .................................... 1,480 1,342 Williams Cos, Inc. - Notes (US) 8.125% due 03/15/12 .................................. 75 80 ------- 2,983 Health Care Equipment & Supplies - 0.0% Hospira, Inc. - Notes 144A (a) (US) 5.9% due 06/15/14 .................................... 110 111 Health Care Providers & Services - 0.0% HCA, Inc. - Notes (US) 6.25% due 02/15/13 ................................... 200 198 6.95% due 05/01/12 ................................... 150 157 HCA-The Healthcare Corp. - Notes (US) 8.75% due 09/01/10 ................................... 60 68 Health Net, Inc. - Sr. Notes (US) 8.375% due 04/15/11 .................................. 140 164 Tenet Healthcare Corp. - Sr. Notes 144A (a) (US) 9.875% due 07/01/14 .................................. 65 66 ------- 653 Home Equity Loan - 1.4% Centex Home Equity Loan Trust - CTF Cl. A5 (US) 6.83% due 07/25/32 ................................... 2,635 2,773 Chase Mortgage Funding - Ser. 2003- 2 Cl. IA 3 (US) 2.864% due 03/25/07 .................................. 100 100 Chase Mortgage Funding Ser. 2003-1 CTF CL. IA-3 (US) 3.14% due 07/25/23 ................................... 100 100 Countrywide Home Loan Corp. (US) 5.5% due 08/01/06 .................................... 2,821 2,940 Residential Asset Mortgage Products, Inc. - Cl. AI2 (US) 3.38% due 03/25/29 ................................... 5,000 5,008 Residential Asset Mortgage Products, Inc. - Ser. 2004-SL2 Cl. AI (US) 6.5% due 10/25/16 .................................... 6,588 6,816 Residential Funding and Mortgage Securities - Ser. 2002-HI2 (US) 5.64% due 10/25/14 ................................... 1,734 1,734 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Home Equity Loan - Continued Residential Funding and Mortgage Securities - Notes Cl. A7 (US) 6.9% due 01/25/33 .................................... $9,000 $ 9,637 Residential Funding and Mortgage Securities Trust II - Ser. 2001-HS2 Cl. A4 (US) 6.43% due 04/25/16 ................................... 19 18 ------- 29,126 Hotels Restaurants & Leisure - 0.4% Boyd Gaming Corp. - Sr. Notes (US) 9.25% due 08/01/09 ................................... 50 55 Buffets, Inc. - Sr. Sub. Notes (US) 11.25% due 07/15/10 .................................. 25 26 Circus & Eldorado Circus - Notes (US) 10.125% due 03/01/12 ................................. 50 50 Harrah's Operating, Inc. - Gtd. Sr Notes 144A (a) (US) 5.5% due 07/01/10 .................................... 100 100 Hilton Hotels Corp. - Notes (US) 7.625% due 12/01/12 .................................. 2,440 2,623 8.25% due 02/15/11 ................................... 40 45 Hilton Hotels Trust - Ser. 2000 Cl. B (US) 1.62% due 10/03/10 ................................... 95 94 Host Marriott LP - Sr. Notes Ser. J (US) 7.125% due 11/01/13 .................................. 50 49 Mandalay Resort Group - Sr. Notes (US) 6.375% due 12/15/11 .................................. 1,000 1,015 MGM Mirage, Inc. - Ser. B (US) 6.0% due 10/01/09 .................................... 1,870 1,833 Royal Caribbean Cruises, Ltd. (US) 8.75% due 02/02/11 ................................... 50 56 Seneca Gaming Corp. - Sr. Notes 144A (a) (US) 7.25% due 05/01/12 ................................... 25 25 Six Flags, Inc. - Sr. Notes (US) 8.875% due 02/01/10 .................................. 75 75 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes (US) 7.875% due 05/01/12 .................................. 2,350 2,514 Tricon Global Restaurants, Inc. - Sr. Notes (US) 8.875% due 04/15/11 .................................. 100 120 ------- 8,680 Household Durables - 0.1% Centex Corp. - Sr. Notes (US) 4.75% due 01/15/08 ................................... 40 41 Mohawk Industries, Inc. - Notes (US) 6.5% due 04/15/07 .................................... $1,580 $ 1,686 ------- 1,727 Industrial Conglomerates - 0.2% General Electric Co. - Notes (US) 5.0% due 02/01/13 .................................... 1,790 1,762 Tyco International Group SA - Notes (US) 6.0% due 11/15/13 .................................... 805 828 Tyco International Group SA - Sr. Notes (US) 6.375% due 10/15/11 .................................. 1,450 1,550 ------- 4,140 Insurance - 0.1% Aetna Inc. - Sr. Notes (US) 7.375% due 03/01/06 .................................. 100 107 Assurant, Inc. - Sr. Notes (US) 5.625% due 02/15/14 .................................. 90 88 Metlife, Inc. - Debs. (US) 3.911% due 05/15/05 .................................. 190 193 Nationwide Mutual Insurance Co. - Notes 144A (a) (US) 7.875% due 04/01/33 .................................. 30 34 Ohio Casualty Corp. - Notes (US) 7.3% due 06/15/14 .................................... 1,400 1,409 Prudential Financial, Inc. (US) 4.75% due 04/01/14 ................................... 315 294 Prudential Insurance Co. - Sr. Notes 144A (a) (US) 6.375% due 07/23/06 .................................. 350 371 ------- 2,496 Leisure Equipment & Products - 0.0% Eastman Kodak Co. - Sr. Notes (US) 7.25% due 11/15/13 ................................... 780 793 Machinery - 0.1% Caterpillar, Inc. - Sr. Debs. (US) 7.25% due 09/15/09 ................................... 1,050 1,188 Terex Corp. - Sr. Sub. Notes (US) 9.25% due 07/15/11 ................................... 50 55 ------- 1,243 Marine - 0.0% Overseas Shipholding Group, Inc. - Notes (US) 8.25% due 03/15/13 ................................... 50 54 Media - 0.8% AMC Entertainment, Inc. - Sr. Sub. Notes (US) 9.875% due 02/01/12 .................................. 25 26 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Media - Continued Canwest Media, Inc. - Sr. Sub. Notes (CA) 10.625% due 05/15/11 ................................. $ 50 $ 56 Carmike Cinemas, Inc. - Sr. Sub. Notes 144A (a) (US) 7.5% due 02/15/14 .................................... 50 48 Charter Communication Operating LLC - Sr. Notes 144A (a) (US) 8.0% due 04/30/12 .................................... 100 97 Cinemark USA, Inc. - Sr. Sub. Notes (US) 9.0% due 02/01/13 .................................... 25 27 Cinemark, Inc. - Sr. Disc. Notes 144A (a) (US) 1.0% due 03/15/14 .................................... 25 16 Clear Channel Communications, Inc. (US) 7.65% due 09/15/10 ................................... 125 141 Comcast Corp. - Notes (US) 6.5% due 01/15/15 .................................... 627 650 7.05% due 03/15/33 ................................... 1,446 1,498 Cox Communications, Inc. - Notes (US) 4.625% due 06/01/13 .................................. 1,470 1,357 Cox Radio, Inc. - Sr. Notes (US) 6.625% due 02/15/06 .................................. 250 263 Dex Media, Inc. - Disc. Notes 144A (a) (US) 1.0% due 11/15/13 .................................... 75 48 Liberty Media Corp. - Sr. Notes (US) 2.64% due 09/17/06 ................................... 760 774 3.5% due 09/25/06 .................................... 20 20 5.7% due 05/15/13 .................................... 2,500 2,463 Liberty Media Corp. - Sr. Debs (US) 8.25% due 02/01/30 ................................... 690 786 News America, Inc. - Sr. Notes (US) 6.75% due 01/09/38 ................................... 30 33 NextMedia Operating, Inc. - Sr. Sub. Notes (US) 10.75% due 07/01/11 .................................. 50 56 Quebecor Media, Inc. - Sr. Notes (US) 11.125% due 07/15/11 ................................. 50 57 Telenet Group Holding NV - Sr. Disc Notes 144A (a) (US) 1.0% due 06/15/14 .................................... 100 63 Time Warner, Inc. (US) 6.15% due 05/01/07 ................................... 1,904 2,016 7.625% due 04/15/31 .................................. 130 141 Time Warner, Inc. - Debs. (US) 7.7% due 05/01/32 .................................... 1,815 1,983 Time Warner, Inc. - Notes (US) 8.18% due 08/15/07 ................................... 900 1,006 Univision Communications, Inc. - Sr. Notes (US) 3.875% due 10/15/08 .................................. $ 125 $ 122 7.85% due 07/15/11 ................................... 130 149 Viacom, Inc. (US) 7.875% due 07/30/30 .................................. 1,054 1,248 Videotron Ltee - Sr. Notes (US) 6.875% due 01/15/14 .................................. 25 24 Young Broadcasting, Inc. - Sr. Sub. Notes (US) 10.0% due 03/01/11 ................................... 50 51 ------- 15,219 Metals & Mining - 0.1% Alcan Aluminum, Ltd. - Notes (US) 5.2% due 01/15/14 .................................... 50 49 Codelco, Inc. - Notes 144A (a) (US) 5.5% due 10/15/13 .................................... 1,104 1,096 Falconbridge, Ltd. - Notes (US) 5.375% due 06/01/15 .................................. 1,395 1,218 Freeport McMoran Copper & Gold - Sr. Notes (US) 10.125% due 02/01/10 ................................. 50 55 ------- 2,418 Multi-Utilities - 0.2% Centerpoint Energy Houston - Bonds Ser. K (US) 6.95% due 03/15/33 ................................... 1,000 1,070 Centerpoint Energy, Inc. - Sr. Notes (US) 5.875% due 06/01/08 .................................. 1,000 1,011 6.85% due 06/01/15 ................................... 1,250 1,267 7.25% due 09/01/10 ................................... 1,250 1,329 ------- 4,677 Multiline Retail - 0.0% Saks, Inc. (US) 7.5% due 12/01/10 .................................... 50 52 Oil & Gas - 0.8% Amerada Hess Corp. - Notes (US) 7.3% due 08/15/31 .................................... 2,100 2,132 Devon Energy Corp. - Sr. Debs. (US) 7.95% due 04/15/32 ................................... 1,480 1,710 Duke Capital LLC - Sr. Notes (US) 6.25% due 02/15/13 ................................... 700 710 Dynegy, Inc. - Sr. Sec. Notes 144A (a) (US) 10.125% due 07/15/13 ................................. 25 27 Enterprise Products Operating LP - Sr. Notes (US) 6.875% due 03/01/33 .................................. 1,714 1,586 Marathon Oil Corp. - Notes (US) 6.8% due 03/15/32 .................................... 1,494 1,549 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Oil & Gas - Continued Newfield Exploration Co. - Sr. Sub. Notes (US) 8.375% due 08/15/12 .................................. $ 50 $ 54 Occidental Petroleum Corp. - Notes (US) 6.75% due 01/15/12 .................................. 1,913 2,107 Peco Energy Transport Trust - Ser. 1999A. Cl. A7 (US) 6.13% due 03/01/09 ................................... 315 338 Pemex Project Funding Master Trust - Sr. Notes 144A (a) (US) 2.82% due 06/15/10 ................................... 200 201 Pemex Project Funding Master Trust - Notes (US) 6.125% due 08/15/08 .................................. 1,500 1,534 7.375% due 12/15/14 .................................. 1,700 1,734 Premcor Refining Group, Inc. - Sr. Sub. Notes (US) 7.75% due 02/01/12 ................................... 100 104 Teppco Partners - Sr. Notes (US) 6.125% due 02/01/13 .................................. 1,308 1,330 Texas Gas Transmission LLC - Notes (US) 4.6% due 06/01/15 .................................... 1,860 1,714 Union Oil Co. of California (US) 7.5% due 02/15/29 .................................... 80 90 Western Oil Sands, Inc. - Sr. Sec. Notes (US) 8.375% due 05/01/12 .................................. 25 27 ------- 16,947 Other Asset Backed - 1.2% Argent Securities, Inc. - Ser. 2004 W1 M3 (US) 1.0% due 02/25/34 .................................... 3,000 3,032 CWABS, Inc. - Ser. 2003-5 Cl. AF 2 (US) 3.042% due 04/25/25 .................................. 3,570 3,554 CWMBS, Inc. - Ser. 2004-7 CTF Cl. 2A1 (US) 1.0% due 04/25/34 .................................... 517 510 CWMBS, Inc. -Ser. 2004-12 CHL Cl. 12A1 (US) 4.933% due 08/25/34 .................................. 1,375 1,380 Drive Time Auto Owner Trust - Notes Ser. 2004-A Cl. A3 (US) 1.0% due 08/15/08 .................................... 150 147 Equity One ABS, Inc. - Ser. 2004-2 Cl. AV2 (US) 1.55% due 07/25/34 ................................... 2,872 2,872 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 (US) 3.531% due 12/25/33 .................................. 1,990 1,976 Equity One ABS, Inc. - Ser. 2004-1 Cl. M2 (US) 5.115% due 04/25/34 .................................. $1,000 $ 932 Equity One ABS, Inc. - Ser. 2004-1 Cl. M3 (US) 5.26% due 04/25/34 ................................... 2,250 2,098 Long Beach Mortgage Loan Trust - Ser. 2004-1 CTF Cl. M6 (US) 1.0% due 03/25/34 .................................... 3,800 3,807 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 (US) 1.0% due 03/25/35 .................................... 2,400 2,400 Option One Loan Trust - Ser. 2004-1 CTF Cl. M 1 (US) 1.7% due 01/25/34 .................................... 1,400 1,399 ------- 24,107 Other Mortgage - 0.4% LB UBS Commercial Mortgage Trust - Ser. 2003-C3 Cl. K 144A (a) (US) 5.18% due 02/17/37 ................................... 1,363 1,269 LB UBS Commercial Mortgage Trust - Ser. 2003-C5 Cl. K 144A (a) (US) 5.25% due 04/15/37 ................................... 1,000 929 LB-UBS Commercial Mortgage Trust - Ser. 2000-C4 Cl. A2 (US) 7.37% due 06/15/10 ................................... 5,318 6,008 ------- 8,206 Paper & Forest Products - 0.2% Georgia Pacific Corp. - Sr. Notes (US) 8.875% due 02/01/10 .................................. 50 57 International Paper Co. - Notes (US) 6.75% due 09/01/11 ................................... 1,410 1,528 Norske Skogindustrier - Notes 144A (a) (US) 6.125% due 10/15/15 .................................. 60 59 7.625% due 10/15/11 .................................. 20 22 Potlatch Corp. - Sr. Sub. Notes (US) 10.0% due 07/15/11 ................................... 25 28 Temple Inland, Inc. - Notes (US) 7.875% due 05/01/12 .................................. 40 45 Weyerhaueser Co. - Debs (US) 7.375% due 03/15/32 .................................. 2,014 2,190 ------- 3,929 Pharmaceuticals - 0.0% Schering Plough Corp. - Sr. Notes (US) 5.3% due 12/01/13 .................................... 255 250 Wyeth - Notes (US) 4.375% due 03/01/08 .................................. 145 144 ------- 394 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Real Estate Development - 0.0% Developers Diversified Realty Co. - Notes (US) 4.625% due 08/01/10 .................................. $ 125 $ 120 Rouse Co. - Notes (US) 5.375% due 11/26/13 .................................. 70 68 7.2% due 09/15/12 .................................... 70 76 ------ 264 Real Estate Investment Trust - 0.3% Boston Properties, Ltd. Partnership - Sr. Notes (US) 6.25% due 01/15/13 ................................... 1,763 1,849 Crescent Real Estate Equities - Notes (US) 1.0% due 09/15/07 .................................... 50 51 Health Care Property Investments, Inc. - Sr. Notes (US) 6.45% due 06/25/12 ................................... 973 1,043 Health Care Reit, Inc. - Notes (US) 6.0% due 11/15/13 .................................... 700 689 Hospitality Properties Trust - Sr. Notes (US) 6.75% due 02/15/13 ................................... 100 104 iStar Financial, Inc. - Sr. Notes (US) 7.0% due 03/15/08 .................................... 1,900 2,014 Price Reit, Inc. (US) 7.5% due 11/05/06 .................................... 125 137 Simon Property Group LP - Notes (US) 5.45% due 03/15/13 ................................... 100 99 Socgen Real Estate Co. LLC - Ser. A 144A (a) (US) 7.64% due 12/29/49 ................................... 110 121 ------ 6,107 Real Estate Operations - 0.0% EOP Operating, Ltd. - Notes (US) 7.5% due 04/19/29 .................................... 50 53 Road & Rail - 0.0% Norfolk Southern Corp. - Notes (US) 7.05% due 05/01/37 ................................... 50 53 Union Pacific Corp. - Sr. Notes (US) 6.25% due 05/01/34 ................................... 50 49 Union Pacific Resources Group, Inc. - Ser. 2002-1 (US) 6.061% due 01/17/23 .................................. 50 53 ------ 155 Semiconductor Equipment & Products - 0.0% Amkor Technologies, Inc. - Sr. Notes (US) 7.75% due 05/15/13 ................................... 75 71 Specialty Retail - 0.0% Pathmark Stores, Inc. - Sr. Sub. Notes (US) 8.75% due 02/01/12 ................................... $ 75 $ 75 Telephone - 0.1% Centennial Communications Corp. - Sr. Notes 144A (a) (US) 8.125% due 02/01/14 .................................. 75 69 Cincinatti Bell, Inc. - Sr. Notes (US) 7.25% due 07/15/13 ................................... 50 47 Citizens Communications Co. - Sr. Notes (US) 9.0% due 08/15/31 .................................... 1,600 1,543 Qwest Services Corp. - Sr. Sub. Sec. Notes 144A (a) (US) 13.5% due 12/15/10 ................................... 75 87 Royal KPNNV - Notes (US) 8.375% due 10/01/30 .................................. 40 49 SBC Communications, Inc. - Notes (US) 5.875% due 02/01/12 .................................. 50 51 ------ 1,846 Textiles & Apparel - 0.0% Payless Shoesource, Inc. - Sr. Sub. Notes (US) 8.25% due 08/01/13 ................................... 75 74 Tobacco - 0.0% Altria Group, Inc. - Notes (US) 7.0% due 11/04/13 .................................... 700 713 Badger Tobacco (US) 6.125% due 06/01/27 .................................. 170 154 ------ 867 U.S. Government Agencies - 11.0% Federal Home Loan Bank - Notes (US) 2.5% due 12/15/05 .................................... 875 874 2.625% due 07/15/08 .................................. 370 352 Federal Home Loan Bank - Sr. Notes (US) 5.8% due 09/02/08 .................................... 1,000 1,068 Federal Home Loan Mortgage Corp. - Bonds (US) 5.0% due 07/25/34 .................................... 8,000 7,720 Federal Home Loan Mortgage Corp. - Debs. (US) 5.5% due 07/15/06 .................................... 480 502 5.875% due 03/21/11 .................................. 1,120 1,177 6.25% due 07/15/32 ................................... 2,000 2,107 Federal Home Loan Mortgage Corp. - Bonds Ser. 2590 CLIP (US) 5.5% due 08/31/15 .................................... 4,000 1,385 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued Federal Home Loan Mortgage Corp. - Bonds (US) 5.5% due 01/01/34 ................................... $ 2,410 $ 2,403 6.0% due 08/01/16 ................................... 268 280 6.0% due 08/01/17 ................................... 321 335 6.5% due 03/01/17 ................................... 170 179 6.5% due 06/25/34 ................................... 5,000 5,209 Federal National Mortgage Assoc. - Bonds (US) 7.5% due 01/25/28 ................................... 113 121 1.0% due 09/01/33 ................................... 660 653 3.875% due 07/01/33 ................................. 177 174 4.5% due 07/25/18 ................................... 16,500 16,118 4.5% due 10/01/18 ................................... 4,642 4,548 5.0% due 05/01/18 ................................... 355 357 5.0% due 07/25/18 ................................... 7,500 7,507 5.0% due 10/01/18 ................................... 952 956 5.0% due 07/25/33 ................................... 10,100 9,753 5.0% due 03/01/34 ................................... 6,910 6,697 5.0% due 03/01/34 ................................... 4,812 4,663 5.5% due 07/25/15 ................................... 15,240 15,583 5.5% due 06/01/33 ................................... 2,846 2,840 5.5% due 07/25/33 ................................... 10,100 10,049 5.5% due 08/01/33 ................................... 6,040 6,029 5.5% due 11/01/33 ................................... 8,569 8,552 5.5% due 12/01/33 ................................... 1,154 1,152 5.5% due 02/01/34 ................................... 6,531 6,508 5.5% due 02/01/34 ................................... 1,367 1,362 6.0% due 07/01/16 ................................... 203 212 6.0% due 03/01/17 ................................... 2,459 2,570 6.0% due 01/01/33 ................................... 3,932 4,021 6.0% due 03/01/33 ................................... 3,117 3,188 6.0% due 07/25/33 ................................... 11,500 11,974 6.0% due 07/25/33 ................................... 14,332 14,628 6.5% due 07/25/18 ................................... 7,244 7,645 6.5% due 04/01/32 ................................... 944 983 6.5% due 07/25/33 ................................... 14,253 14,836 6.5% due 04/01/34 ................................... 783 817 7.0% due 09/01/16 ................................... 216 229 7.0% due 11/01/30 ................................... 64 67 7.0% due 09/01/31 ................................... 110 116 7.0% due 12/01/31 ................................... 340 360 7.0% due 03/01/32 ................................... 137 145 7.0% due 04/01/32 ................................... 80 85 7.0% due 07/25/33 ................................... 7,080 7,465 7.5% due 11/01/30 ................................... 65 69 7.5% due 06/01/31 ................................... 265 284 8.0% due 12/01/29 ................................... 177 193 Federal National Mortgage Assoc. - Notes (US) 2.5% due 06/15/08 ................................... 3,000 2,850 4.25% due 07/15/07 .................................. 7,000 7,129 4.375% due 03/15/13 ................................. 4,250 4,054 6.0% due 12/15/05 ................................... 555 582 6.0% due 05/15/08 ................................... $ 775 $ 835 6.625% due 11/15/10 ................................. 2,700 2,998 Federal National Mortgage Assoc. - Bonds Cl. 2 (US) 5.0% due 06/01/33 ................................... 155 43 5.5% due 11/01/33 ................................... 7,502 2,132 Federal National Mortgage Assoc. - Debs. (US) 6.625% due 11/15/30 ................................. 3,462 3,810 Federal National Mortgage Assoc. - Bonds Ser. 2001-50 Cl. BA (US) 7.0% due 10/25/41 ................................... 128 136 Government National Mortgage Assoc. - Bonds (US) 5.0% due 10/15/33 ................................... 1,145 1,113 5.5% due 01/15/34 ................................... 1,060 1,060 6.0% due 06/15/33 ................................... 2,645 2,717 6.5% due 11/15/32 ................................... -- 8.0% due 11/15/30 ................................... 189 207 -------- 226,766 U.S. Governmental - 5.3% U.S. Treasury - Notes (US) 1.125% due 06/30/05 ................................. 6,250 6,193 1.625% due 09/30/05 ................................. 1,800 1,787 1.625% due 02/28/06 ................................. 36,822 36,283 1.75% due 12/31/04 .................................. 4,450 4,451 2.0% due 11/30/04 ................................... 2,000 2,003 2.25% due 07/31/04 .................................. 2,900 2,902 3.0% due 02/15/09 ................................... 14,351 13,906 3.625% due 01/15/08 ................................. 1,189 1,299 3.875% due 02/15/13 ................................. 1,020 975 4.0% due 06/15/09 ................................... 4,819 4,860 4.75% due 05/15/14 .................................. 12,558 12,689 5.0% due 02/15/11 ................................... 2,050 2,146 5.75% due 08/15/10 .................................. 3,275 3,571 6.0% due 08/15/09 ................................... 1,110 1,220 6.75% due 05/15/05 .................................. 3,465 3,605 U.S. Treasury - Bonds (US) 5.25% due 02/15/29 .................................. 2,695 2,642 5.375% due 02/15/31 ................................. 4,343 4,380 6.5% due 11/15/26 ................................... 92 105 8.0% due 11/15/21 ................................... 285 373 8.875% due 08/15/17 ................................. 2,605 3,570 -------- 108,960 Whole Loan CMOs - 0.3% GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C (US) 1.58% due 05/25/34 .................................. 3,000 3,000 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004 A1 Cl. 2A1 (US) 4.67% due 02/25/34 .................................. 450 449 SCHEDULE OF INVESTMENTS-Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- -------- ----------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Whole Loan CMOs - Continued Structured Asset Securities Corp. - Ser. 2004-6XS Cl. M1 (US) 4.92% due 03/25/34 .............................. $ 2,500 $ 2,437 Structured Assets Securities Corp. (US) 8.517% due 07/15/27 ............................. 70 75 ---------- 5,961 Wireless Telecommunications Services - 0.1% AT&T Wireless, Inc. - Sr. Notes (US) 8.75% due 03/01/31 .............................. 767 935 Dobson Communications Corp. - Sr. Notes (US) 10.875% due 07/01/10 ............................ 100 87 Nextel Communications, Inc. - Sr. Notes (US) 7.375% due 08/01/15 ............................. 50 50 Triton PCS, Inc. - Sr. Sub. Notes (US) 8.75% due 11/15/11 .............................. 75 62 Western Wireless Corp. - Sr. Notes (US) 9.25% due 07/15/13 .............................. 50 51 ---------- 1,185 ---------- TOTAL PUBLICLY-TRADED BONDS- (Cost $694,353) 33.7% 698,195 -------- ---------- TOTAL LONG-TERM INVESTMENTS- (Cost $1,884,692) 98.9% 2,046,754 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 7.7% State Street Navigator Securities Lending Portfolio ............................... 158,706 158,706 SHORT-TERM INVESTMENTS - 6.9% Investment in joint trading account 1.344% due 07/01/04 (Cost $142,528) ................................. 142,528 142,528 -------- ---------- TOTAL INVESTMENTS- (Cost $2,185,926) 113.5% 2,347,988 Payables, less cash and receivables- (13.5)% (279,138) -------- ---------- NET ASSETS- 100.0% $2,068,850 ======== ========== (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $34,711 or 1.7% of net assets of the Portfolio. ADR-American Depository Receipt. See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY COUNTRY % of Country Market Long-Term Abbreviation Value Investments ------------ ---------- ----------- (000s) United States ........................ US $2,046,488 100.0% Supra National ....................... XU 114 0.0% Italy ................................ IT 96 0.0% Canada ............................... CA 56 0.0% ---------- ----- $2,046,754 100.0% ========== ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Managed Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $480 1.50% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $156,092 $158,706 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At December 31, 2003, the Fund had no open forward foreign currency contracts. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the the Fund had approximate net tax basis capital loss carryforwards, which may be NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued applied against any net taxable gains, as follows: $2,001, $90,271, $87,450 and $23,686 which expire in 2008, 2009, 2010 and 2011, respectively. Certain of the above losses may be limited under sections 382-384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $61. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $500 Million and Excess Over First $500 Million $1 Billion $1 Billion ------------------ ---------------- ----------- 0.74% 0.68% 0.65% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $255. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. John Hancock has also entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, and under its supervision, is also responsible for the day-to-day investment management of the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities ---------- -------------------- $2,986,327 $3,008,099 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral held for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $2,155,706 $224,195 $(26,248) $197,947 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and premium amortization and market discount accretion on debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $203,408 $197,947 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (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 $63,276 $-- $8,852 2002 39,246 -- -- Inception: May 1, 1994 -------------------------------------------------------------------------------- Mid Cap Growth Fund (FORMERLY SMALL / MID CAP GROWTH FUND) Wellington Management Company, LLP Frank J. Boggan -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 2.79%, underperforming its custom benchmark. Relative to Morningstar peers, the Fund has an above average rating of 5 with an above average risk profile. . On May 1st, the Fund's name changed to reflect the strategy's focus on primarily mid cap companies. Wellington continues to manage the Fund. . The Fund underperformed its benchmark primarily due to unfavorable security selection decisions, especially in the information technology sector. . The Fund's exposure to the health care sector was the largest contributor to absolute returns, while exposures to information technology companies were the largest detractors. . At quarter end, the Fund held the most significant overweight to the Health Care sector. The Information Technology sector has the largest exposure in the Fund, yet it is underweight relative to its Index. . The manager employs fundamental research to identify high quality companies with above average growth characteristics relative to industry peers. The Fund emphasizes companies with profitable growth characteristics, strong balance sheets and attractive valuations. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ Chesapeake Energy Corp. 2.8% Pactiv Corp. 2.6% Arthur J. Gallagher & Co. 2.5% Varian Semiconductor Equipment Associates, Inc. 2.5% Michaels Stores, Inc. 2.4% Fisher Scientific International, Inc. 2.4% O'Reilly Automotive, Inc. 2.3% Petco Animal Supplies, Inc. 2.3% Federated Investments, Inc. 2.2% ITT Educational Services, Inc. 2.1% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Mid Cap Mid Cap Growth Growth Fund Benchmark/4/ ------- ------------ YTD/3/ 2.79% 5.06% 1 Year 27.32 29.39 3 Years 6.36 0.03 5 Years 4.97 1.87 10 Years 10.56 11.91 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Mid Cap Growth MORNINGSTAR RISK/1/: . Above Average (VL/VUL) . Above Average (VA) MORNINGSTAR RATING/1/: . ***** (VL/VUL) . ***** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 24% Health Care 23% Consumer Discretionary 20% Industrials 13% Financials 10% Energy 5% Materials 3% Consumer Staples 2% Telecommunication Services 1% Utilities 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 482 VL/VUL subaccounts and 850 VA subaccounts in the Morningstar Mid Cap Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions, and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate that shares, when redeemed, may be worth more or less than their original cost. Small company investing entails special risks as discussed in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Mid Cap Growth Fund benchmark is the Russell Mid Cap(TM) Growth Index from May 1994 to April 1999 and the Russell 2500(TM) Growth Index May 1999 to April 2004 and the Russell Mid Cap(TM) Growth Index May 2004 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $54,808 of securities loaned (Note B)) ..................................... $202,937 Net unrealized appreciation of investments ......................... 13,498 Short-term investments at value .................................... 58,882 -------- Total investments ............................................ 275,317 Receivable for: Investments sold ................................................ 4,448 Dividends ....................................................... 80 -------- Total assets ....................................................... 279,845 -------- LIABILITIES Payables for: Investments purchased ........................................... 3,753 Collateral for securities on loan ............................... 55,237 Accrued operating expenses ...................................... 42 -------- Total liabilities .................................................. 59,032 -------- Net assets ......................................................... $220,813 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 14,255 -------- Net asset value per share .......................................... $ 15.49 ======== Composition of net assets: Capital paid-in ................................................. $184,766 Accumulated net realized gain on investments futures and foreign currency transactions ................................ 23,247 Undistributed net investment loss ............................... (698) Net unrealized appreciation of investments ...................... 13,498 -------- Net assets ......................................................... $220,813 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Growth Fund INVESTMENT INCOME Interest ........................................................ $ 16 Dividends ....................................................... 350 Securities lending .............................................. 23 -------- Total investment income ............................................ 389 -------- EXPENSES Investment advisory fee ......................................... 1,032 Auditors fees ................................................... 13 Custodian fees .................................................. 43 Legal fees ...................................................... 13 Printing & mailing fees ......................................... 9 Trustees' fees................................................... 4 Other fees ...................................................... 8 -------- Total expenses ..................................................... 1,122 -------- Less custodian expense reduction offset by commission recapture arrangement (Note C) ......................................... (35) -------- Net expenses ....................................................... 1,087 -------- Net investment loss ................................................ (698) -------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................ 26,975 Change in unrealized depreciation on investments ................ (20,265) -------- Net realized and unrealized gain ................................... 6,710 -------- Net increase in net assets resulting from operations ............... $ 6,012 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Mid Cap Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ....................................... $ (698) $ (694) Net realized gain ......................................... 26,975 16,619 Change in net unrealized appreciation (depreciation) ...... (20,265) 52,166 -------- -------- Net increase in net assets resulting from operations ... 6,012 68,091 Distributions to shareholders from: Realized gains ............................................ (14,419) -------- Decrease in net assets resulting from distributions .... (14,419) From fund share transactions: Proceeds from shares sold ................................. 31,114 77,826 Distributions reinvested .................................. 14,419 Payment for shares redeemed ............................... (39,335) (63,853) -------- -------- Increase (decrease) in net assets from fund share transactions ........................................ (8,221) 28,392 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ........................ (2,209) 82,064 NET ASSETS Beginning of Period ....................................... 223,022 140,958 -------- -------- End of Period (including undistributed net investment loss of $(698) and $0, respectively) ................... $220,813 $223,022 ======== ======== Analysis of fund share transactions: Sold ...................................................... 2,013 5,839 Reinvested ................................................ 970 Redeemed .................................................. (2,557) (4,848) -------- -------- Net increase (decrease) in fund shares outstanding ........... (544) 1,961 ======== ========
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:
Mid Cap Growth Fund -------------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, --------------------------------------------------- 2004 2003 2002 2001 2000 -------------- ----------- ----------- ----------- --------- Net Assets Value at Beginning of Period ................. $ 15.07 $ 10.98 $ 14.09 $ 13.70 $ 14.03 Income from Investment Operations: Net Investment Loss .................................. (0.06) (0.02) (0.09) (0.06) (0.02) Net Realized and Unrealized Gain (Loss) on Investment(a) ..................................... 0.48 5.15 (2.88) 0.45 1.27 -------- -------- -------- -------- -------- Total From Investment Operations ..................... 0.42 5.13 (2.97) 0.39 1.25 Less Distributions: Distribution from Net Realized Gains on Investments ....................................... (1.04) (0.14) (1.43) Distribution from Excess of Net Investment Income/ Gains ............................................. (0.15) Distribution from Capital Paid-in .................... -------- -------- -------- -------- -------- Total Distributions .................................. (1.04) (0.14) (1.58) -------- -------- -------- -------- -------- Net Assets Value at End of Period ....................... $ 15.49 $ 15.07 $ 10.98 $ 14.09 $ 13.70 ======== ======== ======== ======== ======== Total Investment Return(b) .............................. 2.79%(e) 46.87% (21.13)% 2.83% 9.25% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................................ 1.05%(d)(f) 1.06%(d) 1.07%(c) 0.91%(c) 0.85% Ratio of Net Investment Loss to Average Net Assets ............................................ (0.65)%(f) (0.40)% (0.72)% (0.40)% (0.20)% Portfolio Turnover Rate .............................. 60.16%(e) 124.21% 130.01% 113.73% 103.19% Net Assets End of Period (000s Omitted) ................. $220,813 $223,022 $140,958 $185,232 $190,010
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the annual expense ratio would have been 1.07%, and 0.91% for the years ended December 31, 2002, and 2001, respectively. (d) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (e) Not annualized. (f) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.6% Engineered Support Systems, Inc. * ...................... 34,100 $ 1,995 Precision Castparts Corp. ............................... 26,300 1,439 ------- 3,434 Airlines - 0.3% Airtran Holdings, Inc. * ................................ 47,900 677 Auto Components - 0.9% Lear Corp. * ............................................ 35,400 2,088 Beverages - 0.4% Constellation Brands, Inc. - Cl. A * .................... 23,400 869 Biotechnology - 4.0% Abgenix, Inc. * ......................................... 42,700 500 Albany Molecular Research, Inc. * ....................... 36,400 471 Celgene Corp. * ......................................... 20,900 1,197 Cephalon, Inc. * ........................................ 18,400 994 CV Therapeutics, Inc. * ................................. 70,000 1,173 Exelixis, Inc. * ........................................ 63,000 636 Human Genome Sciences, Inc. * ........................... 70,000 814 Incyte Pharmacuticals, Inc. ............................. 130,000 993 Millennium Pharmaceuticals, Inc. * ...................... 77,000 1,062 Vertex Pharmaceuticals, Inc. * .......................... 100,000 1,084 ------- 8,924 Commercial Services & Supplies - 7.0% Career Education Corp. * ................................ 43,900 2,000 Checkfree Corp. * ....................................... 56,900 1,707 Corporate Executive Board Co. * ......................... 35,200 2,034 DST Systems, Inc. * ..................................... 46,100 2,217 ITT Educational Services, Inc. * ........................ 119,700 4,551 Waste Connections, Inc. * ............................... 98,850 2,932 ------- 15,441 Communications Equipment - 6.2% 3Com Corp. .............................................. 127,000 794 Avaya, Inc. * ........................................... 75,000 1,184 Emulex Corp. * .......................................... 60,000 859 Extreme Networks, Inc. * ................................ 85,000 469 Foundry Networks, Inc. * ................................ 85,000 1,196 Polycom, Inc. * ......................................... 105,800 2,371 Research in Motion, Ltd. * .............................. 13,000 890 Tekelec, Inc. * ......................................... 190,000 3,452 Utstarcom, Inc. * ....................................... 84,000 2,541 ------- 13,756 Computers & Peripherals - 1.1% Maxtor Corp. * .......................................... 120,000 795 SanDisk Corp. * ......................................... 79,100 1,716 ------- 2,511 Construction & Engineering - 0.2% Dycom Industries, Inc. * ................................ 14,500 406 Containers & Packaging - 2.5% Pactiv Corp. * .......................................... 221,900 5,534 Diversified Financials - 5.9% Ameritrade Holding Corp. * .............................. 177,100 $ 2,010 E*TRADE Group, Inc. * ................................... 285,300 3,181 Federated Investments, Inc. - Cl. B ..................... 157,300 4,773 Legg Mason, Inc. * ...................................... 34,700 3,158 ------- 13,122 Electrical Equipment - 1.5% American Power Conversion ............................... 168,700 3,315 Electronic Equipment & Instruments - 3.2% Benchmark Electronics, Inc. * ........................... 80,949 2,356 Ingram Micro, Inc. - Cl. A * ............................ 120,700 1,746 Plexus Corp. * .......................................... 20,000 270 TTM Technologies, Inc. * ................................ 36,000 427 Waters Corp. * .......................................... 47,500 2,269 ------- 7,068 Energy Equipment & Services - 1.6% Ensco International, Inc. ............................... 121,000 3,521 Food Products - 1.4% Hain Celestial Group, Inc. * ............................ 166,000 3,005 Health Care Equipment & Supplies - 7.6% Cooper Cos, Inc. ........................................ 43,200 2,729 Diagnostic Products Corp. ............................... 98,500 4,328 Edwards Lifesciences Corp. * ............................ 72,900 2,540 Fisher Scientific International, Inc. ................... 88,400 5,105 Viasys Healthcare, Inc. * ............................... 95,300 1,993 ------- 16,695 Health Care Providers & Services - 6.2% Caremark Rx, Inc. * ..................................... 32,700 1,077 Coventry Health Care, Inc. * ............................ 53,500 2,616 Healthnet, Inc. * ....................................... 120,000 3,180 Odyssey Healthcare, Inc. * .............................. 169,900 3,198 Triad Hospitals, Inc. * ................................. 98,200 3,656 ------- 13,727 Hotels Restaurants & Leisure - 0.6% Krispy Kreme Doughnuts, Inc. * .......................... 63,000 1,203 LifeTime Fitness, Inc. * ................................ 4,100 86 ------- 1,289 Household Durables - 2.2% Garmin, Ltd. ............................................ 12,000 445 Standard Pacific Corp. .................................. 88,300 4,353 ------- 4,798 Insurance - 3.9% Ambac Financial Group, Inc. ............................. 43,600 3,202 Arthur J. Gallagher & Co. ............................... 179,800 5,475 ------- 8,677 Internet & Catalog Retail - 0.3% 1-800 Flowers.com., Inc. - Cl. A * ...................... 82,000 667 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Internet Software & Services - 1.5% Ask Jeeves, Inc. * ..................................... 66,300 $ 2,588 DoubleClick, Inc. ...................................... 90,000 699 -------- 3,287 Machinery - 0.8% Graco, Inc. * .......................................... 55,600 1,726 Oil & Gas - 3.4% Chesapeake Energy Corp. ................................ 415,100 6,111 Plains Exploration & Production Co. * .................. 73,200 1,343 -------- 7,454 Pharmaceuticals - 3.2% Biovail Corp. * ........................................ 131,100 2,489 King Pharmaceuticals, Inc. * ........................... 206,100 2,360 Medco Health Solutions, Inc. * ......................... 36,300 1,361 Watson Pharmaceuticals, Inc. * ......................... 30,900 831 -------- 7,041 Road & Rail - 1.7% Yellow Roadway Corp. * ................................. 91,800 3,659 Semiconductor Equipment & Products - 6.4% Conexant Systems, Inc. * ............................... 145,000 628 Fairchild Semiconductor Corp. - Cl. A * ................ 104,300 1,707 Integrated Device Technology, Inc. * ................... 64,000 886 International Rectifier Corp. * ........................ 58,300 2,415 MPS Group, Inc. * ...................................... 60,000 727 Novellus Systems, Inc. * ............................... 44,300 1,393 ON Semiconductor Corp. * ............................... 77,000 387 Skyworks Solutions, Inc. ............................... 76,000 663 Varian Semiconductor Equipment Associates, Inc. ........ 140,200 5,406 -------- 14,212 Software - 3.1% Ascential Software Corp. ............................... 58,000 927 Cadence Design Systems, Inc. * ......................... 144,100 2,108 Cognex Corp. ........................................... 29,000 1,116 Dendrite International, Inc. * ......................... 73,500 1,366 THQ, Inc. * ............................................ 62,100 1,422 -------- 6,939 Specialty Retail - 12.8% CDW Corp. .............................................. 47,700 3,041 Chicos Fas, Inc. * ..................................... 77,600 3,505 Michaels Stores, Inc. * ................................ 94,200 5,181 O'Reilly Automotive, Inc. * ............................ 111,200 5,026 Pacific Sunwear of California, Inc. * .................. 224,400 4,392 Petco Animal Supplies, Inc. * .......................... 155,600 5,012 Williams-Sonoma, Inc. * ................................ 66,600 2,195 -------- 28,352 Textiles & Apparel - 4.4% Coach, Inc. * .......................................... 60,900 2,752 Columbia Sportswear Co. * .............................. 81,000 4,424 Liz Claiborne, Inc. * .................................. 70,200 $ 2,526 -------- 9,702 Trading Companies & Distributors - 1.5% Fastenal Co. * ......................................... 58,300 3,313 Wireless Telecommunications Services - 0.6% Nextel Partners, Inc. - Cl. A * ........................ 77,000 1,226 -------- TOTAL COMMON STOCK- (Cost $202,937) 98.0% 216,435 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 25.0% State Street Navigator Securities Lending Portfolio. ......................................... $55,237 55,237 SHORT-TERM INVESTMENTS - 1.7% Investment in joint trading account 1.344% due 07/01/04 (Cost $3,645) .................. 3,645 3,645 ------- -------- TOTAL INVESTMENTS-(Cost $261,819) 124.7% 275,317 Payables, less cash and receivables- (24.7)% (54,504) ------- -------- NET ASSETS- 100.0% $220,813 ======= ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Mid Cap Growth Fund, (formerly John Hancock Small/Mid Cap Growth), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $10,882 1.50% $2 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $54,808 $55,237 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003, through December 31, 2003, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 11, 2004, 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 ----------------- --------------- ------------ 1.00% 0.95% 0.90% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $35. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $129,020 $140,469 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------- -------------- $228,422 $35,759 $(5,249) $30,510 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $-- $30,510 In addition, the tax character of distributions paid by the Fund are summarized as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $10,380 $4,039 -- 2002 -- -- $1,738 Included in the Fund's 2003 distributions from ordinary income is $5,111 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. Inception: May 1, 2003 -------------------------------------------------------------------------------- Mid Cap Value Fund T. Rowe Price Associates, Inc. David J. Wallack -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 7.88%, outperforming its benchmark, the Russell MidCap Value Index. . The Fund outperformed its benchmark primarily due to stock selection decisions especially within health care and telecomm services. . The Fund's exposures to the energy and financial sectors were the largest contributors to absolute performance. . The Fund increased its exposure to financials during the period but remained well below the index weight at quarter end. The consumer staples sector was also underweight. Alternatively, the fund ended the quarter with a greater than benchmark weight in the health care and telecommunication services sectors. . The Fund employs a bottom-up, value-oriented investment approach, focusing on companies with attractive valuations, strong cash flow generation and sound balance sheets. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ Diamond Offshore Drilling, Inc. 2.5% St. Paul Cos., Inc. 1.7% Grant Prideco, Inc. 1.5% Neighborcare, Inc. 1.4% MedImmune, Inc. 1.4% Safeco Corp. 1.4% Genworth Financial, Inc. 1.3% Tenet Healthcare Corp. 1.3% NiSource, Inc. 1.3% Viad Corp. 1.3% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Russell Mid Cap Mid Cap(R) Value Value Fund Index/4/ ---------- ---------------- YTD/3/ 7.88% 7.16% 1 Year 31.25 30.81 Since Inception (5/1/03) 39.45 36.14 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Mid Cap Value MORNINGSTAR RISK/1/: . (VL/VUL)NA . (VA) NA MORNINGSTAR RATING/1/: . (VL/VUL) N/A . (VA) N/A -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 24% Consumer Discretionary 15% Industrials 11% Information Technology 11% Health Care 9% Utilities 9% Energy 8% Materials 6% Consumer Staples 4% Telecommunication Services 3% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04 this fund is not yet rated. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ The Russell Midcap(R) Valve Index measures the performance of those Russell Midcap companies with lower price-to-book nation and lower forecasted growth values. The stocks are also members of the Russell 1000(R) Value Index. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Value Fund (000's Omitted) ASSETS Long term investments at cost ........................................ $29,794 Net unrealized appreciation of investments ........................... 2,302 Short-term investments at value ...................................... 1,486 ------- Total investments .............................................. 33,582 Receivable for: Investments sold .................................................. 157 Dividends ......................................................... 31 Other assets ...................................................... 5 ------- Total assets ......................................................... 33,775 ------- LIABILITIES Payables for: Investments purchased ............................................. 391 ------- Total liabilities .................................................... 391 ------- Net assets ........................................................... $33,384 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ....................................................... 2,347 ------- Net asset value per share ............................................ $ 14.22 ======= Composition of net assets: Capital paid-in ................................................... $28,325 Accumulated net realized gain on investments, futures and foreign currency transactions .................................. 2,757 Net unrealized appreciation of investments ........................ 2,302 ------- Net assets ........................................................... $33,384 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Value Fund (000's Omitted) INVESTMENT INCOME Interest ....................................................... $ 9 Dividends (net of foreign withholding tax of $2) ............... 208 ------ Total investment income .............................................. 217 ------ EXPENSES Investment advisory fee ........................................ 166 Auditors fees .................................................. 2 Custodian fees ................................................. 26 Legal fees ..................................................... 2 Printing & mailing fees ........................................ 2 ------ Total expenses ....................................................... 198 Less expenses reimbursed ....................................... (17) Less custodian expense reduction offset by commission recapture arrangement (Note C) .............................. (20) ------ Net expenses ......................................................... 161 ------ Net investment income ................................................ 56 ------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments .................................. 2,701 Change in unrealized depreciation on investments .................. (616) ------ Net realized and unrealized gain ..................................... 2,085 ------ Net increase in net assets resulting from operations ................. $2,141 ====== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Mid Cap Value Fund (000's Omitted)
Unaudited Six-Month Period from Period Ended May 1, 2003 (*) June 30, to December 31, 2004 2003 ------------ --------------- INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ......................................... $ 56 $ 45 Net realized gain ............................................. 2,701 816 Change in net unrealized appreciation (depreciation) .......... (616) 2,918 -------- -------- Net increase in net assets resulting from operations ....... 2,141 3,779 Distributions to shareholders from: Net investment income ......................................... (59) (42) Realized gains ................................................ (760) -------- -------- Decrease in net assets resulting from distributions ........ (59) (802) From fund share transactions: Proceeds from shares sold ..................................... 17,350 23,951 Distributions reinvested ...................................... 59 802 Payment for shares redeemed ................................... (10,597) (3,240) -------- -------- Increase in net assets from fund share transactions ........ 6,812 21,513 -------- -------- NET INCREASE IN NET ASSETS ....................................... 8,894 24,490 NET ASSETS Beginning of Period ........................................... 24,490 -------- End of Period (including undistributed net investment income of $0 and $3, respectively) ................................ $ 33,384 $ 24,490 ======== ======== Analysis of fund share transactions: Sold .......................................................... 1,264 2,073 Reinvested .................................................... 4 62 Redeemed ...................................................... (775) (281) -------- -------- Net increase in fund shares outstanding .......................... 493 1,854 ======== ========
* Commenced of Operations. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Mid Cap Value Fund ---------------------------------- Unaudited Period from Period Ended May 1, to June 30, December 31, 2004 2003(e) ------------ ------------ Net Assets Value at Beginning of Period ................... $ 13.21 $ 10.00 Income from Investment Operations: Net Investment Income .................................. 0.03 0.04 Net Realized and Unrealized Gain on Investment(a) ...... 1.01 3.64 ------- ------- Total From Investment Operations ....................... 1.04 3.68 Less Distributions: Distribution from Net Investment Income ................ (0.03) (0.04) Distribution from Net Realized Gains on Investments .... (0.43) ------- ------- Total Distributions .................................... (0.03) (0.47) ------- ------- Net Assets Value at End of Period ......................... $ 14.22 $ 13.21 ======= ======= Total Investment Return(b) ................................ 7.88%(c) 36.77%(c) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ....... 1.19%(d)(f)(g) 1.20%(d)(f)(g) Ratio of Net Investment Income to Average Net Assets ... 0.37%(d) 0.58%(d) Portfolio Turnover Rate ................................ 54.88%(c) 56.93%(c) Net Assets End of Period (000s Omitted) ................... $33,384 $24,490
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Commencement of investment operations. (f) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the expense ratio would have been 1.30% for the period ending June 30, 2004, and 1.47% for the years ended December 31, 2003. (g) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Aerospace & Defense - 1.9% Raytheon Co. * ........................................... 10,200 $ 365 Rockwell Collins, Inc. * ................................. 8,300 276 ------- 641 Air Freight & Couriers - 0.1% CNF Transportation, Inc. * ............................... 600 25 Airlines - 1.2% Southwest Airlines Co. ................................... 24,300 408 Banks - 8.4% Charter One Financial, Inc. .............................. 5,500 243 Citizens Banking Corp. * ................................. 5,300 165 Commerce Bancshares, Inc. ................................ 3,925 180 First Horizon National Corp. ............................. 5,600 255 Huntington Bancshares, Inc. * ............................ 17,000 389 National Commerce Financial Corp. ........................ 6,900 224 Northern Trust Corp. ..................................... 8,100 342 Synovus Financial Corp. * ................................ 15,400 390 TCF Financial Corp. ...................................... 5,800 337 Union Planters Corp. * ................................... 9,000 268 ------- 2,793 Biotechnology - 2.0% Human Genome Sciences, Inc. * ............................ 7,900 92 MedImmune, Inc. * ........................................ 18,700 437 Vertex Pharmaceuticals, Inc. * ........................... 12,700 138 ------- 667 Chemicals - 1.1% Great Lakes Chemical Corp. ............................... 9,900 268 IMC Global, Inc. ......................................... 8,600 115 ------- 383 Commercial Services & Supplies - 7.2% Ceridian Corp. * ......................................... 11,900 268 Equifax, Inc. * .......................................... 14,500 359 Herman Miller, Inc. * .................................... 10,500 304 Hewitt Associates, Inc. * ................................ 2,700 74 Manpower, Inc. * ......................................... 5,800 295 ServiceMaster Co. ........................................ 15,600 192 The Bisys Group, Inc. * .................................. 26,800 377 Viad Corp. ............................................... 15,300 413 Weight Watchers International, Inc. ..................... 3,300 129 ------- 2,411 Commingled Fund - 0.5% iShares Trust ............................................ 1,400 163 Communications Equipment - 0.4% Tellabs, Inc. * .......................................... 14,400 126 Diversified Financials - 2.9% Charles Schwab Corp. * ................................... 37,100 356 Federated Investments, Inc. - Cl. B ...................... 4,900 149 Janus Capgroup, Inc. ..................................... 16,000 264 LaBranche & Co., Inc. * .................................. 23,200 $ 195 ------- 964 Diversified Telecommunication Services - 1.6% AT&T Corp. * ............................................. 13,400 196 Qwest Communications International, Inc. ................. 97,520 350 ------- 546 Electric Utilities - 5.1% CMS Energy Corp. * ....................................... 13,500 123 El Paso Electric Co. * ................................... 10,800 167 Firstenergy Corp. * ...................................... 7,500 280 NRG Energy, Inc. * ....................................... 16,600 412 Pinnacle West Capital Corp. * ............................ 4,900 198 Teco Energy, Inc. * ...................................... 28,900 346 Unisource Energy Corp. ................................... 2,805 70 Xcel Energy, Inc. ........................................ 5,600 94 ------- 1,690 Electrical Equipment - 1.2% Molex, Inc. - CL A ....................................... 14,400 393 Electronic Equipment & Instruments - 1.1% AVX Corp. ................................................ 17,100 247 Ingram Micro, Inc. - Cl. A * ............................. 8,800 127 ------- 374 Energy Equipment & Services - 6.4% Baker Hughes, Inc. * ..................................... 1,900 72 Cooper Cameron Corp. * ................................... 7,100 346 Diamond Offshore Drilling, Inc. * ........................ 34,200 815 Grant Prideco, Inc. * .................................... 25,700 474 Hanover Compressor Co. ................................... 21,300 253 Key Energy Services, Inc. * .............................. 5,400 51 Petroleum Geo Services ASA - ADR * ....................... 3,300 135 ------- 2,146 Food & Drug Retailing - 2.2% Agrium, Inc. ............................................. 5,000 73 Neighborcare, Inc. * ..................................... 14,400 451 Potash Corp. of Saskatchewan, Inc. ....................... 2,000 194 ------- 718 Food Products - 2.3% Archer Daniels Midland Co. * ............................. 7,100 119 Campbell Soup Co. * ...................................... 12,700 341 H.J. Heinz Co. ........................................... 7,600 298 ------- 758 Health Care Providers & Services - 4.6% Amerisource Bergen Corp. * ............................... 6,100 365 Healthsouth Corp. * ...................................... 49,100 295 Laboratory Corporation of America Holdings * ............................................ 1,600 63 Lincare Holdings, Inc. * ................................. 11,500 378 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Health Care Providers & Services - Continued Tenet Healthcare Corp. * ................................. 31,400 $ 421 ------- 1,522 Household Durables - 1.1% Newell Rubbermaid, Inc. .................................. 15,300 360 Insurance - 10.1% Aon Corp. * .............................................. 4,600 131 Conseco, Inc. ............................................ 12,600 251 Genworth Financial, Inc. - Cl. A * ....................... 18,800 431 Loews Corp. * ............................................ 3,400 204 Ohio Casualty Corp. * .................................... 14,100 284 Protective Life Corp. .................................... 4,700 182 Radian Group, Inc. ....................................... 6,900 330 Safeco Corp. * ........................................... 9,900 436 St. Paul Cos., Inc. ...................................... 13,517 548 UnumProvident Corp. * .................................... 20,700 329 XL Capital, Ltd. - Cl. A * ............................... 3,300 249 ------- 3,375 IT Consulting & Services - 1.0% BearingPoint, Inc. * ..................................... 38,500 341 Leisure Equipment & Products - 0.2% Eastman Kodak Co. * ...................................... 2,100 57 Media - 9.1% Cablevision Systems Corp. - Cl. A * ...................... 18,700 367 Cox Radio, Inc. - Cl. A * ................................ 8,400 146 Dow Jones & Co., Inc. * .................................. 8,000 361 Entercom Communications Corp. * .......................... 11,000 410 Lamar Advertising Co. * .................................. 2,000 87 Meredith Corp. * ......................................... 3,900 214 New York Times Co. - Cl. A * ............................. 5,000 224 Pearson plc - ADR ........................................ 31,700 396 Reuters Group plc - ADR .................................. 7,800 318 Scholastic Corp. * ....................................... 9,800 293 Washington Post Co. - Cl. B .............................. 243 226 ------- 3,042 Metals & Mining - 0.8% Meridian Gold, Inc. * .................................... 17,500 227 Nucor Corp. .............................................. 600 46 ------- 273 Multi-Utilities - 3.1% Duke Energy Co. .......................................... 18,000 365 Dynegy, Inc. - Cl. A * ................................... 59,500 254 NiSource, Inc. * ......................................... 20,100 414 ------- 1,033 Multiline Retail - 2.9% Big Lots, Inc. * ......................................... 12,900 187 Costco Wholesale Corp. ................................... 3,500 144 Dillard's, Inc. - Cl. A * ................................ 11,400 254 Family Dollar Stores, Inc. ............................... 12,700 $ 386 ------- 971 Oil & Gas - 1.3% Forest Oil Corp. * ....................................... 8,000 219 Murphy Oil Corp. ......................................... 3,100 228 ------- 447 Paper & Forest Products - 3.2% Bowater, Inc. ............................................ 8,100 337 Domtar, Inc. ............................................. 14,600 189 MeadWestvaco Corp. * ..................................... 13,100 385 Potlatch Corp. ........................................... 4,000 166 ------- 1,077 Pharmaceuticals - 1.8% Andrx Corp. * ............................................ 2,800 78 Barr Laboratories, Inc. * ................................ 4,200 142 King Pharmaceuticals, Inc. * ............................. 24,800 284 Valeant Pharmaceuticals International .................... 4,000 80 ------- 584 Real Estate Investment Trust - 1.6% Apartment Investment & Management Co. .................... 11,400 355 Equity Office Properties Trust * ......................... 3,400 92 Reckson Associates Realty Corp. .......................... 3,700 102 ------- 549 Road & Rail - 2.2% CSX Corp. * .............................................. 11,900 390 Union Pacific Corp. ...................................... 6,000 357 ------- 747 Semiconductor Equipment & Products - 1.0% Novellus Systems, Inc. * ................................. 10,900 343 Software - 3.7% BMC Software, Inc. * ..................................... 21,500 398 Cadence Design Systems, Inc. * ........................... 22,900 335 Intuit, Inc. * ........................................... 4,900 189 Network Associates, Inc. * ............................... 17,700 321 ------- 1,243 Specialty Retail - 0.9% Abercrombie & Fitch Co. .................................. 5,200 201 Gap, Inc. ................................................ 3,900 95 ------- 296 Textiles & Apparel - 0.3% Unifi, Inc. * ............................................ 32,400 95 Wireless Telecommunications Services - 1.5% Crown Castle International Corp. * ....................... 13,100 193 Telephone and Data Systems, Inc. ......................... 4,100 292 ------- 485 ------- TOTAL COMMON STOCK- (Cost $29,750) 96.0% 32,046 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS Electric/Gas - 0.0% Xcel Energy, Inc. - Sr. Notes 144A (a) 7.5% due 11/21/07 ..................................... $ 7 $ 11 Wireless Telecommunications Services - 0.1% United States Cellular Corp. - Notes 0.0% due 06/15/15 ..................................... 75 39 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $44) 0.1% 50 ------- -------- TOTAL LONG-TERM INVESTMENTS- (Cost $29,794) 96.1% 419,539 SHORT-TERM INVESTMENTS - 4.5% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,486) ........................................ 1,486 $ 1,486 ------- -------- TOTAL INVESTMENTS- (Cost $31,280) 100.6% 33,582 Payables, less cash and receivables- (0.6)% (198) ------- -------- NET ASSETS- 100.0% $ 33,384 ======= ======== * Non-income producing security. (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $11 or 0.0% of net assets of the Portfolio. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Mid Cap Value Fund (the "Fund"), which commenced operations on May 1, 2003, is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $1,033 1.52% $-- 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 June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $2. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Excess Over First $100 Million $100 Million ------------------ ------------ 1.05% 1.00% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $17 to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $20. John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price Associates, Inc., and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- --------------------- $22,851 $16,177 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $21,501 $2,949 $(33) $ 2,916 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $91 $-- $-- $2,916 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $803 $-- $-- Inception: May 1, 1998 -------------------------------------------------------------------------------- Mid Cap Value B Fund (FORMERLY SMALL/MID CAP CORE(SM) FUND) T. Rowe Price Associates, Inc. David J. Wallack -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 5.88%, underperforming its custom benchmark. Relative to Morningstar peers, the Fund has an above average rating of 4 with an above average risk profile. . On May 1st, the Fund's name, investment strategy and sub-adviser were changed. T. Rowe implemented an investment strategy for the Fund that is substantially the same as the investment strategy it now employs for the Mid Cap Value Fund. Under that strategy, the Fund will invest primarily in undervalued mid sized equities. . Since May 1st, the Fund underperformed its benchmark primarily due to unfavorable stock selection and sector allocation exposures. . The Fund employs a bottom-up, value-oriented investment approach, focusing on companies with attractive valuations, strong cash flow generation and sound balance sheets. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Diamond Offshore Drilling, Inc. 2.6% iShares Trust 1.9% St. Paul Cos., Inc. 1.7% Southwest Airlines Co. 1.5% Grant Prideco, Inc. 1.4% Safeco Corp. 1.4% Genworth Financial, Inc. 1.4% Neighborcare, Inc. 1.3% MedImmune, Inc. 1.3% NiSource, Inc. 1.3% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Mid Cap Mid Cap Value B Value B Fund Benchmark/4/ ------------ --------------- YTD/3/ 5.88% 7.08% 1 Year 33.45 33.26 3 Years 8.88 7.68 5 Years 8.72 8.64 Since Inception (5/1/98) 6.68 11.37 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Mid Cap Blend MORNINGSTAR RISK/1/: . Above Average (VL/ VUL) . Above Average (VA) MORNINGSTAR RATING/1/: . **** (VL/VUL) . **** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 25% Consumer Discretionary 15% Industrials 11% Information Technology 11% Health Care 9% Energy 8% Utilities 8% Materials 6% Consumer Staples 4% Telecommunication Services 3% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. Data reviewed by Morningstar reflects the Fund's previous investment strategy. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 190 VL/VUL subaccounts and 369 VA subaccounts in the Morningstar Mid Cap Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Small-company investing entails special risks as outlined in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Mid Cap Value B benchmark represents the Russell 2000, May 1998 to April 2004 and then the Russell Mid Cap Value, May 2004 to the present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted) ASSETS Long term investments at cost (including $8,797 of securities loaned (Note B)) ................................................. $ 99,310 Net unrealized appreciation on investments .......................... 4,132 Short-term investments at value ..................................... 12,527 -------- Total investments ................................................ 115,969 Cash ................................................................ 21 Receivables for: Investments sold ................................................. 522 Dividends ........................................................ 102 -------- Total assets ........................................................ 116,614 -------- LIABILITIES Payables for: Fund shares purchased ............................................ 762 Collateral for securities on loan ................................ 8,955 Accrued operating expenses ....................................... 15 -------- Total liabilities ................................................... 9,732 -------- Net assets .......................................................... $106,882 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ...................................................... 9,223 -------- Net asset value per share ........................................... $ 11.59 ======== Composition of net assets: Capital paid-in .................................................. $ 87,086 Accumulated net realized gain on investments, futures and foreign currency transactions ..................... 15,649 Undistributed net investment income .............................. 15 Net unrealized appreciation of: Investments ................................................... 4,132 -------- Net assets .......................................................... $106,882 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 13 Dividends (net foreign withholding tax of $1) ................... 862 Securities lending .............................................. 34 -------- Total investment income ............................................ 909 -------- EXPENSES Investment advisory fee ......................................... 540 Auditors fees ................................................... 6 Custodian fees .................................................. 29 Legal fees ...................................................... 6 Printing & mailing fees ......................................... 8 Trustees' fees .................................................. 1 Other fees ...................................................... 2 -------- Total expenses ..................................................... 592 Less expenses reimbursed ........................................ (1) -------- Net expenses ....................................................... 591 -------- Net investment income .............................................. 318 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. 15,784 Financial futures contracts .................................. (17) Change in unrealized depreciation on: Investments .................................................. (10,796) Futures ...................................................... (46) -------- Net realized and unrealized gain ................................... 4,925 -------- Net increase in net assets resulting from operations ............... $ 5,243 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 318 $ 298 Net realized gain ......................................... 15,767 7,777 Change in net unrealized appreciation (depreciation) ...... (10,842) 18,500 -------- -------- Net increase in net assets resulting from operations ... 5,243 26,575 Distributions to shareholders from: Net investment income ..................................... (303) (308) Realized gains ............................................ (7,773) -------- -------- Decrease in net assets resulting from distributions ....... (303) (8,081) From fund share transactions: Proceeds from shares sold ................................. 32,401 57,643 Distributions reinvested .................................. 303 8,081 Payment for shares redeemed ............................... (24,664) (38,459) -------- -------- Increase in net assets from fund share transactions .... 8,040 27,265 -------- -------- NET INCREASE IN NET ASSETS ................................... 12,980 45,759 NET ASSETS Beginning of Period ....................................... 93,902 48,143 -------- -------- End of Period (including undistributed net investment income of $15 and $0, respectively) .................... $106,882 $ 93,902 ======== ======== Analysis of fund share transactions: Sold ...................................................... 2,836 5,991 Reinvested ................................................ 27 744 Redeemed .................................................. (2,195) (3,991) -------- -------- Net increase in fund shares outstanding ...................... 668 2,744 ======== ========
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:
Mid Cap Value B Fund --------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ---------------------------------------------- 2004(f) 2003 2002 2001 2000 ------------ ------- ------- ------- ------- Net Assets Value at Beginning of Period ................ $ 10.98 $ 8.28 $ 9.82 $ 9.82 $ 9.82 Income from Investment Operations: Net Investment Income ............................... 0.03 0.04 0.04 0.05 0.05 Net Realized and Unrealized Gain (Loss) on Investment(a) .................................... 0.61 3.69 (1.54) 0.39 -------- ------- ------- ------- ------- Total From Investment Operations .................... 0.64 3.73 (1.50) 0.05 0.44 Less Distributions: Distribution from Net Investment Income ............. (0.03) (0.04) (0.04) (0.05) (0.05) Distribution from Net Realized Gains on Investments ...................................... (0.99) (0.32) Distribution from Excess of Net Investment Income/ Gains ............................................ (0.05) Distribution from Capital Paid-in ................... (0.02) -------- ------- ------- ------- ------- Total Distributions ................................. (0.03) (1.03) (0.04) (0.05) (0.44) -------- ------- ------- ------- ------- Net Assets Value at End of Period ...................... $ 11.59 $ 10.98 $ 8.28 $ 9.82 $ 9.82 ======== ======= ======= ======= ======= Total Investment Return(b) ............................. 5.88%(d) 45.15% (15.19)% 0.53% 4.63% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .... 1.15%(c)(e) 1.15%(c) 0.96%(c) 0.90%(c) 0.90%(c) Ratio of Net Investment Income to Average Net Assets ........................................... 0.62%(e) 0.45% 0.50% 0.52% 0.56% Portfolio Turnover Rate ............................. 161.45%(d) 125.00% 125.11% 96.88% 94.78% Net Assets End of Period (000s Omitted) ................ $106,882 $93,902 $48,143 $46,446 $21,636
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.16% for the period ending June 30, 2004, and 1.19%, 1.12%, 1.15%, and 1.23%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (d) Not annualized. (e) Annualized. (f) The Fund entered into a new sub-advisory agreement with T. Rowe Price Associates, Inc., during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.9% Raytheon Co. * .......................................... 32,300 $1,155 Rockwell Collins, Inc. * ................................ 27,000 900 ------ 2,055 Air Freight & Couriers - 0.1% CNF Transportation, Inc. * .............................. 2,400 100 Airlines - 1.4% Southwest Airlines Co. .................................. 90,300 1,514 Banks - 8.3% Charter One Financial, Inc. ............................. 17,200 760 Citizens Banking Corp. * ................................ 17,000 528 Commerce Bancshares, Inc. ............................... 11,973 550 First Horizon National Corp. ............................ 18,300 832 Huntington Bancshares, Inc. * ........................... 54,500 1,248 National Commerce Financial Corp. ....................... 21,700 705 Northern Trust Corp. .................................... 27,200 1,150 Synovus Financial Corp. * ............................... 48,500 1,228 TCF Financial Corp. ..................................... 18,200 1,057 Union Planters Corp. * .................................. 27,800 829 ------ 8,887 Biotechnology - 1.9% Human Genome Sciences, Inc. * ........................... 25,300 294 MedImmune, Inc. * ....................................... 57,500 1,345 Vertex Pharmaceuticals, Inc. * .......................... 35,400 384 ------ 2,023 Chemicals - 0.7% Great Lakes Chemical Corp. .............................. 14,800 400 IMC Global, Inc. ........................................ 28,100 377 ------ 777 Commercial Services & Supplies - 7.3% Ceridian Corp. * ........................................ 37,600 846 Equifax, Inc. * ......................................... 47,200 1,168 Herman Miller, Inc. * ................................... 34,400 995 Hewitt Associates, Inc. * ............................... 10,000 275 Manpower, Inc. * ........................................ 18,400 934 ServiceMaster Co. ....................................... 49,200 606 The Bisys Group, Inc. * ................................. 85,900 1,208 Viad Corp. .............................................. 48,200 1,302 Weight Watchers International, Inc. ..................... 10,800 423 ------ 7,757 Commingled Fund - 1.8% iShares Trust ........................................... 16,800 1,960 Communications Equipment - 0.3% Tellabs, Inc. * ......................................... 41,700 364 Diversified Financials - 2.9% Charles Schwab Corp. * .................................. 118,300 1,137 Federated Investments, Inc. - Cl. B ..................... 14,000 425 Janus Capgroup, Inc. .................................... 55,900 922 LaBranche & Co., Inc. * ................................. 77,100 $ 649 ------ 3,133 Diversified Telecommunication Services - 1.6% AT&T Corp. * ............................................ 41,600 609 Qwest Communications International, Inc. ................ 314,200 1,128 ------ 1,737 Electric Utilities - 4.9% CMS Energy Corp. * ...................................... 37,000 338 El Paso Electric Co. * .................................. 32,800 506 Firstenergy Corp. * ..................................... 23,600 883 NRG Energy, Inc. * ...................................... 51,500 1,277 Pinnacle West Capital Corp. * ........................... 15,500 626 Teco Energy, Inc. * ..................................... 92,400 1,108 Unisource Energy Corp. .................................. 8,600 214 Xcel Energy, Inc. ....................................... 18,000 301 ------ 5,253 Electric/Gas - 1.1% Duke Energy Co. ......................................... 58,000 1,177 Electrical Equipment - 1.1% Molex, Inc. - CL A ...................................... 44,300 1,208 Electronic Equipment & Instruments - 1.2% AVX Corp. ............................................... 54,900 793 Ingram Micro, Inc. - Cl. A * ............................ 31,600 457 ------ 1,250 Energy Equipment & Services - 6.5% Baker Hughes, Inc. * .................................... 6,200 233 Cooper Cameron Corp. * .................................. 22,500 1,096 Diamond Offshore Drilling, Inc. * ....................... 113,000 2,693 Grant Prideco, Inc. * ................................... 79,500 1,467 Hanover Compressor Co. .................................. 73,500 875 Key Energy Services, Inc. * ............................. 17,100 161 Petroleum Geo Services ASA - ADR * ...................... 9,700 397 ------ 6,922 Food & Drug Retailing - 2.1% Agrium, Inc. ............................................ 17,500 255 Neighborcare, Inc. * .................................... 43,000 1,347 Potash Corp. of Saskatchewan, Inc. ...................... 6,200 601 ------ 2,203 Food Products - 2.3% Archer Daniels Midland Co. * ............................ 22,900 384 Campbell Soup Co. * ..................................... 40,700 1,094 H.J. Heinz Co. .......................................... 23,900 937 ------ 2,415 Health Care Providers & Services - 4.6% Amerisource Bergen Corp. * .............................. 19,300 1,154 Healthsouth Corp. * ..................................... 171,600 1,030 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Health Care Providers & Services - Continued Laboratory Corporation of America Holdings * ........... 4,900 $ 194 Lincare Holdings, Inc. * ............................... 36,200 1,189 Tenet Healthcare Corp. * ............................... 99,100 1,329 ------- 4,896 Household Durables - 1.1% Newell Rubbermaid, Inc. ................................ 48,400 1,137 Insurance - 10.1% Aon Corp. * ............................................ 13,200 376 Conseco, Inc. .......................................... 39,700 790 Genworth Financial, Inc. - Cl. A * ..................... 61,500 1,411 Loews Corp. * .......................................... 10,300 618 Ohio Casualty Corp. * .................................. 44,400 894 Protective Life Corp. .................................. 14,400 557 Radian Group, Inc. ..................................... 22,500 1,078 Safeco Corp. * ......................................... 33,200 1,461 St. Paul Cos., Inc. .................................... 43,800 1,776 UnumProvident Corp. * .................................. 65,500 1,041 XL Capital, Ltd. - Cl. A * ............................. 10,900 822 ------- 10,824 IT Consulting & Services - 1.0% BearingPoint, Inc. * ................................... 124,800 1,107 Leisure Equipment & Products - 0.2% Eastman Kodak Co. * .................................... 7,000 189 Media - 8.8% Cablevision Systems Corp. - Cl. A * .................... 66,800 1,313 Dow Jones & Co., Inc. * ................................ 25,200 1,137 Entercom Communications Corp. * ........................ 35,700 1,332 Lamar Advertising Co. * ................................ 6,600 286 Meredith Corp. * ....................................... 11,500 632 New York Times Co. - Cl. A * ........................... 15,900 711 Pearson plc - ADR ...................................... 100,600 1,255 Reuters Group plc - ADR ................................ 25,000 1,018 Scholastic Corp. * ..................................... 33,300 997 Washington Post Co. - Cl. B ............................ 800 744 ------- 9,425 Metals & Mining - 0.9% Meridian Gold, Inc. * .................................. 62,300 808 Nucor Corp. ............................................ 2,000 154 ------- 962 Multi-Utilities - 2.1% Dynegy, Inc. - Cl. A * ................................. 198,500 846 NiSource, Inc. * ....................................... 65,100 1,342 ------- 2,188 Multiline Retail - 2.9% Big Lots, Inc. * ....................................... 42,100 609 Costco Wholesale Corp. ................................. 11,300 464 Dillard's, Inc. - Cl. A * .............................. 36,400 812 Family Dollar Stores, Inc. ............................. 38,200 $ 1,162 -------- 3,047 Oil & Gas - 1.3% Forest Oil Corp. * ..................................... 25,700 702 Murphy Oil Corp. ....................................... 9,800 722 -------- 1,424 Paper & Forest Products - 3.3% Bowater, Inc. .......................................... 25,500 1,060 Domtar, Inc. ........................................... 45,200 585 MeadWestvaco Corp. * ................................... 41,500 1,220 Potlatch Corp. ......................................... 14,600 608 -------- 3,473 Pharmaceuticals - 1.8% Andrx Corp. * .......................................... 9,200 257 Barr Laboratories, Inc. * .............................. 13,700 462 King Pharmaceuticals, Inc. * ........................... 81,400 932 Valeant Pharmaceuticals International .................. 13,600 272 -------- 1,923 Real Estate Investment Trust - 1.9% Apartment Investment & Management Co. .................. 39,100 1,217 Equity Office Properties Trust * ....................... 14,700 400 Reckson Associates Realty Corp. ........................ 14,900 409 -------- 2,026 Road & Rail - 2.3% CSX Corp. * ............................................ 37,700 1,236 Union Pacific Corp. .................................... 19,600 1,165 -------- 2,401 Semiconductor Equipment & Products - 1.0% Novellus Systems, Inc. * ............................... 34,500 1,085 Software - 3.7% BMC Software, Inc. * ................................... 68,400 1,265 Cadence Design Systems, Inc. * ......................... 72,400 1,059 Intuit, Inc. * ......................................... 15,800 610 Network Associates, Inc. * ............................. 56,400 1,023 -------- 3,957 Specialty Retail - 0.9% Abercrombie & Fitch Co. ................................ 16,700 647 Gap, Inc. .............................................. 13,700 332 -------- 979 Wireless Telecommunications Services - 1.5% Crown Castle International Corp. * ..................... 44,100 650 Telephone and Data Systems, Inc. ....................... 13,900 990 -------- 1,640 -------- TOTAL COMMON STOCK- (Cost $99,287) 96.8% 103,418 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------ --------- (000's) PUBLICLY-TRADED BONDS Real Estate Development - 0.0% Brookfield Homes Corp. - Sr. Sub. Notes ................ 23,000 $ 24 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $23) 0.0% 24 ------ -------- TOTAL LONG-TERM INVESTMENTS- (Cost $99,310) 96.8% 103,442 Par Value ------ (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 8.4% State Street Navigator Securities Lending Portfolio .... $8,955 8,955 SHORT-TERM INVESTMENTS - 3.3% Investment in joint trading account 1.344% due 07/01/04 (Cost $3,572) ................... 3,572 3,572 ------ -------- TOTAL INVESTMENTS- (Cost $111,837) 108.5% 115,969 Payables, less cash and receivables- (8.5)% (9,087) ------ -------- NET ASSETS- 100.0% $106,882 ====== ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Mid Cap Value B (formerly John Hancock Small/Mid Cap CORE), (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 June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to each fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $3,679 1.51% $1 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $8,797 $8,955 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $1. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $100 Million $100 Million ------------------ ------------ 1.05% 1.00% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $1 to the Fund. As of May 3, 2004, John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price Associates, Inc., and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000'S Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $168,597 $162,650 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $90,735 $15,922 $(1,066) $14,856 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and to certain distributions received from investments in Real Estate Investment Trust. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $-- $14,856 In addition, the tax character of distributions paid by the Fund are summarized as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $6,248 $594 $1,239 2002 226 -- 2 Included in the Fund's 2003 distributions from ordinary income is $2,609 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. Inception: March 29, 1986 -------------------------------------------------------------------------------- Money Market Fund Wellington Management Company, LLP John C. Keogh -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.41%. . Fund's performance reflects the overall low level of market interest rates as well as the Fund's weighted average maturity and emphasis on commercial paper and U.S. Treasury and Agency securities. . At quarter-end, the Fund was 51% invested in commercial paper, 23% invested in GSE's (Government Sponsored Entities), and 17% invested in floating rate notes. . The manager combines top down analysis with fundamental bottom-up security selection. The manager employs rigorous bottom-up fundamental research and a stringent credit review process to identify securities with stable credit quality. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Federal Home Loan Mortgage Corp. 10.2% Federal National Mortgage Assoc. 8.2% Federal Home Loan Bank 4.8% Allstate Financial Global 3.0% SBC Warburg Repo 2.3% Travelers Insurance Co. 2.3% Metlife, Inc. 2.3% Pfizer, Inc. 2.3% Clipper Receivables Corp. 2.0% Old Line Funding Corp. 2.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/1/ Money Market Fund/3/ ------------ YTD/2/ 0.41% 1 Year 0.85 3 Years 1.41 5 Years 3.12 10 Years 4.23 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR ALLOCATION (as of June 30, 2004) % of Assets ------ Commercial Paper 55.13% U.S. Treasury/Agency Securities 23.27% Variable Rate Securities 15.25% CDs, Bank Notes 4.01% Repurchase Agreements 2.34% -------------------------------------------------------------------------------- The Money Market Fund is neither insured nor guaranteed by the U.S. Government and there is no guarantee the fund will be able to maintain a stable net asset value of $1.00/share. /1/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /2/ Year to date returns are not annualized. /3/ Returns reflect extra-ordinary capital contribution of $284,471 in October 2000. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Money Market Fund (000's Omitted) ASSETS Short-term investments at value .................................... $658,040 Cash .............................................................. 1 Receivable for: Interest ........................................................ 666 -------- Total assets ....................................................... 658,707 -------- LIABILITIES Payables for: Accrued advisory expenses ....................................... 136 Accrued operating expenses ...................................... 239 Other payables .................................................. 1 -------- Total liabilities .................................................. 376 -------- Net assets ......................................................... $658,331 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 658,331 -------- Net asset value per share .......................................... $ 1.00 ======== Composition of net assets: Capital paid-in ................................................. $658,331 Accumulated net realized loss on investments .................... (82) Undistributed net investment income ............................. 82 -------- Net assets ......................................................... $658,331 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Money Market Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................... $3,718 EXPENSES Investment advisory fee ............................................ 809 Auditors fees ...................................................... 42 Custodian fees ..................................................... 71 Fidelity Bond fees ................................................. 1 Legal fees ......................................................... 45 Printing & mailing fees ............................................ 59 Trustees' fees ..................................................... 10 Other fees ......................................................... 9 ------ Total expenses ........................................................ 1,046 ------ Net investment income ................................................. $2,672 ====== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Money Market Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE IN NET ASSETS From operations Net investment income .................................... $ 2,672 $ 7,879 Distributions to shareholders from: Net investment income .................................... (2,672) (7,879) --------- --------- Decrease in net assets resulting from distributions ... (2,672) (7,879) From fund share transactions: Proceeds from shares sold ................................ 225,815 754,784 Distributions reinvested ................................. 2,672 7,879 Payment for shares redeemed .............................. (251,789) (999,146) --------- --------- Decrease in net assets from fund share transactions ... (23,302) (236,483) --------- --------- NET DECREASE IN NET ASSETS .................................. (23,302) (236,483) NET ASSETS Beginning of Period ...................................... 681,633 918,116 --------- --------- End of Period (including undistributed net investment income of $82 and $82, respectively) .................. $ 658,331 $ 681,633 ========= ========= Analysis of fund share transactions: Sold ..................................................... 225,815 754,784 Reinvested ............................................... 2,672 7,879 Redeemed ................................................. (251,789) (999,146) --------- --------- Net decrease in fund shares outstanding ..................... (23,302) (236,483) ========= =========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Money Market Fund -------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ----------------------------------------- 2004 2003 2002(d) 2001(c) 2000(c) ------------ -------- -------- -------- -------- Net Assets Value at Beginning of Period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net Investment Income .................................. (g) 0.01 0.01 0.04 0.06 -------- -------- -------- -------- -------- Total From Investment Operations ....................... 0.01 0.01 0.04 0.06 Less Distributions: Distribution from Net Investment Income ................ (g) (0.01) (0.01) (0.04) (0.06) -------- -------- -------- -------- -------- Total Distributions .................................... (g) (0.01) (0.01) (0.04) (0.06) -------- -------- -------- -------- -------- Net Assets Value at End of Period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Investment Return(b) ................................ 0.41%(e) 0.95% 1.48% 3.93% 6.29%(a) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ....... 0.32%(f) 0.31% 0.32% 0.32% 0.29% Ratio of Net Investment Income to Average Net Assets ... 0.83%(f) 0.95% 1.46% 3.72% 6.05% Portfolio Turnover Rate ................................ n/a n/a n/a n/a n/a Net Assets End of Period (000s Omitted) ................... $658,331 $681,633 $918,116 $745,516 $496,853
(a) The total investment return includes the effect of the capital contribution of $0.01 per share. The total investment return without the capital contribution would have been 6.18%. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Per share amounts have been restated to reflect a 10-for-1 stock split effective May 1, 2001. (d) The fund entered into a new sub-advisory agreement with Wellington Management Company during the period shown. (e) Not annualized. (f) Annualized. (g) Amount is less than $0.01. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MONEY MARKET FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS Banks- 0.7% Chase Manhattan Bank USA 1.05% due 05/11/05 ..................................... $ 4,475 $ 4,475 Finance- 1.5% General Electric Capital Corp. - Disc Notes 1.14% due 03/10/17 ..................................... 7,000 7,000 Nationwide Building Society 1.08% due 07/23/04 ..................................... 2,700 2,700 -------- 9,700 Insurance- 0.5% Monumental Life Insurance - Notes 1.21% due 11/01/03 ..................................... 3,000 3,000 U.S. Government Agencies- 23.2% Federal Home Loan Bank 1.5% due 03/01/05 ...................................... 6,000 6,000 Federal Home Loan Bank - Bonds 1.66% due 05/16/05 ..................................... 2,800 2,800 Federal Home Loan Bank - Disc. Notes 1.39% due 11/12/04 ..................................... 9,000 8,953 3.875% due 12/15/04 .................................... 9,000 9,108 Federal Home Loan Bank - Notes 1.625% due 04/15/05 .................................... 5,000 5,013 Federal Home Loan Mortgage Corp. - Disc. Notes 1.135% due 12/20/04 .................................... 15,000 14,919 1.17% due 08/16/04 ..................................... 10,000 9,985 1.18% due 08/18/04 ..................................... 18,000 17,972 1.22% due 08/06/04 ..................................... 10,000 9,988 1.34% due 10/26/04 ..................................... 11,353 11,304 Federal Home Loan Mortgage Corp. - Notes 1.4% due 08/11/04 ...................................... 3,000 3,000 Federal National Mortgage Assoc. 6.5% due 08/15/04 ...................................... 8,000 8,052 Federal National Mortgage Assoc. - Disc. Notes 1.245% due 08/11/04 .................................... 10,000 9,986 1.25% due 11/03/04 ..................................... 20,308 20,215 Federal National Mortgage Assoc. - Notes 1.375% due 02/14/05 .................................... 5,500 5,499 1.61% due 05/13/05 ..................................... 1,300 1,300 1.75% due 05/23/05 ..................................... 9,000 9,000 -------- 153,094 Whole Loan CMOs- 3.3% Granite Mortgages plc - Notes Ser. 1 Cl. A1 1.049% due 12/20/04 .................................... 3,772 3,772 Holmes Financing plc - Notes Ser. 1 Cl. A 1.045% due 04/15/05 .................................... 5,500 5,500 Permanent Financing plc - Notes Ser. 1 Cl. A 1.04% due 03/10/05 ..................................... 8,500 8,500 Permanent Financing plc - Notes Ser. 3 Cl. 1A 1.08% due 12/10/04 ..................................... $ 4,110 $ 4,110 -------- 21,882 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $192,151) 29.2% 192,151 COMMERCIAL PAPER Banks - 7.7% ABN AMRO Bank NV 1.27% due 12/30/04 ..................................... 8,000 7,999 Barclays Bank plc 1.221% due 03/24/05 .................................... 11,700 11,698 Royal Bank of Scotland 1.31% due 08/23/04 ..................................... 10,000 9,981 Svenska Handelsbanken 1.23% due 10/12/04 ..................................... 11,000 11,000 Westdeutche Lands 1.32% due 01/27/05 ..................................... 9,973 9,973 -------- 50,651 Beverages - 3.1% Coca Cola Enterprises, Inc. 1.04% due 07/01/04 ..................................... 9,000 9,000 Fortune Brands, Inc. 1.1% due 07/21/04 ...................................... 11,376 11,369 -------- 20,369 Diversified Financials - 9.7% Allstate Financial Global 1.19% due 12/22/04 ..................................... 20,000 19,999 Cafco LLC 1.23% due 08/04/04 ..................................... 6,931 6,923 Goldman Sachs Group 1.35% due 08/23/04 ..................................... 10,000 9,980 J.P. Morgan Chase & Co. 1.1% due 07/19/04 ...................................... 8,000 7,996 Morgan Stanley Dean Witter & Co. 1.18% due 07/19/04 ..................................... 9,007 9,002 Wilmington Trust Co. 1.1% due 07/26/04 ...................................... 10,000 10,000 -------- 63,900 Finance - 38.4% Bradford & Bingley Building Society 1.13% due 01/07/05 ..................................... 8,000 8,000 CBA Delaware Finance, Inc. 1.15% due 08/16/04 ..................................... 12,000 11,982 Ciesco LP 1.16% due 08/02/04 ..................................... 8,084 8,076 1.21% due 07/26/04 ..................................... 3,937 3,934 Clipper Receivables Corp. 1.07% due 07/19/04 ..................................... 13,094 13,086 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- MONEY MARKET FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) COMMERCIAL PAPER - Continued Finance - Continued CRC Funding LLC 1.18% due 08/03/04 ..................................... $11,000 $ 10,988 Delaware Funding Corp. 1.23% due 07/27/04 ..................................... 10,000 9,991 Diageo Capital plc 1.2% due 08/31/04 ...................................... 10,000 9,980 Eureka Securitization, Inc. 1.32% due 08/18/04 ..................................... 10,000 9,982 Falcon Asset Securitization 1.07% due 07/06/04 ..................................... 6,311 6,310 1.22% due 07/16/04 ..................................... 6,500 6,497 Galaxy Funding, Inc. 1.23% due 08/23/04 ..................................... 8,514 8,499 Greyhawk Funding Corp. 1.07% due 07/14/04 ..................................... 12,000 11,995 International Lease Finance Corp. 1.16% due 08/24/04 ..................................... 11,000 10,981 KFW International Finance, Inc. 1.1% due 08/30/04 ...................................... 9,023 9,006 1.14% due 08/06/04 ..................................... 2,128 2,126 Kittyhawk Funding 1.1% due 07/15/04 ...................................... 10,000 9,996 National Australia Funding Delaware, Inc. 1.03% due 07/01/04 ..................................... 8,571 8,571 Nationwide Building Society 1.07% due 07/16/04 ..................................... 10,000 9,996 Old Line Funding Corp. 1.1% due 07/15/04 ...................................... 13,000 12,994 Park Avenue Reconstruction Corp. 1.1% due 07/08/04 ...................................... 8,956 8,954 1.23% due 07/23/04 ..................................... 989 988 Societe Generale 1.22% due 09/01/04 ..................................... 12,000 11,975 UBS Finance Delaware LLC 1.06% due 07/19/04 ..................................... 4,458 4,456 1.175% due 08/19/04 .................................... 7,356 7,344 Variable Funding Capital Corp. 1.05% due 07/02/04 ..................................... 12,000 12,000 Windmill Funding Corp. 1.05% due 07/06/04 ..................................... 6,000 5,999 1.13% due 08/04/04 ..................................... 6,000 5,994 Yorktown Capital LLC 1.21% due 07/26/04 ..................................... 12,000 11,990 -------- 252,690 Food Products - 1.1% Archer Daniels Midland Co. 1.09% due 08/10/04 ..................................... 7,000 6,992 Insurance - 4.6% Metlife, Inc. 1.259% due 08/02/04 .................................... $15,000 $ 14,999 Travelers Insurance Co. 1.385% due 08/27/04 .................................... 15,000 15,000 -------- 29,999 Personal Products - 1.6% Proctor & Gamble Co. 1.28% due 08/02/04 ..................................... 10,908 10,896 Pharmaceuticals - 2.3% Pfizer, Inc. 1.12% due 08/05/04 ..................................... 15,000 14,984 -------- TOTAL COMMERCIAL PAPER- (Cost $450,481) 68.5% 450,481 JOINT REPURCHASE AGREEMENT - 2.3% Investment in joint repurchase agreement with SBC Warburg, 1.3% due 07/01/04 (Secured by U.S. Treasury obligations) (Cost $15,408) ...................................... 15,408 15,408 ------- -------- TOTAL INVESTMENTS- (Cost $658,040) 100.0% 658,040 Cash and Receivables, less payables- 0.0% 291 ------- -------- NET ASSETS- 100.0% $658,331 ======= ======== See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE A--ORGANIZATION John Hancock Money Market Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Board of Trustees has determined that the appropriate method for valuing Fund securities is amortized cost, so long as the average weighted maturity of money market instruments comprising the Fund does not exceed 90 days. Accordingly, Fund securities are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and the cost of the security to the Fund. Investment security transactions are recorded on the date of purchase or sale. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Name of Issuer Market Value -------------- ------------ Clipper Receivables Corp., 1.50%, due 07/01/04 $ 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $4 and $78 which expire in 2007 and 2008, respectively. Dividends, Interest and Distributions: Interest income is recorded on the accrual basis. A dividend of its net investment income will be declared and distributed daily by the Fund. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the rate of 0.25% on an annual basis of the Fund's net assets. In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS The identified cost of investment of the Fund at December 31, 2003, was $679,752, which is the same as its tax cost. Distribution of Income and Gains: Distributions of net investment income, if any, are made daily. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on it's federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Net Unrealized Ordinary Net Long-Term Capital Loss Appreciation/ Income Capital Gain Carryforwards (Depreciation) ------------- ------------- ------------- -------------- $82 $-- $82 $-- In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $ 7,879 $-- $-- 2002 11,513 -- -- Inception: May 1, 1996 -------------------------------------------------------------------------------- Overseas Equity Fund Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- . Year to date, the Fund returned 1.51%, underperforming its benchmark, the MSCI EAFE Index. Relative to Morningstar peers, the Fund has an above average rating of 5 with a low risk profile. . The Fund underperformed its benchmark primarily due to unfavorable security selection both within countries and sectors. . The Fund's exposures to selected countries (Japan) and sectors (financials & consumer discretionary) were the largest contributors to absolute performance. . The manager employs a multiple portfolio manager system, with each portfolio managed by several portfolio managers and research analysts. The manager selects stocks using proprietary fundamental research. Fundamental research seeks to uncover companies that are undervalued and asset rich. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Vodafone AirTouch plc 3.0% AstraZeneca Group plc 2.9% Royal Dutch Petroleum Co. 2.6% Sanofi-Synthelabo SA 2.5% Mitsubishi 2.5% Novartis AG 2.0% Koninklijke 1.6% BNP Paribas 1.6% Nestle SA 1.6% Sumitomo 1.6% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Overseas Equity Overseas Equity Fund Benchmark/4/ --------------- --------------- YTD/3/ 1.51% 4.86% 1 Year 26.71 32.85 3 Years 9.12 11.64 5 Years 4.37 6.26 Since Inception (5/1/96) 5.40 6.43 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Foreign Large Blend MORNINGSTAR RISK/1/: . Low (VL/VUL) . Low (VA) MORNINGSTAR RATING/1/: . ***** (VL/VUL) . ***** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DIVERSIFICATION BY REGION AND COUNTRY/5/ (as of June 30, 2004) % of Assets ------ Europe (excluding U.K.) 44.5% Japan 24.7% United Kingdom (U.K.) 17.3% Pacific Basin (excluding Japan) 5.8% United States 5.0% Other 2.6% DIVERSIFICATION BY REGION/6/ Developed Markets 98% Emerging Markets 2% /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 363 VL/VUL subaccounts and 603 VA subaccounts in the Morningstar Foreign Large Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. There are special risks associated with international investing including currency fluctuations, political and economic instability, foreign taxation and different accounting standards, as outlined in the current prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ Overseas Equity Composite Index: 65% MSCI World Index Excluding US, and 35% Citigroup Non-US Govt. Bond Index, Unhedged, May 1996 to April 2000, then 60% MSCI World / 40% Citigroup World Government Bond, Unhedged, May 2000 to April 2003 and then MSCI EAFE Index May 2003 to present. /5/ Calculations based upon country in which security is traded (listed). /6/ Calculations based upon country in which security is domiciled. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $49,886 Net unrealized appreciation of investments .......................... 7,717 Short-term investments at value ..................................... 1,551 ------- Total investments ............................................. 59,154 Cash ................................................................ 1 Foreign currency at value (cost $11) ................................ 11 Receivable for: Investments sold ................................................. 328 Interest ......................................................... 3 Dividends ........................................................ 62 Foreign dividend tax withholding reclaim ......................... 41 ------- Total assets ........................................................ 59,600 ------- LIABILITIES Payables for: Investments purchased ............................................ 242 Foreign dividend tax withholding ................................. 5 Foreign interest tax expenses .................................... 2 Accrued operating expenses ....................................... 55 Unrealized depreciation in forward currency contracts ............ 24 ------- Total liabilities ................................................... 328 ------- Net assets .......................................................... $59,272 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 5,638 ------- Net asset value per share ........................................... $ 10.51 ======= Composition of net assets: Capital paid-in .................................................. $53,149 Accumulated net realized loss on investments, futures and foreign currency transactions ................................. (1,559) Undistributed net investment loss ................................... (11) Net unrealized appreciation (depreciation) of: Investments ................................................... 7,717 Translation of assets and liabilities in foreign currencies ... (24) ------- Net assets .......................................................... $59,272 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 12 Dividends (net of foreign withholding tax of $100) ............ 723 ------- Total investment income ............................................. 735 ------- EXPENSES Investment advisory fee ....................................... 314 Auditors fees ................................................. 3 Custodian fees ................................................ 81 Legal fees .................................................... 3 Printing & mailing fees ....................................... 8 Trustees' fees ................................................ 1 Other fees .................................................... 1 ------- Total expenses ...................................................... 411 Less expenses reimbursed ...................................... (24) Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................. (20) ------- Net expenses ........................................................ 367 ------- Net investment income ............................................... 368 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments ................................................... 2,210 Foreign currency transactions ................................. 4 Change in unrealized appreciation (depreciation) on: Investments ................................................... (1,930) Translation of assets and liabilities in foreign currencies ... 10 ------- Net realized and unrealized gain .................................... 294 ------- Net increase in net assets resulting from operations ................ $ 662 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Overseas Equity Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ........................................... $ 368 $ 301 Net realized gain ............................................... 2,214 491 Change in net unrealized appreciation (depreciation) ............ (1,920) 11,873 ------- ------- Net increase in net assets resulting from operations ......... 662 12,665 Distributions to shareholders from: Net investment income ........................................... (374) (1,633) Realized gains .................................................. (1,073) ------- ------- Decrease in net assets resulting from distributions .......... (374) (2,706) From fund share transactions: Proceeds from shares sold ....................................... 17,094 26,834 Distributions reinvested ........................................ 374 2,706 Payment for shares redeemed ..................................... (7,660) 20,259) ------- ------- Increase in net assets from fund share transactions .......... 9,808 9,281 ------- ------- NET INCREASE IN NET ASSETS ......................................... 10,096 19,240 NET ASSETS Beginning of Period ............................................. 49,176 29,936 ------- ------- End of Period (including undistributed net investment loss of $(11) and $(5), respectively) ................................ $59,272 $49,176 ======= ======= Analysis of fund share transactions: Sold ............................................................ 1,605 2,962 Reinvested ...................................................... 35 270 Redeemed ........................................................ (720) (2,292) ------- ------- Net increase in fund shares outstanding ............................ 920 940 ======= =======
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Overseas Equity Fund -------------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------- 2004 2003 2002 2001 2000(c) ------------ ------- ------- ------- ------- Net Assets Value at Beginning of Period ..... $ 10.42 $ 7.92 $ 8.57 $ 9.27 $ 10.71 Income from Investment Operations: Net Investment Income .................... 0.12 0.09 0.10 0.11 0.23 Net Realized and Unrealized Gain (Loss) on Investment(a) ......................... 0.04 3.03 (0.65) (0.70) (1.20) ------- ------- ------- ------- ------- Total From Investment Operations ......... 0.16 3.12 (0.55) (0.59) (0.97) Less Distributions: Distribution from Net Investment Income .. (0.07) (0.37) (0.10) (0.24) Distribution from Net Realized Gains on Investments ........................... (0.25) (0.01) Distribution from Excess of Net Investment Income/ Gains ......................... (0.10) Distribution from Capital Paid-in ........ (0.11) (0.12) Total Distributions ...................... (0.07) (0.62) (0.10) (0.11) (0.47) ------- ------- ------- ------- ------- Net Assets Value at End of Period ........... $ 10.51 $ 10.42 $ 7.92 $ 8.57 $ 9.27 ======= ======= ======= ======= ======= Total Investment Return(b) .................. 1.51%(g) 39.85% (6.32)% (6.45)% (9.08)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................ 1.41%(d)(f)(h) 1.15%(d)(f) 1.15%(d) 1.15%(d) 0.98%(d) Ratio of Net Investment Income to Average Net Assets ............................ 1.34%(h) 0.84% 1.28% Portfolio Turnover Rate .................. 14.99%(g) 89.10% 71.20% 53.11% 204.98% Net Assets End of Period (000s Omitted) ..... $59,272 $49,176 $29,936 $31,290 $28,527
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Capital Guardian Trust Company during the period shown. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.49% for the period ending June 30, 2004, and 1.39%, 1.45%, 1.36%, and 1.27%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (e) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 1.38% for the years ended December 31, 2001. (f) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (g) Not annualized. (h) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY FUND Market Name of Issuer Shares Value -------------- -------- ------- (000's) COMMON STOCK Australia - 2.9% Amcor, Ltd. (BE) ....................................... $ 24,700 $ 120 Australia & New Zealand Banking Group, Ltd. (JP) ....... 16,427 209 Brambles Industries, Ltd. (BO) ......................... 27,900 116 Broken Hill Proprietary Co., Ltd. (BF) ................. 23,500 205 Foster's Brewing Group, Ltd. (JG) ...................... 33,900 111 Insurance Australia Group (JR) ......................... 12,900 45 National Australia Bank, Ltd. (JP) ..................... 8,800 182 Promina Group (JR) ..................................... 42,000 117 QBE Insurance Group, Ltd. (JR) ......................... 20,808 185 Rinker Group (BD) ...................................... 2,750 15 Wesfarmers (BL) ........................................ 8,600 176 WMC Resources, Ltd. (BF) ............................... 33,000 113 Woolworth's, Ltd. (JF) ................................. 16,500 131 ------ 1,725 Belgium - 0.0% UCB SA (JO) ............................................ 500 23 Canada - 1.8% Abitibi Consolidated, Inc. (BG) ........................ 13,700 94 Alcan Aluminum, Ltd. (BF) .............................. 6,100 251 Bombardier, Inc. - Cl. B (BH) .......................... 74,600 224 Great West Lifeco, Inc. (JR) ........................... 2,400 86 National Bank of Canada (JP) ........................... 3,600 115 Suncor Energy, Inc. (BB) ............................... 4,700 119 Thomson Corp. (JA) ..................................... 5,500 183 ------ 1,072 Denmark - 0.6% Novo Nordisk AS (JO) ................................... 4,500 232 Tele Danmark AS (J1) ................................... 3,500 114 ------ 346 Finland - 0.7% Nokia Oyj (JW) ......................................... 17,900 258 UPM-Kymmene Corp. (BG) ................................. 8,700 166 ------ 424 France - 10.0% Accor SA (BZ) .......................................... 6,000 253 Air Liquide (BC) ....................................... 2,860 473 BNP Paribas (JP) ....................................... 15,100 930 Bouygues SA (J2) ....................................... 15,600 523 Carrefour SA (JF) ...................................... 3,100 151 Essilor International (JL) ............................. 3,100 203 Groupe Danone (JH) ..................................... 4,600 402 L'Oreal SA (JK) ........................................ 3,300 264 Renault (BV) ........................................... 4,600 351 Sanofi-Synthelabo SA (JO) .............................. 22,900 1,453 Schneider SA (BK) ...................................... 3,600 246 Societe Generale - Cl. A (JP) .......................... 2,200 187 STMicroelectronics (J0) ................................ 6,700 147 Vivendi Universal SA (JA) .............................. $ 11,200 $ 311 ------ 5,894 Germany - 5.1% Allianz AG (JR) ........................................ 3,600 390 Aventis SA (JO) ........................................ 1,000 75 Bayerische Motoren Werke AG (BV) ....................... 4,900 217 Bayerische Vereinsbank AG (JP) ......................... 12,500 223 DaimlerChrysler AG (BV) ................................ 12,100 566 Deutsche Bank AG (JP) .................................. 1,200 94 Deutsche Boerse AG (JQ) ................................ 4,361 222 E.On AG (J3) ........................................... 2,000 145 Infineon Technologies AG (J0) .......................... 14,400 194 Muenchener Rueckversicherungs-Gesellschaft AG (JR) ..... 3,328 361 SAP AG (JV) ............................................ 600 100 Siemens AG (BK) ........................................ 5,100 367 Thyssen Krupp AG (BF) .................................. 5,500 94 ------ 3,048 Hong Kong - 1.3% Cheung Kong Holdings, Ltd. (JS) ........................ 14,000 103 Esprit Holdings, Ltd. (JE) ............................. 15,000 67 Hang Lung Properties (JS) .............................. 130,000 168 Hang Seng Bank, Ltd. (JP) .............................. 9,300 119 Li & Fung, Ltd. (JB) ................................... 160,000 234 Swire Pacific, Ltd. - Cl. A (JQ) ....................... 13,000 84 ------ 775 Italy - 1.0% ENI (BB) ............................................... 19,900 396 UniCredito Italiano SpA (JP) ........................... 41,500 205 ------ 601 Japan - 24.0% Acom Co., Ltd. (JQ) .................................... 1,600 104 Advantest (J0) ......................................... 2,800 187 Canon, Inc. (JZ) ....................................... 4,000 210 Chudenko Corp. (BJ) .................................... 6,800 111 Dai-Nippon Printng Co., Ltd. (BO) ...................... 10,000 160 Daiwa House Industry Co., Ltd. (BW) .................... 11,000 127 East Japan Railway Co. (BS) ............................ 24 134 Fanuc, Ltd. (BK) ....................................... 4,000 238 Furukawa Electric Co. (BK) ............................. 28,000 119 Hirose Electric Co., Ltd. (JY) ......................... 2,100 230 Honda Motor Co. (BV) ................................... 2,000 96 Hoya Corp. (JY) ........................................ 2,300 240 Japan Airlines (BQ) .................................... 17,000 54 Jusco Co., Ltd. (JD) ................................... 13,000 521 Kansai Electric Power Co., Inc. (J3) ................... 14,800 269 Keyence Corp. (JY) ..................................... 500 114 Konica Corp. (BX) ...................................... 21,000 289 Kyocera Corp. (JY) ..................................... 1,700 144 Millea Holdings, Inc. (JR) ............................. 36 533 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY FUND Market Value Name of Issuer Shares (000's) -------------- -------- ------- COMMON STOCK - Continued Japan - Continued Mitsubishi Corp. (BN) .................................. $ 19,000 $ 184 Mitsubishi Estate Co., Ltd. (JS) ....................... 54,000 669 Mitsubishi Heavy Industries, Ltd. (BM) ................. 33,000 89 Mitsubishi Motor (BV) .................................. 8,000 13 Mitsubishi Tokyo Finance (JP) .......................... 47 434 Mitsui Fudosan Co., Ltd. (JS) .......................... 17,000 203 Mitsui Marine & Fire Insurance Co., Ltd. (JR) .......... 57,100 535 Mizuho Financial GB (JP) ............................... 22 100 Murata Manufacturing Co., Ltd. (J0) .................... 2,700 154 NEC Corp. (JX) ......................................... 96,000 674 Nidec Corp. (JY) ....................................... 900 92 Nikko Securities Co., Ltd. (JQ) ........................ 23,000 111 Nikon Corp. (J0) ....................................... 14,000 157 Nintendo Corp., Ltd. (BW) .............................. 2,400 278 Nissan Motor Acceptance Corp. (BV) ..................... 50,000 555 Nitto Denko Corp. (BK) ................................. 4,500 230 Nomura Securities Co., Ltd. (JQ) ....................... 9,000 133 Omron Corp. (JY) ....................................... 5,000 117 Orix Corp. (JQ) ........................................ 3,500 400 Rohm Co., Ltd. (JY) .................................... 2,000 239 Sankyo Co., Ltd. (JO) .................................. 11,000 238 Sekisui House, Ltd. (BW) ............................... 26,000 288 Shimamura Co., Ltd. (JE) ............................... 1,400 121 Shionogi & Co., Ltd. (JO) .............................. 18,000 309 SMC Corp. (BM) ......................................... 2,400 259 Sumitomo Chemical Co. (BC) ............................. 48,000 224 Sumitomo Forestry Co. (BW) ............................. 6,000 69 Sumitomo Mitsui GR (JP) ................................ 89 609 Suzuki Motor Corp. (BV) ................................ 23,000 404 Takeda Chemical Industries (JO) ........................ 5,000 219 Tokyo Electron, Ltd. (J0) .............................. 8,800 493 Tokyo Gas Co. (J4) ..................................... 48,000 170 Tostem Corp. (BI) ...................................... 6,000 129 Toyota Motor Corp. (BV) ................................ 11,800 477 UFJ Holdings, Inc. (JP) ................................ 65 287 Uni-Charm Corp. (JJ) ................................... 2,500 124 Yamanouchi Pharmaceutical Co., Ltd. (JO) ............... 3,000 101 Yamato Transport Co., Ltd. (BP) ........................ 14,000 228 Yasuda F & M Insurance (JR) ............................ 20,000 204 ------- 14,200 Netherlands - 8.4% ABN Amro Holding NV (JP) ............................... 30,148 660 Aegon NV (JR) .......................................... 13,763 166 Elsevier NV (JA) ....................................... 16,900 238 Heineken Holdings (JG) ................................. 1,125 33 Heineken NV (JG) ....................................... 23,075 759 ING Groep NV (JQ) ...................................... 17,447 412 Koninklijke (Royal) Philips Electronics NV (BW) ........ 4,400 119 Koninklijke KPN NV (J1) ................................ 109,500 835 Royal Dutch Petroleum Co. (BB) ......................... 27,000 1,387 TNT Post Group NV (BP) ................................. 7,600 174 VNU NV (JA) ............................................ $ 6,444 $ 188 ------- 4,971 Norway - 1.1% Den Norske Bank (JP) ................................... 16,000 109 Norsk Hydro ASA (BB) ................................... 2,925 190 Norske Skogindustrier ASA - Cl. A (BG) ................. 2,700 48 Statoil ASA (BB) ....................................... 25,400 323 ------- 670 Singapore - 1.3% Hong Kong Land Holdings, Ltd. (JS) ..................... 34,000 53 Singapore Telecommunications, Ltd. (J1) ................ 382,000 499 United Overseas Bank, Ltd. (JP) ........................ 15,000 117 Venture Manufacturing, Ltd. (JY) ....................... 9,000 94 ------- 763 Spain - 3.0% Banco Bilbao Vizcaya SA (JP) ........................... 54,900 734 Iberdrola SA (J3) ...................................... 1,000 21 Inditex (JE) ........................................... 21,500 494 Telefonica SA (J1) ..................................... 36,853 546 ------- 1,795 Sweden - 2.5% Assa Abloy (BI) ........................................ 10,900 139 AstraZeneca Group plc (JO) ............................. 21,200 963 ForeningsSparbanken AB (JP) ............................ 14,100 270 Scania AB - Ser. B (BM) ................................ 3,600 123 ------- 1,495 Switzerland - 10.9% ABB, Ltd. (BK) ......................................... 26,589 145 Adecco SA (BO) ......................................... 2,509 125 Credit Suisse Group (JP) ............................... 8,170 290 Holcim (BD) ............................................ 12,658 689 Nestle SA (JH) ......................................... 3,399 907 Novartis AG (JO) ....................................... 26,588 1,173 Richemont (JE) ......................................... 25,336 662 Roche Holdings AG (JO) ................................. 2,192 217 Serono SA (JN) ......................................... 231 146 Swiss Reinsurance Co. (JR) ............................. 11,804 767 Swisscom AG (J1) ....................................... 2,126 703 Syngenta AG (BC) ....................................... 1,327 111 Synthes, Inc. (JL) ..................................... 1,260 144 UBS AG (JP) ............................................ 4,978 351 ------- 6,430 United Kingdom - 16.8% Anglo American plc (BF) ................................ 5,700 117 ARM Holdings plc (J0) .................................. 52,600 114 AstraZeneca Group plc (JO) ............................. 11,100 498 Barclays (JP) .......................................... 12,300 105 BG Group plc (BB) ...................................... 135,600 835 Billiton plc (BF) ...................................... 36,555 317 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY FUND Market Name of Issuer Shares Value -------------- -------- ------- (000's) COMMON STOCK - Continued United Kingdom - Continued British Aerospace plc (BH) ............................. $ 20,000 $ 79 Centrica plc (J4) ...................................... 44,900 183 CRH (BD) ............................................... 11,600 246 Diageo plc (JG) ........................................ 24,100 325 HBOS (JP) .............................................. 34,600 428 HSBC Holdings plc (JP) ................................. 42,200 627 Lloyds TSB Group plc (JP) .............................. 14,900 117 National Grid Group (J3) ............................... 48,700 376 Pearson plc (JA) ....................................... 29,800 362 Reckitt Benckiser (JJ) ................................. 4,400 124 Reed International plc (JA) ............................ 20,500 199 Rio Tinto plc (BF) ..................................... 7,700 185 Royal Bank of Scotland Group (JP) ...................... 30,900 890 Shell Transport & Trading Co. plc (BB) ................. 33,100 243 Smiths Group (BL) ...................................... 34,200 463 Standard Chartered plc (JP) ............................ 21,500 350 Unilever plc (JH) ...................................... 66,400 651 Vodafone AirTouch plc (J2) ............................. 783,138 1,714 Wolseley (BN) .......................................... 7,100 110 Xstrata (BF) ........................................... 23,700 317 ------- 9,975 United States - 4.9% America Movil SA de CV - ADR Ser. L (J2) ............... 2,400 87 AstraZeneca Group plc - ADR (JO) ....................... 5,000 228 Companhia Vale Do Rio Doce - ADR (BF) .................. 1,800 86 Hon Hai Precision Industry Co., Ltd. - GDR (JY) ........ 11,000 83 Inco, Ltd. (BF) ........................................ 7,800 270 Nokia Oyj - ADR (JW) ................................... 4,500 65 Royal Dutch Petroleum Co. (BB) ......................... 2,000 103 Samsung Electronics - 144A (a) (J0) .................... 2,250 463 Sap Aktiengesellschaft - ADR (JV) ...................... 3,200 134 STMicroelectronics NV (J0) ............................. 5,200 114 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR (J0) ..................................... 46,734 388 The Thomson Corp. (JA) ................................. 10,400 348 Vodafone Group Plc (J2) ................................ 17,100 378 Yukos Corp. - ADR (BL) ................................. 4,500 143 ------- 2,890 ------- TOTAL COMMON STOCK- (Cost $49,500) 96.3% 57,097 PREFERRED STOCK Australia - 0.2% News Corp., Ltd. (JA) .................................. 15,247 124 ------- TOTAL PREFERRED STOCK- (Cost $122) 0.2% 124 Par Market Name of Issuer Value Value -------------- -------- ------- (000's) PUBLICLY-TRADED BONDS Supra National - 0.7% SMFG Finance (CB) 2.25% due 07/11/05 .................................. $ 15,000 $ 330 2.25% due 07/11/05 .................................. 6,000 52 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $264) 0.7% 382 -------- ------- TOTAL LONG-TERM INVESTMENTS- (Cost $49,886) 97.2% 57,603 SHORT-TERM INVESTMENTS - 2.6% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,551) .......................................... 1,551 1,551 -------- ------- TOTAL INVESTMENTS- (Cost $51,437) 99.8% 59,154 Cash and Receivables, less payables- 0.2% 118 -------- ------- NET ASSETS- 100.0% $59,272 ======== ======= (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $463 or 0.8% of net assets of the Portfolio. ADR-American Depository Receipt. GDR-Global Depository Receipt. See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------ ----------- Banks .................................... JP $8,742 15.2% Pharmaceuticals .......................... JO 5,730 9.9% Oil & Gas ................................ BB 3,596 6.2% Insurance ................................ JR 3,390 5.9% Wireless Telecommunications Services ..... J2 2,703 4.7% Diversified Telecommunication Services ... J1 2,697 4.7% Automobiles .............................. BV 2,679 4.7% Semiconductor Equipment & Products ....... J0 2,411 4.2% Food Products ............................ JH 1,960 3.4% Metals & Mining .......................... BF 1,953 3.4% Media .................................... JA 1,952 3.4% Diversified Financials ................... JQ 1,466 2.5% Electronic Equipment & Instruments ....... JY 1,353 2.3% Electrical Equipment ..................... BK 1,346 2.3% Specialty Retail ......................... JE 1,344 2.3% Beverages ................................ JG 1,228 2.1% Real Estate Operations ................... JS 1,196 2.1% Construction Materials ................... BD 950 1.7% SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY FUND Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------- ----------- Household Durables ...................... BW $ 880 1.5% Electric Utilities ...................... J3 811 1.4% Chemicals ............................... BC 808 1.4% Industrial Conglomerates ................ BL 782 1.4% Computers & Peripherals ................. JX 674 1.2% Multiline Retail ........................ JD 521 0.9% Machinery ............................... BM 471 0.8% Air Freight & Couriers .................. BP 402 0.7% Commercial Services & Supplies .......... BO 401 0.7% Finance ................................. FB 382 0.7% Gas Utilities ........................... J4 353 0.6% Health Care Equipment & Supplies ........ JL 346 0.6% Communications Equipment ................ JW 324 0.6% Paper & Forest Products ................. BG 307 0.5% Aerospace & Defense ..................... BH 303 0.5% Trading Companies & Distributors ........ BN 294 0.5% Leisure Equipment & Products ............ BX 289 0.5% Food & Drug Retailing ................... JF 281 0.5% Building Products ....................... BI 269 0.5% Personal Products ....................... JK 264 0.5% Hotels Restaurants & Leisure ............ BZ 254 0.4% Household Products ...................... JJ 249 0.4% Distributors ............................ JB 234 0.4% Software ................................ JV 233 0.4% Office Electronics ...................... JZ 210 0.4% Biotechnology ........................... JN 146 0.3% Road & Rail ............................. BS 134 0.2% Containers & Packaging .................. BE 120 0.2% Construction & Engineering .............. BJ 111 0.2% Airlines ................................ BQ 54 0.1% ------- ----- $57,603 100.0% ======= ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Overseas Equity Fund, (formerly John Hancock Global Balanced Fund), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Currency translation: All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 5:00 p.m., London time, on the date of any determination of the net asset value of the Fund. Unrealized exchange adjustments are included in unrealized appreciation (depreciation) of investments. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between trade and settlement dates of security transactions, and the difference between the amounts of net NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued investment income accrued and the U.S. dollar amount actually received. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For period ended June 30, 2004, the Fund had no bank borrowings. Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. As of June 30, 2004, the Fund had open forward foreign currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Principal Amount Unrealized Currency Sold Covered by Contract Expiration Month Gain (Loss) --------------- ------------------- ---------------- ----------- Canadian Dollar 345 August 04 $ (9) Swiss Franc 100 August 04 (4) Swiss Franc 410 August 04 (8) Swiss Franc 518 September 04 -- Japanese Yen 190 September 04 (3) ---- (24) Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $478, $2,241 and $1,032 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred approximately $37 in net realized currency losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending on December 31, 2004. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $100. 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 11, 2004, 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 $20 Million and Excess Over First $20 Million $50 Million $50 Million ----------------- --------------- ----------- 1.30% 1.15% 1.05% NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $24 to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $20. John Hancock has entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D-INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $18,453 $7,995 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $40,215 $9,900 $(273) $9,627 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued States of America. These differences primarily relate to certain securities sold at a loss, premium amortization and market discount accretion on debt securities and investments in passive foreign investment companies and foreign currency denominated investments. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $3,751 $9,627 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $1,620 $-- $1,086 2002 374 -- -- NOTE E--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Overseas Equity Fund, an 76% 18% 6% amendment to the current investment mangement agreement between the Trust and John Hancock to increase the fees paid by this Fund to John Hancock and to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses. Inception: May 1, 1996 -------------------------------------------------------------------------------- Overseas Equity B Fund (FORMERLY INTERNATIONAL OPPORTUNITIES FUND) Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.04% underperforming its custom benchmark. Relative to Morningstar peers, the Fund has an average rating of 3 with an above average / average risk profile. . On May 1st, the Fund's name, investment strategy and sub-adviser were changed. Capital Guardian implemented an investment strategy for the Fund that is substantially the same as the investment strategy it now employs for the Overseas Equity Fund. Under that strategy, the Fund will invest primarily in foreign large and mid sized equities with modest emerging markets exposure. . Since May 1st, the Fund underperformed its benchmark partially due to the restructuring of the Fund to the new strategy, as well as unfavorable stock selection. . The manager employs a multiple portfolio manager system, with each portfolio managed by several portfolio managers and research analysts. The manager selects stocks using proprietary fundamental research. Fundamental research seeks to uncover companies that are undervalued and asset rich. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Vodafone AirTouch plc 3.5% AstraZeneca Group plc 3.4% Sanofi-Synthelabo SA 2.7% Mitsubishi 2.4% Novartis AG 2.0% BNP Paribas 1.8% Sumitomo 1.8% Koninklijke 1.7% Nestle SA 1.6% Shell Transport & Trading Co. plc 1.6% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Foreign Large Blend MORNINGSTAR RISK/1/: . Average (VL/VUL) . Above Average (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Overseas Overview Equity B Equity B/4/ Fund Benchmark -------- ----------- YTD/3/ 0.04% 4.29% 1 Year 23.50 32.72 3 Years 0.63 5.30 5 Years -1.59 1.00 Since Inception (5/1/96) 2.36 3.93 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DIVERSIFICATION BY REGION AND COUNTRY/5/ (as of June 30, 2004) % of Assets ------ Europe (excluding U.K.) 40.7% Japan 24.7% United Kingdom (U.K.) 20.9% Pacific Basin (excluding Japan) 7.2% United States 3.1% Other 2.4% Emerging Markets 1% DIVERSIFICATION BY REGION/6/ Developed Markets 98% Emerging Markets 2% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 367 VL/VUL subaccounts and 570 VA subaccounts in the Morningstar Foreign Large Blend category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. There are special risks associated with international investing including currency fluctuations, political and economic instability, foreign taxation and different accounting standards, as outlined in the current prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Overseas Equity benchmark represents the MSCI All Country World Ex US Index from May 1996 to April 2004 and now the MSCI EAFE from May 2004 to present. /5/ Calculations based upon country in which security is traded (listed). /6/ Calculations based upon country in which security is domiciled. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted) ASSETS Long term investments at cost (including $9,615 of securities loaned (Note B)) ............................................... $ 113,868 Net unrealized appreciation on investments ........................ 5,299 Short-term investments at value ................................... 10,137 --------- Total investments ........................................... 129,304 Foreign currency at value (cost $3,875) ........................... 3,834 Receivable for: Investments sold ............................................... 141 Dividends ...................................................... 129 Foreign dividend tax withholding reclaim ....................... 52 Interest ....................................................... 6 --------- Total assets ...................................................... 133,466 --------- LIABILITIES Payables for: Fund shares purchased .......................................... 63 Collateral for securities on loan .............................. 10,137 Foreign dividend tax withholding ............................... 11 Accrued operating expenses ..................................... 95 Unrealized depreciation in forward currency contracts .......... 32 Line of credit ................................................. 1,141 --------- Total liabilities ................................................. 11,479 --------- Net assets ........................................................ $ 121,987 ========= Shares outstanding, $0.01 Par Value (unlimited shares authorized) .................................................... 12,449 --------- Net asset value per share ......................................... $ 9.80 ========= Composition of net assets: Capital paid-in ................................................ $ 150,828 Accumulated net realized loss on investments, futures and foreign currency transactions ........................... (34,056) Undistributed net investment loss .............................. (11) Net unrealized appreciation (depreciation) of: Investments ................................................. 5,299 Translation of assets and liabilities in foreign currencies ............................................... (73) --------- Net assets ........................................................ $ 121,987 ========= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 16 Dividends (net of foreign withholding tax of $218) .............. 1,525 Securities lending ................................................. 34 -------- Total investment income ............................................ 1,575 -------- EXPENSES Investment advisory fee ......................................... 714 Auditors fees ................................................... 8 Custodian fees .................................................. 124 Legal fees ...................................................... 8 Printing & mailing fees ......................................... 21 Trustees' ...................................................... 2 Other fees ...................................................... 2 -------- Total expenses ..................................................... 879 Less expenses reimbursed ........................................ (24) Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................... (2) -------- Net expenses ....................................................... 853 -------- Net investment income .............................................. 722 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. 14,703 Foreign currency transactions ................................ (80) Realized Thai Tax ............................................ (436) Change in unrealized appreciation (depreciation) on: Investments .................................................. (14,962) Translation of assets and liabilities in foreign currencies .. 94 -------- Net realized and unrealized gain ................................... (681) -------- Net increase in net assets resulting from operations ............... $ 41 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 722 $ 959 Net realized gain (loss) ............................................ 14,187 (5,089) Change in net unrealized appreciation (depreciation) ................ (14,868) 35,456 -------- --------- Net increase in net assets resulting from operations ............. 41 31,326 Distributions to shareholders from: Net investment income ............................................... (733) (1,556) -------- --------- Decrease in net assets resulting from distributions .............. (733) (1,556) From fund share transactions: Proceeds from shares sold ........................................... 16,357 131,885 Distributions reinvested ............................................ 733 1,556 Payment for shares redeemed ......................................... (20,376) (124,524) -------- --------- Increase (decrease) in net assets from fund share transactions ... (3,286) 8,917 -------- --------- NET INCREASE (DECREASE) IN NET ASSETS .................................. (3,978) 38,687 NET ASSETS Beginning of Period ................................................. 125,965 87,278 -------- --------- Period (including undistributed net investment loss of $(11) and $0, respectively) ................................................ $121,987 $ 125,965 ======== ========= Analysis of fund share transactions: Sold ................................................................ 1,617 16,865 Reinvested .......................................................... 74 188 Redeemed ............................................................ (2,029) (15,816) -------- --------- Net increase in fund shares outstanding ................................ (338) 1,237 ======== =========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Overseas Equity B Fund ----------------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------- 2004(i) 2003 2002 2001 2000(c) ------------ -------- ------- ------- -------- Net Assets Value at Beginning of Period ......... $ 9.85 $ 7.56 $ 9.30 $ 11.85 $ 15.17 Income from Investment Operations: Net Investment Income ........................ 0.06 0.08 0.07 0.06 0.07 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................. (0.05) 2.34 (1.75) (2.53) (2.57) -------- -------- ------- ------- -------- Total From Investment Operations ............. 0.01 2.42 (1.68) (2.47) (2.50) Less Distributions: Distribution from Net Investment Income ...... (0.06) (0.13) (0.06) (0.05) (0.06) Distribution from Net Realized Gains on Investments ............................... (0.62) Distribution from Excess of Net Investment Income/ Gains ............................. (0.05) Distribution from Capital Paid-in ............ (0.03) (0.09) -------- -------- ------- ------- -------- Total Distributions .......................... (0.06) (0.13) (0.06) (0.08) (0.82) -------- -------- ------- ------- -------- Net Assets Value at End of Period ............... $ 9.80 $ 9.85 $ 7.56 $ 9.30 $ 11.85 ======== ======== ======= ======= ======== Total Investment Return(b) ...................... 0.04%(f) 32.36% (18.22)% (20.93)% (16.36)%(d) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................ 1.34%(e)(g)(h) 1.23%(e) 1.24%(e) 1.00%(e) 0.93%(e) Ratio of Net Investment Income to Average Net Assets ................................ 1.13%(g) 0.95% 0.69% Portfolio Turnover Rate ...................... 82.77%(f) 40.85% 78.14%(d) 33.31% 37.92%(d) Net Assets End of Period (000s Omitted) ......... $121,987 $125,965 $87,278 $83,591 $120,034
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with T. Rowe Price Associates, Inc. during the period shown. (d) Excludes merger activity. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.38% for the period ending June 30, 2004, and 1.44%, 1.55%, 1.16%, and 1.09%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (f) Not annualized. (g) Annualized. (h) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (i) The Fund entered into a new sub-advisory agreement with Capital Guardian Trust Co., during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Australia - 4.1% Amcor, Ltd. (BE) ........................................ 51,000 $ 247 Australia & New Zealand Banking Group, Ltd. * (JP) ...... 34,500 438 Brambles Industries, Ltd. * (BO) ........................ 64,800 270 Broken Hill Proprietary Co., Ltd. * (BF) ................ 151,819 1,322 Foster's Brewing Group, Ltd. * (JG) ..................... 67,200 221 Insurance Australia Group (JR) .......................... 92,600 322 National Australia Bank, Ltd. (JP) ...................... 12,100 251 Promina Group (JR) ...................................... 93,300 259 QBE Insurance Group, Ltd. * (JR) ........................ 45,700 407 Rinker Group (BD) ....................................... 60,600 339 Wesfarmers (BL) ......................................... 18,600 380 WMC Resources, Ltd. * (BF) .............................. 71,800 246 Woolworth's, Ltd. * (JF) ................................ 38,200 303 ------- 5,005 Belgium - 0.1% UCB SA * (JO) ........................................... 2,500 117 Canada - 1.7% Abitibi Consolidated, Inc. * (BG) ....................... 35,300 241 Alcan Aluminum, Ltd. (BF) ............................... 13,402 552 Bombardier, Inc. - Cl. B * (BH) ......................... 144,600 433 Great West Lifeco, Inc. (JR) ............................ 8,400 302 Inco, Ltd. * (BF) ....................................... 3,700 127 National Bank of Canada (JP) ............................ 7,700 247 Suncor Energy, Inc. (BB) ................................ 8,000 203 ------- 2,105 Denmark - 0.6% Novo Nordisk AS (JO) .................................... 9,280 478 Tele Danmark AS (J1) .................................... 7,800 254 ------- 732 Finland - 0.8% Nokia Oyj * (JW) ........................................ 43,704 631 UPM-Kymmene Corp. * (BG) ................................ 19,400 370 ------- 1,001 France - 9.8% Air Liquide * (BC) ...................................... 6,050 1,002 BNP Paribas * (JP) ...................................... 35,102 2,162 Bouygues SA * (J2) ...................................... 36,600 1,227 Carrefour SA * (JF) ..................................... 6,800 330 Essilor International (JL) .............................. 6,200 405 Groupe Danone * (JH) .................................... 10,300 900 L'Oreal SA * (JK) ....................................... 7,064 565 Renault (BV) ............................................ 7,700 587 Sanofi-Synthelabo SA * (JO) ............................. 51,042 3,239 Schneider SA * (BK) ..................................... 3,765 257 Societe Generale - Cl. A * (JP) ......................... 4,422 376 STMicroelectronics * (J0) ............................... 14,156 311 Vivendi Universal SA * (JA) ............................. 22,913 $ 636 ------- 11,997 Germany - 5.6% Allianz AG * (JR) ....................................... 7,528 816 Bayerische Motoren Werke AG * (BV) ...................... 10,500 465 Bayerische Vereinsbank AG * (JP) ........................ 29,598 527 DaimlerChrysler AG * (BV) ............................... 31,100 1,455 Deutsche Bank AG * (JP) ................................. 2,981 235 Deutsche Boerse AG (JQ) ................................. 9,200 468 E.On AG (J3) ............................................ 4,145 299 Infineon Technologies AG * (J0) ......................... 31,500 423 Muenchener Rueckversicherungs- Gesellschaft AG * (JR) ............................ 6,900 749 SAP AG * (JV) ........................................... 2,780 461 Siemens AG * (BK) ....................................... 8,952 645 Thyssen Krupp AG * (BF) ................................. 14,100 241 ------- 6,784 Hong Kong - 1.5% Cheung Kong Holdings, Ltd. * (JS) ....................... 24,000 177 Esprit Holdings, Ltd. (JE) .............................. 59,000 264 Hang Lung Properties (JS) ............................... 279,000 360 Hang Seng Bank, Ltd. * (JP) ............................. 20,000 256 Li & Fung, Ltd. * (JB) .................................. 350,000 512 Swire Pacific, Ltd. - Cl. A * (JQ) ...................... 34,000 220 ------- 1,789 Italy - 1.1% ENI * (BB) .............................................. 43,472 864 UniCredito Italiano SpA * (JP) .......................... 89,403 442 ------- 1,306 Japan - 24.1% Acom Co., Ltd. (JQ) ..................................... 3,700 240 Advantest (J0) .......................................... 5,500 368 Canon, Inc. * (JZ) ...................................... 8,000 421 Chudenko Corp. (BJ) ..................................... 13,300 217 Dai-Nippon Printng Co., Ltd. (BO) ....................... 17,000 271 Daiwa House Industry Co., Ltd. (BW) ..................... 23,000 266 East Japan Railway Co. (BS) ............................. 50 280 Fanuc, Ltd. * (BK) ...................................... 8,100 482 Furukawa Electric Co. (BK) .............................. 63,000 268 Hirose Electric Co., Ltd. * (JY) ........................ 4,800 526 Honda Motor Co. * (BV) .................................. 7,400 356 Hoya Corp. * (JY) ....................................... 3,200 334 Japan Airlines (BQ) ..................................... 61,000 195 Jusco Co., Ltd. * (JD) .................................. 30,000 1,202 Kansai Electric Power Co., Inc. (J3) .................... 31,600 575 Keyence Corp. (JY) ...................................... 1,200 273 Konica Corp. (BX) ....................................... 39,000 537 Kyocera Corp. * (JY) .................................... 4,400 373 Millea Holdings, Inc. * (JR) ............................ 79 1,170 Mitsubishi Corp. (BN) ................................... 40,000 388 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued Mitsubishi Estate Co., Ltd. * (JS) ...................... 108,000 $ 1,337 Mitsubishi Heavy Industries, Ltd. * (BM) ................ 66,000 179 Mitsubishi Tokyo Finance (JP) ........................... 101 933 Mitsui Fudosan Co., Ltd. * (JS) ......................... 40,000 478 Mitsui Marine & Fire Insurance Co., Ltd. * (JR) ......... 122,000 1,144 Mizuho Financial GB * (JP) .............................. 57 258 Murata Manufacturing Co., Ltd. * (J0) ................... 5,900 336 NEC Corp. * (JX) ........................................ 227,000 1,594 Nidec Corp. * (JY) ...................................... 2,800 286 Nikko Securities Co., Ltd. * (JQ) ....................... 51,000 247 Nikon Corp. (J0) ........................................ 31,000 348 Nintendo Corp., Ltd. (BW) ............................... 4,600 532 Nissan Motor Acceptance Corp. (BV) ...................... 126,400 1,402 Nitto Denko Corp. * (BK) ................................ 9,800 500 Nomura Securities Co., Ltd. * (JQ) ...................... 17,000 251 Omron Corp. (JY) ........................................ 10,000 234 Ricoh Co., Ltd. (JZ) .................................... 14,000 297 Rohm Co., Ltd. * (JY) ................................... 4,500 537 Sankyo Co., Ltd. * (JO) ................................. 26,000 562 Sekisui House, Ltd. * (BW) .............................. 60,000 664 Shionogi & Co., Ltd. * (JO) ............................. 42,000 721 SMC Corp. * (BM) ........................................ 5,200 561 Sumitomo Chemical Co. (BC) .............................. 105,000 489 Sumitomo Forestry Co. (BW) .............................. 25,000 287 Sumitomo Mitsui GR (JP) ................................. 202 1,382 Takeda Chemical Industries * (JO) ....................... 9,200 403 Tokyo Electron, Ltd. * (J0) ............................. 17,900 1,002 Tokyo Gas Co. (J4) ...................................... 103,000 365 Tostem Corp. (BI) ....................................... 11,000 237 Toyota Motor Corp. * (BV) ............................... 28,700 1,160 UFJ Holdings, Inc. * (JP) ............................... 123 542 Uni-Charm Corp. (JJ) .................................... 5,400 269 Yamanouchi Pharmaceutical Co., Ltd. * (JO) .............. 7,200 242 Yamato Transport Co., Ltd. (BP) ......................... 31,000 505 Yasuda F & M Insurance (JR) ............................. 42,000 428 ------- 29,454 Luxembourg - 0.2% Society Europeenne des Satellites (JA) .................. 26,900 228 Netherlands - 5.2% Heineken Holdings (JG) .................................. 14,125 414 Heineken NV (JG) ........................................ 41,050 1,351 Koninklijke * (Royal) Philips Electronics NV (BW) ....... 10,927 295 Koninklijke KPN NV * (J1) ............................... 235,700 1,797 Royal Dutch Petroleum Co. * (BB) ........................ 33,120 1,702 TNT Post Group NV (BP) .................................. 15,700 359 VNU NV * (JA) ........................................... 13,354 388 ------- 6,306 Norway - 1.4% Den Norske Bank (JP) .................................... 38,800 $ 265 Norsk Hydro ASA (BB) .................................... 6,300 409 Norske Skogindustrier ASA - Cl. A * (BG) ................ 13,400 239 Statoil ASA * (BB) ...................................... 60,000 762 ------- 1,675 Singapore - 1.3% Singapore Telecommunications, Ltd. * (J1) ............... 807,000 1,055 United Overseas Bank, Ltd. * (JP) ....................... 31,072 242 Venture Manufacturing, Ltd. * (JY) ...................... 22,000 230 ------- 1,527 South Africa - 0.2% Anglo American plc * (BF) ............................... 12,300 251 South Korea - 0.8% Samsung Electronics * (J0) .............................. 2,310 954 Spain - 3.1% Banco Bilbao Vizcaya SA * (JP) .......................... 133,900 1,791 Iberdrola SA (J3) ....................................... 1,800 38 Inditex (JE) ............................................ 46,400 1,066 Telefonica SA * (J1) .................................... 59,409 879 ------- 3,774 Sweden - 0.7% ForeningsSparbanken AB * (JP) ........................... 30,600 585 Scania AB - Ser. B (BM) ................................. 8,100 276 ------- 861 Switzerland - 10.9% ABB, Ltd. (BK) .......................................... 62,913 344 Adecco SA * (BO) ........................................ 5,000 249 Credit Suisse Group * (JP) .............................. 7,151 254 Holcim * (BD) ........................................... 27,657 1,504 Nestle SA * (JH) ........................................ 7,305 1,949 Novartis AG (JO) ........................................ 53,600 2,366 Richemont (JE) .......................................... 56,000 1,463 Roche Holdings AG * (JO) ................................ 4,608 456 Serono SA (JN) .......................................... 525 331 Swiss Reinsurance Co. * (JR) ............................ 25,300 1,644 Swisscom AG * (J1) ...................................... 4,200 1,389 Syngenta AG (BC) ........................................ 3,500 294 Synthes, Inc. * (JL) .................................... 2,300 262 UBS AG * (JP) ........................................... 11,516 812 ------- 13,317 United Kingdom - 20.4% ARM Holdings plc (J0) ................................... 112,500 245 AstraZeneca Group plc * (JO) ............................ 89,358 4,008 Barclays (JP) ........................................... 25,900 221 BG Group plc * (BB) ..................................... 288,600 1,778 British Aerospace plc (BH) .............................. 66,700 265 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued United Kingdom - Continued Centrica plc (J4) .................................... 130,000 $ 529 CRH (BD) ............................................. 23,900 507 Diageo plc * (JG) .................................... 56,137 757 HBOS * (JP) .......................................... 73,100 904 HSBC Holdings plc (JP) ............................... 85,100 1,265 Johnston Press (JA) .................................. 11,600 119 Lloyds TSB Group plc (JP) ............................ 32,500 254 National Grid Group * (J3) ........................... 103,800 801 Reckitt Benckiser * (JJ) ............................. 9,700 274 Reed International plc (JA) .......................... 114,061 1,108 Rio Tinto plc * (BF) ................................. 16,151 388 Royal Bank of Scotland Group * (JP) .................. 60,802 1,750 Shell Transport & Trading Co. plc * (BB) ............. 253,411 1,858 Smiths Group (BL) .................................... 70,900 960 Standard Chartered plc * (JP) ........................ 48,100 783 Unilever plc * (JH) .................................. 133,848 1,313 Vodafone AirTouch plc (J2) ........................... 1,899,744 4,159 Wolseley (BN) ........................................ 16,800 260 Xstrata (BF) ......................................... 31,900 426 -------- 24,932 United States - 3.0% America Movil SA de CV - ADR Ser. L (J2) ............. 13,400 487 Companhia Vale do Rio Doce - ADR (BF) ................ 7,169 280 Inco, Ltd. * (BF) .................................... 12,600 436 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR * (J0) ........................................ 75,297 626 Telefonica SA * (J1) ................................. 6,725 300 The Thomson Corp. * (JA) ............................. 37,300 1,248 Yukos Corp. - ADR * (BL) ............................. 9,383 298 -------- 3,675 -------- TOTAL COMMON STOCK - (Cost $112,435) ................. 96.6% 117,790 PREFERRED STOCK Australia - 0.2% News Corp., Ltd. (JA) ................................ 36,349 297 -------- TOTAL PREFERRED STOCK- (Cost $275) 0.2% 297 Par Market Value Value ----------- -------- (000's) (000's) PUBLICLY-TRADED BONDS Supra National - 0.6% SMFG Finance - Bonds (FB) 2.25% due07/11/05 ...... $33,000,000 726 Switzerland - 0.3% Credit Suisse - Bonds (JP) 6.0% due12/23/05 ...... $ 334,000 $ 354 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $1,158) 0.9% 1,080 ----------- -------- TOTAL LONG-TERM INVESTMENTS- (Cost $113,868) 97.7% 119,167 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 8.3% State Street Navigator Securities Lending Portfolio ..................................... 10,137 10,137 ----------- -------- TOTAL INVESTMENTS- (Cost $124,005) 106.0% 129,304 Payables, less cash and receivables- (6.0)% (7,317) ----------- -------- NET ASSETS- 100.0% $121,987 =========== ======== * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------- ----------- Banks ................................... JP $17,530 14.7% Pharmaceuticals ......................... JO 12,592 10.6% Oil & Gas ............................... BB 7,576 6.4% Insurance ............................... JR 7,242 6.1% Wireless Telecommunications Services .... J2 5,873 4.9% Diversified Telecommunication Services .. J1 5,674 4.8% Automobiles ............................. BV 5,425 4.6% Semiconductor Equipment & Products ...... J0 4,612 3.9% Metals & Mining ......................... BF 4,269 3.6% Food Products ........................... JH 4,161 3.5% Media ................................... JA 4,025 3.4% Electronic Equipment & Instruments ...... JY 2,794 2.3% Specialty Retail ........................ JE 2,793 2.3% Beverages ............................... JG 2,742 2.3% Electrical Equipment .................... BK 2,497 2.1% Real Estate Operations .................. JS 2,352 2.0% Construction Materials .................. BD 2,350 2.0% Household Durables ...................... BW 2,044 1.7% Chemicals ............................... BC 1,784 1.5% Electric Utilities ...................... J3 1,713 1.4% SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ -------- ----------- Industrial Conglomerates ............... BL $ 1,638 1.4% Computers & Peripherals ................ JX 1,594 1.3% Diversified Financials ................. JQ 1,426 1.2% Multiline Retail ....................... JD 1,202 1.0% Machinery .............................. BM 1,015 0.8% Gas Utilities .......................... J4 894 0.7% Air Freight & Couriers ................. BP 864 0.7% Paper & Forest Products ................ BG 849 0.7% Commercial Services & Supplies ......... BO 790 0.7% Finance ................................ FB 726 0.6% Office Electronics ..................... JZ 718 0.6% Aerospace & Defense .................... BH 699 0.6% Health Care Equipment & Supplies ....... JL 667 0.6% Trading Companies & Distributors ....... BN 648 0.5% Food & Drug Retailing .................. JF 633 0.5% Communications Equipment ............... JW 631 0.5% Personal Products ...................... JK 565 0.5% Household Products ..................... JJ 543 0.5% Leisure Equipment & Products ........... BX 537 0.4% Distributors ........................... JB 512 0.4% Software ............................... JV 461 0.4% Biotechnology .......................... JN 331 0.3% Road & Rail ............................ BS 280 0.2% Containers & Packaging ................. BE 247 0.2% Building Products ...................... BI 237 0.2% Construction & Engineering ............. BJ 217 0.2% Airlines ............................... BQ 195 0.2% -------- ----- $119,167 100.0% ======== ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Overseas Equity B, (formerly John Hancock International Opportunities Fund), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- $303,014 ======== Currency translation: All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 5:00 p.m., London time, on the date of any determination of the net asset value of the Fund. Unrealized exchange adjustments are included in unrealized appreciation (depreciation) of investments. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between trade and settlement dates of security transactions, and the difference between the amounts of net investment income accrued and the U.S. dollar amount actually received. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $2,050 1.58% $1 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $9,615 $10,137 Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued As of June 30, 2004, the Fund had open forward foreign currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: Unrealized Principal Amount Appreciation/ Covered by Contract Expiration Month (Depreciation) ------------------- ---------------- -------------- Currency Sold Swiss Franc 220 August 04 $ (8) Swiss Franc 898 August 04 (18) Swiss Franc 1,106 September 04 -- Japanese Yen 405 September 04 $ (6) ---- $(32) ==== Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $266, $2,070, $2,540, $9,656, $12,511 and $11,857 which expire in 2006, 2007, 2008, 2009, 2010 and 2011, respectively. Certain of the above losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $218. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual bais of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Between $20 Million and Excess Over First $20 Million $50 Million $50 Million ----------------- --------------- ----------- 1.30% 1.15% 1.05% For the period from January 1, 2004 to April 30, 2004, John Hancock and JVLICO agreed to reimburse the Fund for normal operating expenses, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses that exceed 0.10% of the Fund's daily net asset value. Accordingly, for the period from January 1, 2004 to April 30, 2004 the Fund was reimbursed $24 by John Hancock and JVLICO. On March 18, 2004, the Fund's Shareholders approved the removal of John Hancock and JVLICO's respective obligations to reimburse the Fund for excess operating expenses effective May 1, 2004. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $2. As of April 30, 2004, John Hancock has entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $102,826 $107,226 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $131,494 $13,496 $(2,579) $10,917 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and sales of certain foreign currency denominated debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $38,900 $10,917 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $1,514 $- $42 2002 592 - - NOTE E--COMBINATION On August 20, 2002, the Board of Trustees of the John Hancock Variable Series Trust I, including all of its independent Trustees, approved an amended plan to combine the International Opportunities B Fund. ("Acquired Fund") into the International Opportunities Fund ("Acquiring Fund"). The amended plan does not require a shareholder vote to approve the combination, in compliance with recent changes to rules of the SEC, because (a) the fundamental investment restrictions of the Acquiring Fund are substantially identical to the fundamental investment restrictions of the Acquired Fund, (b) there are no material differences between the investment management agreements (and sub-investment management agreements) of the Acquired Fund and the Acquiring Fund, and (c) the Board of Trustees includes a majority of independent Trustees who were elected by shareholders of the Acquired Fund. The combination of the Acquired Fund into the Acquiring Fund took place at the close of business on September 13, 2002. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION--Continued This combination provided for the transfer of substantially all of the assets and liabilities of the target fund to the acquiring fund in exchange solely for the fund shares of the acquiring fund. This acquisition was accounted for as taxfree exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination ---------------------- -------------- ----------- ------------ ---------------- -------------------- VST International Opportunities vs. VST International Opportu- nites B (formerly, International Equity) 3,278 $24,706 $(5,332) $71,914 $96,620
NOTE F--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters:
For Against Abstain --- ------- ------- To approve, as to the Overseas Equity B Fund, an amendment to the current 89% 6% 5% investment mangement agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses.
Inception: May 1, 1998 -------------------------------------------------------------------------------- Overseas Equity C Fund (FORMERLY EMERGING MARKETS EQUITY FUND) Capital Guardian Trust Company Management Team -------------------------------------------------------------------------------- . Year to date, the Fund returned 8.68% outperforming its custom benchmark. Relative to Morningstar peers, the Fund has an above average rating of 5 with an average risk profile. . On May 1st, the Fund's name, investment strategy and sub-adviser were changed. Capital Guardian implemented an investment strategy for the Fund that is substantially the same as the investment strategy it now employs for the Overseas Equity Fund. Under that strategy, the Fund will invest primarily in foreign large and mid sized equities with modest emerging market equity exposure. . Since May 1st, the Fund underperformed its benchmark partially due to the restructuring of the Fund to the new strategy, as well as unfavorable stock selection. . The manager employs a multiple portfolio manager system, with each portfolio managed by several portfolio managers and research analysts. The manager selects stocks using proprietary fundamental research. Fundamental research seeks to uncover companies that are undervalued and asset rich. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Assets ------ Vodafone AirTouch plc 3.5% AstraZeneca Group plc 3.4% Sanofi-Synthelabo SA 2.7% Mitsubishi 2.5% Royal Dutch Petroleum Co. 2.3% Novartis AG 2.0% Sumitomo 1.8% BNP Paribas 1.8% Koninklijke 1.7% Nestle SA 1.7% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Overseas Equity Overseas Equity C Fund C Benchmark/4/ --------------- --------------- YTD/3/ 8.68% 3.43% 1 Year 48.52 39.17 3 Years 16.51 14.67 5 Years 5.11 4.14 Since Inception (5/1/98) 2.77 3.25 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Diversified Emerging Markets MORNINGSTAR RISK/1/: . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . ***** (VL/VUL) . ***** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DIVERSIFICATION BY REGION AND COUNTRY/5/ (as of June 30, 2004) % of Assets ------ Europe 63% Asia 28.1% Other 6.2% United States 2.9% DIVERSIFICATION BY REGION/6/ Developed Markets 97% Emerging Markets 3% Returns reflect extra-ordinary capital contribution of $445,000 in June 1999. On May 31, MSCI implemented the final phase of its enhanced methodology which shifts to a weighting system based on freely floated or publicly available shares, rather than just market capitalization. South Africa and South Korea market weight increased the most while Mexico, India and Malaysia declined the most. /1/ Source: MorningStar, Inc. Data as of 6/30/04. Data reviewed by Morningstar reflects the Fund's previous investment strategy. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 130 VL/VUL subaccounts and 236 VA subaccounts in the Morningstar Diversified Emerging Markets category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. International investing entails special risks as outlined in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized /4/ The Overseas Equity benchmark represents the MSCI Emerging Markets Index from May 1998 to April 2004 and then the MSCI EAFE Index from May 2004 to present. /5/ Calculations based upon country in which security is traded (listed). /6/ Calculations based upon country in which security is domiciled. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity C Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $68,770 Net unrealized appreciation of investments .......................... 84 Short-term investments at value ..................................... 1,377 ------- Total investments ................................................ 70,231 Foreign currency at value (cost $1,400) ............................. 1,376 Receivable for: Investments sold ................................................. 50 Interest ......................................................... 3 Dividends ........................................................ 85 Foreign dividend tax withholding reclaim ......................... 8 ------- Total assets ........................................................ 71,753 ------- LIABILITIES Payables for: Investments purchased ............................................ 24 Foreign dividend tax withholding ................................. 6 Unrealized depreciation in forward currency contracts ............ 19 Accrued operating expenses ....................................... 105 ------- Total liabilities ................................................... 154 ------- Net assets .......................................................... $71,599 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 7,432 ------- Net asset value per share ........................................... $ 9.63 ======= Composition of net assets: Capital paid-in .................................................. $67,076 Accumulated net realized gain on investment, and foreign currency transactions ......................................... 4,642 Undistributed net investment loss ................................ (160) Net unrealized appreciation (depreciation) of: Investments ................................................... 84 Translation of assets and liabilities in foreign currencies ... (43) ------- Net assets .......................................................... $71,599 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Overseas Equity C Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 29 Dividends (net of foreign withholding tax of $101) .............. 835 -------- Total investment income ............................................ 864 -------- EXPENSES Investment advisory fee ......................................... 498 Auditors fees ................................................... 4 Custodian fees .................................................. 171 Legal fees ...................................................... 4 Printing & mailing fees ......................................... 11 Trustees' fees .................................................. 1 Other fees ...................................................... 3 -------- Total expenses ..................................................... 692 Less expenses reimbursed ........................................ (65) Less custodian expense reduction offset by commission recapture arrangement (Note C) ......................................... (49) -------- Net expenses ....................................................... 578 -------- Net investment income .............................................. 286 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. 23,024 Realized Thai Tax ............................................ (308) Foreign currency transactions ................................ (1,698) Change in unrealized appreciation (depreciation) on: Investments .................................................. (16,060) Translation of assets and liabilities in foreign currencies .. 260 -------- Net realized and unrealized gain ................................... 5,218 -------- Net increase in net assets resulting from operations ............... $ 5,504 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Overseas Equity C Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .......................................... $ 286 $ 565 Net realized gain .............................................. 21,018 2,779 Change in net unrealized appreciation (depreciation) ........... (15,800) 18,113 -------- -------- Net increase in net assets resulting from operations ........ 5,504 21,457 Distributions to shareholders from: Net investment income .......................................... (312) (803) Realized gains ................................................. (2,285) -------- -------- Decrease in net assets resulting from distributions ......... (312) (3,088) From fund share transactions: Proceeds from shares sold ...................................... 16,232 82,919 Distributions reinvested ....................................... 312 3,088 Payment for shares redeemed .................................... (14,810) (74,209) -------- -------- Increase in net assets from fund share transactions ......... 1,734 11,798 -------- -------- NET INCREASE IN NET ASSETS ........................................ 6,926 30,167 NET ASSETS Beginning of Period ............................................ 64,673 34,506 -------- -------- End of Period (including undistributed net investment loss of $(160) and $(134), respectively) ............................ $ 71,599 $ 64,673 ======== ======== Analysis of fund share transactions: Sold ........................................................... 1,690 12,330 Reinvested ..................................................... 33 376 Redeemed ....................................................... (1,554) (11,202) -------- -------- Net increase in fund shares outstanding ........................... 169 1,504 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Overseas Equity C Fund ----------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ---------------------------------------------- 2004(g) 2003 2002 2001 2000 ------------ ------- ------- ------- ------- Net Assets Value at Beginning of Period .................. $ 8.90 $ 5.99 $ 6.44 $ 6.70 $ 12.26 Income from Investment Operations: Net Investment Income (Loss) .......................... 0.04 0.09 0.02 0.05 (0.02) Net Realized and Unrealized Gain (Loss) on Investment(a) ...................................... 0.73 3.27 (0.45) (0.29) (4.91) ------- ------- ------- ------- ------- Total From Investment Operations ...................... 0.77 3.36 (0.43) (0.24) (4.93) Less Distributions: Distribution from Net Investment Income ............... (0.04) (0.12) (0.02) Distribution from Net Realized Gains on Investments ... (0.33) (0.62) Distribution from Capital Paid-in ..................... (0.02) (0.01) ------- ------- ------- ------- ------- Total Distributions ................................... (0.04) (0.45) (0.02) (0.02) (0.63) Capital Contributions ................................. ------- ------- ------- ------- ------- Net Assets Value at End of Period ........................ $ 9.63 $ 8.90 $ 5.99 $ 6.44 $ 6.70 ======= ======= ======= ======= ======= Total Investment Return(b) ............................... 8.68%(e) 56.90% (6.73)% (3.63)% (40.11)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...... 1.74%(c)(d)(f) 1.60%(d) 1.60%(d) 1.40%(d) 1.32%(d) Ratio of Net Investment Income (Loss) to Average Net Assets ......................................... 0.79%(f) 1.28% 0.27% 0.77% (0.28)% Portfolio Turnover Rate ............................... 155.96%(e) 92.85% 88.40% 120.72% 103.90% Net Assets End of Period (000s Omitted) .................. $71,599 $64,673 $34,506 $28,956 $31,010
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.92% for the period ending June 30, 2004, and 2.24%, 3.45%, 4.02%, and 2.49%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (e) Not annualized. (f) Annualized. (g) The fund entered into a new sub-advisory agreement with Capital Guardian Trust Co. during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY C FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Australia - 3.8% Amcor, Ltd. (BE) ........................................ 28,400 $ 138 Australia & New Zealand Banking Group, Ltd. * (JP) ...... 17,200 219 Brambles Industries, Ltd. * (BO) ........................ 37,200 155 Broken Hill Proprietary Co., Ltd. * (BF) ................ 70,100 611 Foster's Brewing Group, Ltd. * (JG) ..................... 34,500 113 Insurance Australia Group (JR) .......................... 51,500 179 National Australia Bank, Ltd. (JP) ...................... 7,000 145 Promina Group (JR) ...................................... 58,800 163 QBE Insurance Group, Ltd. * (JR) ........................ 25,000 222 Rinker Group (BD) ....................................... 41,966 235 Wesfarmers (BL) ......................................... 9,500 194 WMC Resources, Ltd. * (BF) .............................. 44,900 154 Woolworth's, Ltd. * (JF) ................................ 21,200 168 ------ 2,696 Belgium - 0.1% UCB SA * (JO) ........................................... 1,000 47 Canada - 1.6% Abitibi Consolidated, Inc. * (BG) ....................... 21,800 149 Alcan Aluminum, Ltd. (BF) ............................... 7,500 309 Bombardier, Inc. - Cl. B * (BH) ......................... 80,800 242 Great West Lifeco, Inc. (JR) ............................ 4,900 176 National Bank of Canada (JP) ............................ 4,700 151 Suncor Energy, Inc. (BB) ................................ 3,900 99 ------ 1,126 Denmark - 0.6% Novo Nordisk AS (JO) .................................... 5,300 273 Tele Danmark AS (J1) .................................... 4,400 143 ------ 416 Finland - 0.7% Nokia Oyj * (JW) ........................................ 21,500 310 UPM-Kymmene Corp. * (BG) ................................ 11,900 227 ------ 537 France - 10.5% Accor SA (BZ) ........................................... 6,200 262 Air Liquide * (BC) ...................................... 3,740 619 BNP Paribas * (JP) ...................................... 19,900 1,226 Bouygues SA * (J2) ...................................... 23,300 781 Carrefour SA * (JF) ..................................... 4,000 194 Essilor International (JL) .............................. 3,900 255 Groupe Danone * (JH) .................................... 6,000 524 L'Oreal SA * (JK) ....................................... 4,100 328 Renault (BV) ............................................ 4,300 328 Sanofi-Synthelabo SA * (JO) ............................. 29,800 1,891 Schneider SA * (BK) ..................................... 5,400 369 Societe Generale - Cl. A * (JP) ......................... 2,600 221 STMicroelectronics * (J0) ............................... 8,200 180 Vivendi Universal SA * (JA) ............................. 12,300 342 ------ 7,520 Germany - 5.5% Allianz AG * (JR) ....................................... 4,500 $ 488 Bayerische Motoren Werke AG * (BV) ...................... 6,100 270 Bayerische Vereinsbank AG * (JP) ........................ 18,700 333 DaimlerChrysler AG * (BV) ............................... 17,700 828 Deutsche Bank AG * (JP) ................................. 1,300 102 Deutsche Boerse AG (JQ) ................................. 5,380 274 E.On AG (J3) ............................................ 2,900 210 Infineon Technologies AG * (J0) ......................... 20,100 270 Muenchener Rueckversicherungs-Gesellschaft AG * (JR) .... 4,300 467 SAP AG * (JV) ........................................... 1,400 232 Siemens AG * (BK) ....................................... 4,600 331 Thyssen Krupp AG * (BF) ................................. 6,700 114 ------ 3,919 Hong Kong - 1.8% Cheung Kong Holdings, Ltd. * (JS) ....................... 15,000 111 Esprit Holdings, Ltd. (JE) .............................. 35,000 157 Hang Lung Properties (JS) ............................... 168,000 216 Hang Seng Bank, Ltd. * (JP) ............................. 14,300 183 Huaneng Power International * (J3) ...................... 158,000 141 Li & Fung, Ltd. * (JB) .................................. 208,000 304 Swire Pacific, Ltd. - Cl. A * (JQ) ...................... 22,000 142 ------ 1,254 Italy - 1.0% ENI * (BB) .............................................. 25,100 499 UniCredito Italiano SpA * (JP) .......................... 51,200 253 ------ 752 Japan - 23.4% Acom Co., Ltd. (JQ) ..................................... 2,400 156 Advantest (J0) .......................................... 3,800 254 Canon, Inc. * (JZ) ...................................... 4,000 210 Chudenko Corp. (BJ) ..................................... 7,300 119 Dai-Nippon Printng Co., Ltd. (BO) ....................... 11,000 175 Daiwa House Industry Co., Ltd. (BW) ..................... 13,000 150 East Japan Railway Co. (BS) ............................. 30 168 Fanuc, Ltd. * (BK) ...................................... 4,700 280 Furukawa Electric Co. (BK) .............................. 37,000 158 Hirose Electric Co., Ltd. * (JY) ........................ 2,500 274 Honda Motor Co. * (BV) .................................. 4,500 216 Hoya Corp. * (JY) ....................................... 1,900 198 Japan Airlines (BQ) ..................................... 39,000 124 Jusco Co., Ltd. * (JD) .................................. 18,000 721 Kansai Electric Power Co., Inc. (J3) .................... 18,600 338 Keyence Corp. (JY) ...................................... 700 159 Konica Corp. (BX) ....................................... 25,000 344 Kyocera Corp. * (JY) .................................... 2,600 220 Millea Holdings, Inc. * (JR) ............................ 43 637 Mitsubishi Corp. (BN) ................................... 22,000 213 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY C FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued Mitsubishi Estate Co., Ltd. * (JS) ...................... 66,000 $ 817 Mitsubishi Heavy Industries, Ltd. * (BM) ................ 42,000 114 Mitsubishi Tokyo Finance (JP) ........................... 56 517 Mitsui Fudosan Co., Ltd. * (JS) ......................... 19,000 227 Mitsui Marine & Fire Insurance Co., Ltd. * (JR) ......... 64,000 600 Mizuho Financial GB * (JP) .............................. 38 172 Murata Manufacturing Co., Ltd. * (J0) ................... 3,100 176 NEC Corp. * (JX) ........................................ 109,000 766 Nidec Corp. * (JY) ...................................... 1,500 153 Nikko Securities Co., Ltd. * (JQ) ....................... 21,000 102 Nikon Corp. (J0) ........................................ 16,000 180 Nintendo Corp., Ltd. (BW) ............................... 3,000 347 Nissan Motor Acceptance Corp. (BV) ...................... 71,000 788 Nitto Denko Corp. * (BK) ................................ 4,500 230 Nomura Securities Co., Ltd. * (JQ) ...................... 10,000 148 Omron Corp. (JY) ........................................ 7,000 164 Rohm Co., Ltd. * (JY) ................................... 2,500 299 Sankyo Co., Ltd. * (JO) ................................. 12,000 260 Sekisui House, Ltd. * (BW) .............................. 34,000 377 Shionogi & Co., Ltd. * (JO) ............................. 23,000 395 SMC Corp. * (BM) ........................................ 3,300 356 Sumitomo Chemical Co. (BC) .............................. 64,000 298 Sumitomo Forestry Co. (BW) .............................. 14,000 161 Sumitomo Mitsui GR (JP) ................................. 122 835 Takeda Chemical Industries * (JO) ....................... 6,100 267 Tokyo Electron, Ltd. * (J0) ............................. 10,700 599 Tokyo Gas Co. (J4) ...................................... 49,000 173 Tostem Corp. (BI) ....................................... 9,000 194 Toyota Motor Corp. * (BV) ............................... 16,800 679 UFJ Holdings, Inc. * (JP) ............................... 79 348 Uni-Charm Corp. (JJ) .................................... 3,200 159 Yamanouchi Pharmaceutical Co., Ltd. * (JO) .............. 4,000 134 Yamato Transport Co., Ltd. (BP) ......................... 20,000 326 Yasuda F & M Insurance (JR) ............................. 24,000 245 ------- 16,720 Luxembourg - 0.2% Society Europeenne des Satellites (JA) .................. 14,000 119 Netherlands - 5.8% Heineken Holdings (JG) .................................. 4,825 142 Heineken NV (JG) ........................................ 24,575 809 Koninklijke * (Royal) Philips Electronics NV (BW) ....... 5,600 151 Koninklijke KPN NV * (J1) ............................... 135,400 1,032 Royal Dutch Petroleum Co. * (BB) ........................ 31,200 1,603 TNT Post Group NV (BP) .................................. 9,500 217 VNU NV * (JA) ........................................... 7,800 227 ------- 4,181 Norway - 1.1% Den Norske Bank (JP) .................................... 22,400 153 Norsk Hydro ASA (BB) .................................... 2,700 $ 175 Norske Skogindustrier ASA - Cl. A * (BG) ................ 8,000 143 Statoil ASA * (BB) ...................................... 26,000 330 ------- 801 Singapore - 1.2% Singapore Telecommunications, Ltd. * (J1) ............... 442,000 578 United Overseas Bank, Ltd. * (JP) ....................... 21,000 163 Venture Manufacturing, Ltd. * (JY) ...................... 13,000 136 ------- 877 South Korea - 0.7% Samsung Electronics * (J0) .............................. 1,200 495 Spain - 3.2% Banco Bilbao Vizcaya SA * (JP) .......................... 78,700 1,053 Iberdrola SA (J3) ....................................... 1,000 21 Inditex (JE) ............................................ 25,700 590 Telefonica SA * (J1) .................................... 43,700 647 ------- 2,311 Sweden - 4.0% AstraZeneca Group plc (JO) .............................. 52,000 2,363 ForeningsSparbanken AB * (JP) ........................... 18,300 350 Scania AB - Ser. B (BM) ................................. 4,700 160 ------- 2,873 Switzerland - 10.7% ABB, Ltd. (BK) .......................................... 33,436 183 Adecco SA * (BO) ........................................ 3,193 159 Credit Suisse Group * (JP) .............................. 2,172 77 Holcim * (BD) ........................................... 15,169 825 Nestle SA * (JH) ........................................ 4,420 1,179 Novartis AG (JO) ........................................ 31,505 1,391 Richemont (JE) .......................................... 33,529 876 Roche Holdings AG * (JO) ................................ 2,383 236 Serono SA (JN) .......................................... 313 197 Swiss Reinsurance Co. * (JR) ............................ 14,838 964 Swisscom AG * (J1) ...................................... 2,430 804 Syngenta AG (BC) ........................................ 1,987 167 Synthes, Inc. * (JL) .................................... 1,620 185 UBS AG * (JP) ........................................... 5,822 410 ------- 7,653 United Kingdom - 16.6% Anglo American plc (BF) ................................. 7,200 147 ARM Holdings plc (J0) ................................... 74,500 162 Barclays (JP) ........................................... 15,200 130 BG Group plc * (BB) ..................................... 176,900 1,090 British Aerospace plc (BH) .............................. 38,800 154 Centrica plc (J4) ....................................... 65,200 265 CRH (BD) ................................................ 14,100 299 Diageo plc * (JG) ....................................... 31,700 427 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY C FUND Market Name of Issuer Shares Value -------------- ----------- ------- (000's) COMMON STOCK - Continued United Kingdom - Continued HBOS * (JP) ......................................... 43,300 $ 536 HSBC Holdings plc (JP) .............................. 54,000 803 Johnston Press (JA) ................................. 7,200 74 Lloyds TSB Group plc (JP) ........................... 18,800 147 National Grid Group * (J3) .......................... 52,900 408 Reckitt Benckiser * (JJ) ............................ 5,300 150 Reed International plc (JA) ......................... 59,600 579 Rio Tinto plc * (BF) ................................ 9,400 226 Royal Bank of Scotland Group * (JP) ................. 40,400 1,163 Shell Transport & Trading Co. plc * (BB) ............ 62,800 461 Smiths Group (BL) ................................... 37,700 510 Standard Chartered plc * (JP) ....................... 24,200 394 Unilever plc * (JH) ................................. 84,100 825 Vodafone AirTouch plc (J2) .......................... 1,113,900 2,438 Wolseley (BN) ....................................... 9,800 152 Xstrata (BF) ........................................ 26,300 351 ------- 11,891 United States - 2.8% America Movil SA de CV - ADR Ser. L (J2) ............ 5,500 200 Companhia Vale Do Rio Doce - ADR (BF) ............... 2,000 95 Hon Hai Precision Industry Co., Ltd. - GDR (JY) ..... 16,000 120 Inco, Ltd. * (BF) ................................... 9,600 332 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR * (J0) .............................. 47,802 397 The Thomson Corp. * (JA) ............................ 21,500 720 Yukos Corp. - ADR * (BL) ............................ 4,100 130 ------- 1,994 ------- TOTAL COMMON STOCK- (Cost $68,054) 95.3% 68,182 PREFERRED STOCK Australia - 0.2% News Corp., Ltd. (JA) ............................... 19,400 158 ------- TOTAL PREFERRED STOCK- (Cost $166) 0.2% 158 Par Market Name of Issuer Value Value -------------- ----------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Supra National - 0.5% SMFG Finance - Bonds (FB) 2.25% due 07/11/05 .................................. $15,000,000 330 Switzerland - 0.2% Credit Suisse - Bonds (JP) 6.0% due 12/23/05 ................................... $ 173,000 184 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $550) 0.7% 514 ----------- ------- TOTAL LONG-TERM INVESTMENTS- (Cost $68,770) 96.2% 68,854 SHORT-TERM INVESTMENTS - 1.9% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,377) .................................... $ 1,377 $ 1,377 ----------- ------- TOTAL INVESTMENTS- (Cost $70,147) 98.1% 70,231 Cash and Receivables, less payables- 1.9% 1,368 ----------- ------- NET ASSETS- 100.0% $71,599 =========== ======= * Non-income producing security ADR-American Depository Receipt. GDR-Global Depository Receipt. See notes to financial statements SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY Market % of Industry Value Long-Term Industry Abbreviation (000's) Investments -------- ------------ ------- ----------- Banks JP $10,268 14.9% Pharmaceuticals JO 7,256 10.5% Oil & Gas BB 4,257 6.2% Insurance JR 4,142 6.0% Wireless Telecommunications Services J2 3,419 5.0% Diversified Telecommunication Services J1 3,204 4.7% Automobiles BV 3,109 4.5% Semiconductor Equipment & Products J0 2,714 3.9% Food Products JH 2,528 3.7% Metals & Mining BF 2,339 3.4% Media JA 2,218 3.2% Electronic Equipment & Instruments JY 1,723 2.5% Specialty Retail JE 1,623 2.4% Electrical Equipment BK 1,550 2.3% Beverages JG 1,490 2.2% Real Estate Operations JS 1,372 2.0% Construction Materials BD 1,359 2.0% Household Durables BW 1,186 1.7% Electric Utilities J3 1,118 1.6% Chemicals BC 1,084 1.6% SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- OVERSEAS EQUITY C FUND Market % of Industry Value Long-Term Industry Abbreviation (000s) Investments -------- ------------ ------- ----------- Industrial Conglomerates BL $ 835 1.2% Diversified Financials JQ 821 1.2% Computers & Peripherals JX 765 1.1% Multiline Retail JD 721 1.0% Machinery BM 630 0.9% Air Freight & Couriers BP 543 0.8% Paper & Forest Products BG 518 0.8% Commercial Services & Supplies BO 490 0.7% Health Care Equipment & Supplies JL 440 0.6% Gas Utilities J4 439 0.6% Aerospace & Defense BH 396 0.6% Trading Companies & Distributors BN 365 0.5% Food & Drug Retailing JF 362 0.5% Leisure Equipment & Products BX 344 0.5% Finance FB 330 0.5% Personal Products JK 328 0.5% Communications Equipment JW 311 0.5% Household Products JJ 309 0.4% Distributors JB 304 0.4% Hotels Restaurants & Leisure BZ 262 0.4% Software JV 232 0.3% Office Electronics JZ 210 0.3% Biotechnology JN 197 0.3% Building Products BI 194 0.3% Road & Rail BS 168 0.2% Containers & Packaging BE 138 0.2% Airlines BQ 124 0.2% Construction & Engineering BJ 119 0.2% ------- ----- $68,854 100.0% ======= ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Overseas Equity C, (formerly, John Hancock Emerging Markets Equity Fund), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Investment security transactions are recorded on the date of purchase or sale. Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the case-balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Currency translation: All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 5:00 p.m., London time, on the date of any determination of the net asset value of the Fund. Unrealized exchange adjustments are included in unrealized appreciation (depreciation) of investments. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between trade and settlement dates of security transactions, and the difference between the amounts of net investment income accrued and the U.S. dollar amount actually received. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $566 1.52% $-- 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued As of June 30, 2004, the Fund had open forward foreign currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: Unrealized Principal Amount Appreciation/ Covered by Contract Expiration Month (Depreciation) ------------------- ---------------- -------------- Currency Sold ------------- Swiss Franc 130 August 04 $ (5) Swiss Franc 522 August 04 (10) Swiss Franc 642 September 04 -- Japanese Yen 235 September 04 $ (4) ---- $(19) ==== 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: $12,716 and $3,211 which expire in 2009 and 2010, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $101. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Between $20 Million and Excess Over First $20 Million $50 Million $50 Million ----------------- --------------- ----------- 1.30% 1.15% 1.05% For the period from January 1, 2004 to April 30, 2004, John Hancock and JVLICO agreed to reimburse the Fund for normal operating expenses, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses that exceed 0.10% of the Fund's daily net asset value. Accordingly, for the period from January 1, 2004 to April 30, 2004 the Fund was reimbursed $65 by John Hancock and JVLICO. On March 18, 2004, the Fund's Shareholders approved the removal of John Hancock and JVLICO's respective obligations to reimburse the Fund for excess operating expenses effective May 1, 2004. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $49. As of April 30, 2004, John Hancock has entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $92,865 $94,429 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $49,043 $16,200 $(579) $15,621 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and gains and losses related to certain foreign equity investments. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $15,927 $15,621 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $2,228 $-- $860 2002 93 -- -- Included in the Fund's 2003 distributions from ordinary income is $870 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as amended, requires registered management investment companies to furnish information relating to any matter submitted during the reporting period to a vote of Shareholders of the Trust. John Hancock Variable Series Trust I solicited a vote at special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matters: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS--Continued
For Against Abstain --- ------- ------- To approve, as to the Overseas Equity C Fund, an amendment to the current 84% 11% 5% investment mangement agreement between the Trust and John Hancock to decrease the fees paid by this Fund to John Hancock and to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses
Inception: May 16, 1988 -------------------------------------------------------------------------------- Real Estate Equity Fund RREEF America LLC K. Knudson/J. Robertson Van Kampen T. Bigman -------------------------------------------------------------------------------- The Fund employs a multi-manager approach with two sub-advisers, each of which independently manages its portion of the Fund. At quarter end, Van Kampen managed approximately 52% and RREEF managed approximately 48% of the Fund's assets. Fund Commentary . Year-to-date, Fund returned 7.02%, outperforming its benchmark, the Dow Jones Wilshire REIT Index. Relative to Morningstar peers, the Fund has an average rating of 3 with an above average risk profile. In each portion of the Fund, exposure to the regional malls and apartment sub-sectors were the largest contributors to absolute performance. RREEF . Outperformed its benchmark primarily due to favorable stock selection especially within the hotel and retail subsectors, with sub-sector allocation exposures also contributing. . The manager uses both a top-down market overview to identify attractive growth sectors and bottom-up fundamental research to identify companies that have sustainable cash flow growth. Van Kampen . Outperformed its benchmark primarily due to favorable stock selection especially within residential apartments and retail strip centers, with sub-sector allocations also adding value. . The manager uses a top-down market overview and bottom-up fundamental, value-driven research to select stocks that are attractively priced relative to their underlying real estate assets. Inception: May 16, 1988 -------------------------------------------------------------------------------- Real Estate Equity Fund RREEF America LLC K. Knudson/J. Robertson Van Kampen T. Bigman -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Simon Property Group, Inc. 7.9% Prologis Trust 5.4% Starwood Hotels & Resorts Worldwide, lr 5.1% Equity Residential Properties Trust 4.9% Archstone Communities Trust 4.8% Avalonbay Communities, Inc. 4.7% General Growth Properties 4.4% Rouse Co. 4.4% Brookfield Properties Corporation 4.2% Federal Realty Investment Trust 3.6% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Real Estate Real Estate Equity Fund Equity Benchmark/4/ ----------- ------------------- YTD/3/ 7.02% 6.00% 1 Year 29.39 27.17 3 Years 14.32 14.28 5 Years 14.01 14.20 10 Years 11.48 11.22 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/ . Specialty Real Estate MORNINGSTAR RISK/1/ . Above Average (VL/VUL) . Above Average (VA) MORNINGSTAR RATING/1/ . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Real Estate Investment Trust 86.3% Hotel/Motel 8.6% Real Estate 5.1% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 116 VL/VUL subaccounts and 210 VA subaccounts in the Morningstar Specialty-Real Estate category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original costs. Sector investing and a nondiversified fund entails special risks as discussed in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Real Estate Equity Benchmark represents the Dow Jones Wilshire Real Estate Securities Index from June 1988 to April 2003 and then the Dow Jones Wilshire REIT Index from May 2003 to present. Dow Jones Wilshire Real Estate Securities Index is a market-capitalization weighted index which measures the performance of real estate securities. The index contains performance data on five major categories of property: office, retail, industrial, apartment and miscellaneous. "Van Kampen" is a registered trade name used by Morgan Stanley Investment Management, Inc. in its role as a subdivision to the Fund. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $196,453 Net unrealized appreciation of investments .......................... 54,901 Short-term investments at value ..................................... 3,056 -------- Total investments ............................................. 254,410 Receivable for: Investments sold ................................................. 416 Dividends ........................................................ 1,113 -------- Total assets ........................................................ 255,939 -------- LIABILITIES Payables for: Investments purchased ............................................ 719 Accrued operating expenses ....................................... 93 -------- Total liabilities ................................................... 812 -------- Net assets .......................................................... $255,127 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 14,959 -------- Net asset value per share ........................................... $ 17.06 ======== Composition of net assets: Capital paid-in .................................................. $188,112 Accumulated net realized gain on investments, futures and foreign currency transactions ......................................... 11,915 Undistributed net investment income .............................. 199 Net unrealized appreciation of investments ....................... 54,901 -------- Net assets .......................................................... $255,127 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 33 Dividends (net of foreign withholding tax of $18) ................ 5,829 ------- Total investment income ............................................. 5,862 ------- EXPENSES Investment advisory fee .......................................... 1,162 Auditors fees .................................................... 15 Custodian fees ................................................... 46 Legal fees ....................................................... 15 Printing & mailing fees .......................................... 20 Trustees' fees ................................................... 4 Other fees ....................................................... 4 ------- Total expenses ...................................................... 1,266 Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (8) ------- Net expenses ........................................................ 1,258 ------- Net investment income ............................................... 4,604 ------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................. 10,385 Change in unrealized appreciation on investments ................. 1,220 ------- Net realized and unrealized gain .................................... 11,605 ------- Net increase in net assets resulting from operations ................ $16,209 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE IN NET ASSETS From operations Net investment income .................................... $ 4,604 $ 9,610 Net realized gain ........................................ 10,385 6,974 Change in net unrealized appreciation .................... 1,220 46,768 -------- -------- Net increase in net assets resulting from operations .. 16,209 63,352 Distributions to shareholders from: Net investment income .................................... (4,405) (9,525) Realized gains ........................................... (6,666) -------- -------- Decrease in net assets resulting from distributions ... (4,405) (16,191) From fund share transactions: Proceeds from shares sold ................................ 27,614 52,162 Distributions reinvested ................................. 4,405 16,191 Payment for shares redeemed .............................. (25,620) (56,516) -------- -------- Increase in net assets from fund share transactions ... 6,399 11,837 -------- -------- NET INCREASE IN NET ASSETS .................................. 18,203 58,998 NET ASSETS Beginning of Period ...................................... 236,924 177,926 -------- -------- End of Period (including undistributed net investment income of $199 and $0, respectively) ................. $255,127 $236,924 ======== ======== Analysis of fund share transactions: Sold ..................................................... 1,650 3,726 Reinvested ............................................... 262 1,077 Redeemed ................................................. (1,562) (4,106) -------- -------- Net increase in fund shares outstanding ..................... 350 697 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each fund share of beneficial interest outstanding throughout the period indicated:
Real Estate Equity Fund ------------------------------------------------------------ Unaudited Period Year Ended December 31, Ended June 30, ----------------------------------------- 2004 2003(d) 2002 2001 2000(c) ---------------- -------- -------- -------- -------- Net Assets Value at Beginning of Period ............... $ 16.22 $ 12.79 $ 13.55 $ 13.67 $ 11.47 Income from Investment Operations: Net Investment Income .............................. 0.31 0.69 0.62 0.67 0.76 Net Realized and Unrealized Gain (Loss) on Investment(a) ................................... 0.82 3.90 (0.43) 0.21 2.73 -------- -------- -------- -------- -------- Total From Investment Operations ................... 1.13 4.59 0.19 0.88 3.49 Less Distributions: Distribution from Net Investment Income ............ (0.29) (0.69) (0.65) (0.58) (0.76) Distribution from Net Realized Gains on Investments ..................................... (0.47) (0.30) (0.42) (0.06) Distribution from Excess of Net Investment Income/Gains .................................... (0.17) Distribution from Capital Paid-in .................. (0.30) -------- -------- -------- -------- -------- Total Distributions ................................ (0.29) (1.16) (0.95) (1.00) (1.29) -------- -------- -------- -------- -------- Net Assets Value at End of Period ..................... $ 17.06 $ 16.22 $ 12.79 $ 13.55 $ 13.67 ======== ======== ======== ======== ======== Total Investment Return(b) ............................ 7.02%(f) 36.89% 1.36% (6.61)% 31.29% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .......................................... 1.03%(e)(g) 1.07% 1.07% 1.07% 0.76% Ratio of Net Investment Income to Average Net Assets ...................................... 3.75%(g) 4.84% 4.60% 4.97% 5.99% Portfolio Turnover Rate ............................ 21.85%(f) 38.11% 22.74% 29.07% 58.81% Net Assets End of Period (000s Omitted) ............... $255,127 $236,924 $177,926 $163,653 $158,811
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Van Kampen during the period shown. (d) The Fund entered into a new sub-advisory agreement with RREEF America LLC during the period shown. (e) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (f) Not annualized. (g) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- REAL ESTATE EQUITY FUND Market Value Name of Issuer Shares (000's) -------------- ------- -------- COMMON STOCK Real Estate Development - 6.6% Catellus Development Corp. ............................. 187,300 $ 4,617 Rouse Co. .............................................. 232,400 11,039 The Macerich Co. ....................................... 24,300 1,163 -------- 16,819 Real Estate Investment Trust - 75.5% Acadia Realty Trust .................................... 4,100 56 Affordable Residential Communities ..................... 13,400 222 American Financial Realty Trust ........................ 257,200 3,675 AMLI Residential Properties Trust ...................... 25,825 758 Apartment Investment & Management Co. .................. 121,300 3,776 Archstone Communities Trust ............................ 414,310 12,152 Arden Realty Group, Inc. ............................... 261,000 7,676 Avalonbay Communities, Inc. ............................ 211,022 11,927 Boston Properties, Inc. ................................ 121,684 6,094 BRE Properties, Inc. ................................... 55,600 1,932 Chelsea Property Group, Inc. ........................... 34,750 2,266 Correctional Properties Trust .......................... 14,300 418 Crescent Real Estate Equities, Inc. .................... 109,900 1,772 Equity Office Properties Trust * ....................... 293,625 7,987 Equity Residential Properties Trust * .................. 415,590 12,356 Essex Property Trust, Inc. ............................. 43,700 2,987 Federal Realty Investment Trust ........................ 215,000 8,942 General Growth Properties .............................. 374,400 11,071 Glenborough Realty Trust, Inc. ......................... 63,900 1,173 Heritage Property Investment Trust, Inc. ............... 4,200 114 Highwoods Properties, Inc. ............................. 130,700 3,071 Host Marriott Corp. * .................................. 662,500 8,189 HRPT Properties Trust .................................. 184,583 1,848 Inland Real Estate Corp. ............................... 8,500 111 Innkeepers USA Trust ................................... 17,000 175 Kimco Realty Corp. ..................................... 8,200 373 LaSalle Hotel Properties ............................... 5,300 129 Liberty Property Trust ................................. 104,200 4,190 Mack-Cali Realty LP * .................................. 167,800 6,944 MeriStar Hospitality Corp. ............................. 17,600 120 OMEGA Healthcare Investors, Inc. ....................... 57,200 574 PAN Pacific Retail Properties, Inc. .................... 87,100 4,400 Pennsylvania Real Estate Investment .................... 85,483 2,928 Post Properties, Inc. .................................. 42,050 1,226 Price Legacy Corp. * ................................... 1,450 27 Prologis Trust ......................................... 410,970 13,529 PS Business Parks, Inc. ................................ 7,650 308 Public Storage, Inc. ................................... 106,200 4,886 Reckson Associates Realty Corp. ........................ 91,800 2,521 Regency Centers Corp. .................................. 156,455 6,712 Shurgard Storage Centers, Inc. ......................... 85,400 3,194 Simon Property Group, Inc. ............................. 386,300 19,864 SL Green Realty Corp. .................................. 22,950 1,074 Summit Properties, Inc. ................................ 55,000 1,410 Taubman Centers, Inc. .................................. 66,800 1,529 The St. Joe Co. ........................................ 26,900 1,068 Trizec Properties, Inc. ................................ 24,200 $ 393 Ventas, Inc. ........................................... 3,100 72 Vornado Realty Trust ................................... 76,750 4,383 -------- 192,602 Real Estate Operations - 16.4% AMB Property Corp. ..................................... 159,000 5,506 Brookfield Properties Corporation ...................... 371,700 10,686 Forest City Enterprises, Inc. .......................... 18,500 980 Frontline Capital Group * .............................. 121,500 -- Hilton Hotels Corp. * .................................. 461,500 8,612 La Quinta Corp. - CTF 1 Cl. B .......................... 160,500 1,348 Lodgian, Inc. * ........................................ 12,400 131 Manufactured Home Communities, Inc. .................... 52,000 1,726 Starwood Hotels & Resorts Worldwide, Inc. * ............ 285,300 12,796 Wyndham International, Inc. ............................ 148,000 148 -------- 41,933 -------- TOTAL COMMON STOCK- (Cost $196,453) 98.5% 251,354 Par Value (000's) ------- SHORT-TERM INVESTMENTS - 1.2% Investment in joint trading account 1.344% due 07/01/04 (Cost $3,056) ........................................ $3,056 3,056 ------ -------- TOTAL INVESTMENTS- (Cost $199,509) 99.7% 254,410 Cash and Receivables, less payables- 0.3% 717 ------ -------- NET ASSETS- 100.0% $255,127 ====== ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Real Estate Equity Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $190 1.50% $ - 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Dividend income for the Fund is shown net of foreign taxes withheld of $18. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on annual basis of the Fund's net assets: Between Between $50 Million and $100 Million and Excess Over First $50 Million $100 Million $200 Million $200 Million ----------------- --------------- ---------------- ------------ 1.10% 1.00% 0.90% 0.80% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $8. John Hancock has entered into Sub-Advisory Agreements with John Hancock Advisers, an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. John Hancock has also entered into Sub-Advisory Agreements with Van Kampen and RREEF America LLC, and under its supervision, are also responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $57,190 $46,033 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $180,950 $55,554 $(1,197) $54,357 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and to certain distributions received from investments in Real Estate Investment Trusts. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $889 $-- $54,357 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $10,296 $ 5,895 $-- 2002 8,766 4,175 -- Inception: May 1, 1994 -------------------------------------------------------------------------------- Short-Term Bond Fund Independence Investment LLC J. Shallcross/P. Farley -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.14%, outperforming its benchmark, the Lehman Brothers 1-3 Year Aggregate Bond Index. Relative to Morningstar peers, the Fund has an average/above average rating of 3/4 with a below average / average risk profile. . The Fund outperformed its benchmark primarily due to favorable security selection and duration/yield curve decisions, while sector allocation decisions were neutral. . The Fund's exposure to mortgaged-backed and corporate bonds contributed the most to absolute performance. . The manager employs proprietary research and quantitative tools in a risk controlled, benchmark-relative approach to evaluate bonds and bond sectors that are attractively priced. Fund emphasizes higher quality U.S. investment grade sectors. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Federal National Mortgage Assoc. 16.0% Federal Home Loan Mortgage Corp. 10.7% Wells Fargo & Co. 3.6% U.S. Treasury 3.4% General Motors 2.2% JP Morgan Chase & Co. 2.1% LB UBS Commercial Mortgage Trust 1.9% Citigroup, Inc. 1.8% Bear Stearns 1.7% General Electric 1.7% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Short-Term Short-Term Bond Fund Bond Benchmark/4/ ---------- ----------------- YTD/3/ 0.14% 0.11% 1 Year 0.79 0.89 3 Years 4.09 4.25 5 Years 5.32 5.47 10 Years 5.47 5.98 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Short-Term Bond MORNINGSTAR RISK/1/: . Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . **** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004) % of Credit Quality Assets -------------- ------ AAA/Government/Agency 59.49% AA 6.41% A 9.79% BBB 20.61% BB 3.71% Not Rated 0% Weighted Average Yield 3.20% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 52 VL/VUL subaccounts and 96 VA subaccounts in the Morningstar Short-Term Bond category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. 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. /3/ Year to date returns are not annualized. /4/ Short-Term Bond Benchmark represents the Merrill Lynch 1-5 Year Government Bond from May 1994 to April 1998, 65% Lehman Brothers 1-3 Year Credit Bond, 35% Lehman Brothers 1-3 Year Government Bond Index, May 1998 to April 2002 and now Lehman Brothers 1-3 Year Aggregate Bond from May 2002 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Short-Term Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $15,655 of securities loaned (Note B)) ..................................... $232,490 Net unrealized depreciation of investments ......................... (244) Short-term investments at value .................................... 34,261 -------- Total investments ............................................ 266,507 Cash ............................................................... 2 Receivable for interest ............................................ 1,953 -------- Total assets ....................................................... 268,462 -------- LIABILITIES Payables for: Collateral for securities on loan ............................... 15,939 Accrued operating expenses ...................................... 54 -------- Total liabilities .................................................. 15,993 -------- Net assets ......................................................... $252,469 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized)... 25,294 -------- Net asset value per share .......................................... $ 9.98 ======== Composition of net assets: Capital paid-in ................................................. $253,464 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (778) Undistributed net investment income ............................. 27 Net unrealized depreciation of investments ...................... (244) -------- Net assets ......................................................... $252,469 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Short-Term Bond Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 5,173 Securities lending ............................................... 24 ------- Total investment income ............................................. 5,197 ------- EXPENSES Investment advisory fee .......................................... 771 Auditors fees .................................................... 16 Custodian fees ................................................... 40 Legal fees ....................................................... 17 Printing & mailing fees .......................................... 22 Trustees' ....................................................... 4 Other fees ....................................................... 4 ------- Total expenses ...................................................... 874 ------- Net investment income ............................................... 4,323 ------- REALIZED AND UNREALIZED LOSS Net realized loss on investments ................................. (882) Change in unrealized depreciation on investments ................. (3,073) ------- Net realized and unrealized loss .................................... (3,955) ------- Net increase in net assets resulting from operations ................ $ 368 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Short-Term Bond Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income .......................................................... $ 4,323 $ 9,392 Net realized loss .............................................................. (882) (468) Change in net unrealized depreciation .......................................... (3,073) (2,066) -------- -------- Net increase in net assets resulting from operations ........................ 368 6,858 Distributions to shareholders from: Net investment income .......................................................... (4,296) (9,367) -------- -------- Decrease in net assets resulting from distributions ......................... (4,296) (9,367) From fund share transactions: Proceeds from shares sold ...................................................... 31,304 96,185 Distributions reinvested ....................................................... 4,296 9,367 Payment for shares redeemed .................................................... (39,220) (84,143) -------- -------- Increase (decrease) in net assets from fund share transactions .............. (3,620) 21,409 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ............................................. (7,548) 18,900 NET ASSETS Beginning of Period ............................................................ 260,017 241,117 -------- -------- End of Period (including undistributed net investment income of $27 and $0, respectively) ............................................................... $252,469 $260,017 ======== ======== Analysis of fund share transactions: Sold ........................................................................... 3,095 9,405 Reinvested ..................................................................... 426 919 Redeemed ....................................................................... (3,883) (8,235) -------- -------- Net increase (decrease) in fund shares outstanding ................................ (362) 2,089 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Short-Term Bond Fund ------------------------------------------------------------ Unaudited Period Ended Year Ended December 31, June 30, -------------------------------------------- 2004 2003 2002 2001 2000 ------------ --------- -------- -------- ------- Net Assets Value at Beginning of Period ....................... $ 10.13 $ 10.23 $ 10.11 $ 9.86 $ 9.72 Income from Investment Operations: Net Investment Income ...................................... 0.17 0.37 0.44 0.52 0.61 Net Realized and Unrealized Gain (Loss) on Investment(a) ... (0.15) (0.10) 0.12 0.26 0.14 -------- -------- -------- -------- ------- Total From Investment Operations ........................... 0.02 0.27 0.56 0.78 0.75 Less Distributions: Distribution from Net Investment Income .................... (0.17) (0.37) (0.41) (0.53) (0.61) Distribution from Net Realized Gains on Investments ........ (0.03) -------- -------- -------- -------- ------- Total Distributions ........................................ (0.17) (0.37) (0.44) (0.53) (0.61) -------- -------- -------- -------- ------- Net Assets Value at End of Period ............................. $ 9.98 $ 10.13 $ 10.23 $ 10.11 $ 9.86 ======== ======== ======== ======== ======= Total Investment Return(b) .................................... 0.14%(d) 2.76% 5.67% 8.09% 7.98% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........... 0.68%(e) 0.67% 0.68% 0.48% 0.36% Ratio of Net Investment Income to Average Net Assets ....... 3.38%(e) 3.68% 4.29% 5.20%(c) 6.27% Portfolio Turnover Rate .................................... 19.73%(d) 58.94% 97.00% 86.39% 52.68% Net Assets End of Period (000s Omitted) ....................... $252,469 $260,017 $241,117 $149,450 $80,109
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Had the Fund not amortized premiums and accreted discounts on debt securities, the annual ratio of net investment income to average net assets would have been 5.32% for the years ended December 31, 2001. (d) Not annualized. (e) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.5% Raytheon Co. - Notes 6.75% due 08/15/07 ................................... $1,100 $ 1,191 Auto Loan - 2.9% Ford Motor Credit Co. 6.7% due 07/16/04 .................................... 1,000 1,001 Ford Motor Credit Co. - Notes 6.875% due 02/01/06 ................................. 1,000 1,049 General Motors Acceptance Corp. 7.5% due 07/15/05 ..................................... 4,000 4,179 General Motors Acceptance Corp. - Notes 6.75% due 01/15/06 ................................... 1,000 1,048 ------- 7,277 Automobiles - 0.6% Daimler Chrysler - Notes 6.4% due 05/15/06 .................................... 1,500 1,579 Banks - 5.2% Bank of America Corp. - Notes 4.75% due 10/15/06 ................................... 1,400 1,445 Bank One Corp. - Notes 6.875% due 08/01/06 .................................. 1,800 1,926 Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2001 Cl. A1 5.06% due 11/15/16 ................................... Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2004 Cl. A1 3.26% due 02/11/41 ................................... 2,946 2,857 Credit Suisse First Boston - Ser. 2003-C3 Cl. A1 2.218% due 05/15/38 .................................. 2,629 2,537 Credit Suisse First Boston Mortgage Securities Corp. - Cl. A1 3.801% due 06/15/06 .................................. 312 313 First Union Corp. - Notes 6.95% due 11/01/04 ................................... 500 508 7.55% due 08/18/05 ................................... 2,500 2,634 First Union National Bank Commercial & Mortgage Trust - CTF Cl. A1 7.739% due 07/15/09 .................................. Popular North America, Inc. 6.125% due 10/15/06 .................................. 855 902 ------- 13,122 Beverages - 0.4% Coca Cola Co. - Sr. Notes 4.0% due 06/01/05 .................................... 1,000 1,013 Communications Equipment - 0.3% Motorola, Inc. - Notes 6.75% due 02/01/06 ................................... 715 752 Credit Card - 1.0% Citibank Credit Card Issuance Trust - Notes 4.1% due 12/07/06 .................................... 2,591 2,616 Diversified Financials - 11.9% Bear Stearns Cos, Inc. - Notes 3.0% due 03/30/06 .................................... $1,250 $ 1,249 BP Capital Markets plc - Notes 4.0% due 04/29/05 .................................... 1,000 1,013 Chase Commercial Mortgage Securities Corp. - Cl. A1 7.656% due 06/15/08 .................................. 1,610 1,679 Chase Funding - Ser. 2002-2 Cl. IA 3 4.038% due 02/25/23 .................................. 847 850 Chase Manhattan Corp. 6.0% due 11/01/05 .................................... 2,000 2,090 CIT Group, Inc. 1.48% due 05/18/07 ................................... 1,000 999 Citigroup, Inc. - Notes 6.75% due 12/01/05 ................................... 4,000 4,220 GE Capital Commercial Mortgage Corp. - CTF Cl. A1 5.033% due 12/10/35 .................................. 706 725 GE Commercial Mortgage Corp. - Ser 2004-C1 CTF Cl. A1 3.009% due 11/10/38 .................................. Goldman Sachs Group, Inc. - Notes 7.625% due 08/17/05 .................................. 1,000 1,051 Green Tree Financial Corp. - Ser. 1996-8 Cl. A6 7.6% due 10/15/27 .................................... 269 286 GS Mortgage Securities Corp. II - Ser. 2003- C1 Cl. A1 2.904% due 01/10/40 .................................. 1,796 1,759 Lehman Brothers Holdings, Inc. - Notes 6.625% due 02/05/06 .................................. 2,600 2,742 Morgan Stanley Group, Inc. 6.1% due 04/15/06 .................................... 800 842 Nomura Asset Securities Corp. - Ser. 1998- D6 A1A 6.28% due 03/17/28 ................................... 1,665 1,742 PNC Mortgage Securities Corp. - CTF Ser. 1998-14 6.25% due 01/25/14 ................................... 202 202 Wells Fargo & Co. - Notes 6.625% due 07/15/04 .................................. 2,000 2,003 Wells Fargo & Co. - Ser. 2002-E CTF Cl. M 4.969% due 09/25/32 .................................. 1,338 1,336 Wells Fargo Mortgage Backed Securities - Ser. 2003-2 Cl. A6 5.25% due 02/25/18 ................................... 5,000 5,123 ------- 29,911 Diversified Telecommunication Services - 1.8% France Telecom SA - Notes 8.7% due 03/01/06 .................................... 2,000 2,145 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Telecommunication Services - Continued Verizon Global Funding Corp. - Notes 6.75% due 12/01/05 ................................... $2,303 $ 2,427 ------- 4,572 Electric Utilities - 1.2% Firstenergy Corp. - Notes Ser. A 5.5% due 11/15/06 .................................... 2,200 2,276 Progress Energy, Inc. - Sr. Notes 6.75% due 03/01/06 ................................... 700 738 ------- 3,014 Electric/Gas - 3.0% Alabama Power Co. - Sr. Notes Ser. U 2.65% due 02/15/06 ................................... 1,000 996 American Electric Power, Inc. - Sr. Notes Ser. A 6.125% due 05/15/06 .................................. 1,145 1,202 Citizens Utilities Co. Delaware - Debs. 7.6% due 06/01/06 .................................... 1,250 1,311 Kansas City Power & Light Co. - Sr. Notes Ser. A 6.0% due 03/15/07 .................................... 1,000 1,055 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 ................................... 2,000 2,001 TXU Corp. - Sr. Notes 6.375% due 06/15/06 .................................. 1,000 1,053 ------- 7,618 Finance - 6.9% Boeing Capital Corp. - Sr. Notes 5.65% due 05/15/06 ................................... 1,300 1,366 Bombadier Capital, Inc. - 144A (a) 6.125% due 06/29/06 .................................. 1,000 990 Chase Funding Loan Acquisition Trust - CTF Cl. A2 1.275% due 04/25/31 .................................. 192 192 Deutsche Telekom International Finance 8.25% due 06/15/05 ................................... 1,300 1,367 General Electric Capital Corp. 7.5% due 05/15/05 .................................... 3,150 3,287 Household Financial Corp. 6.5% due 01/24/06 .................................... 2,000 2,108 Nisource Finance Corp. - Notes 7.625% due 11/15/05 .................................. 1,700 1,803 Pinnacle West Capital Corp. - Sr. Notes 6.4% due 04/01/06 .................................... 1,700 1,787 PNC Funding Corp. - Sr. Notes 5.75% due 08/01/06 ................................... 875 920 Sprint Capital Corp. - Notes 7.9% due 03/15/05 .................................... 2,000 2,073 Vornado Realty Trust - Sr. Notes 5.625% due 06/15/07 .................................. 1,485 1,571 ------- 17,464 Gas Utilities - 0.4% Sempra Energy - Notes 1.0% due 05/21/08 .................................... $1,130 $ 1,128 Governmental - 0.1% Federal National Mortgage Assoc. - Notes 7.0% due 12/01/10 .................................... 308 327 Health Care Providers & Services - 0.4% Columbia/HCA Healthcare Corp. ........................... 6.91% due 06/15/05 ................................... 1,000 1,031 Home Equity Loan - 1.6% Residential Asset Mortgage Products, Inc. - Cl. AI2 3.38% due 03/25/29 ................................... 4,000 4,006 Hotels Restaurants & Leisure - 1.9% Harrah's Operating, Inc. - Sr. Notes 7.125% due 06/01/07 .................................. 1,000 1,077 Hilton Hotels Corp. - Sr. Notes 7.95% due 04/15/07 ................................... 1,000 1,080 Park Place Entertainment Corp. - Notes 8.5% due 11/15/06 .................................... 1,500 1,631 Starwood Hotels & Resorts - Sr. Notes 7.375% due 05/01/07 .................................. 1,000 1,063 ------- 4,851 Industrial Conglomerates - 0.6% Tyco International Group SA - Notes 5.8% due 08/01/06 .................................... 1,500 1,567 Insurance - 0.8% Aetna Inc. - Sr. Notes 7.375% due 03/01/06 .................................. 2,000 2,132 Internet Software & Services - 0.8% Electronic Data System Corp. - Notes 6.85% due 10/15/04 ................................... 2,000 2,020 Media - 2.8% British Sky Broadcasting Group - GTD Notes 7.3% due 10/15/06 .................................... 1,000 1,085 Liberty Media Corp. - Sr. Notes 2.64% due 09/17/06 ................................... 1,500 1,528 The Walt Disney Co. - Sr. Notes 6.75% due 03/30/06 ................................... 1,100 1,165 Time Warner, Inc. - Notes 5.625% due 05/01/05 .................................. 1,500 1,537 Univision - Sr. Notes 2.875% due 10/15/06 .................................. 1,700 1,675 ------- 6,990 Metals & Mining - 0.4% Minnesota Ming & Manufacturing Co. 4.15% due 06/30/05 ................................... 1,000 1,017 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Multi-Utilities - 0.5% Centerpoint Energy, Inc. - Sr. Notes 5.875% due 06/01/08 .................................. $1,150 $ 1,163 Oil & Gas - 1.2% Devon Energy Corp. - Sr. Notes 2.75% due 08/01/06 ................................... 1,500 1,478 Duke Energy Field Services - Notes 5.75% due 11/15/06 ................................... 1,450 1,513 ------- 2,991 Other Asset Backed - 5.6% Centex Home Equity Loan Trust - Ser. 2003-B Cl. AF 2 1.838% due 06/25/20 .................................. 2,000 1,987 CWABS, Inc. Ser. 2003-5 Cl. AF 2 3.042% due 04/25/25 .................................. 1,300 1,294 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 3.531% due 12/25/33 .................................. 900 894 Equity One ABS, Inc. - Ser. 2004-2 Cl. AV2 1.55% due 07/25/34 ................................... 1,627 1,627 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 1.0% due 03/25/35 .................................... 4,000 4,000 Option One Loan Trust - Ser. 2004-1 CTF Cl. A2 1.39% due 01/25/34 ................................... 1,362 1,363 Residential Funding Mortgage Securities II - Ser. 2002 HI4 Cl. A3 3.61% due 02/25/15 ................................... 2,335 2,339 Vanderbilt & Mortgage, Inc. - Sr. Sub. CTF Cl. A2 4.235% due 08/07/14 .................................. 567 572 ------- 14,076 Other Mortgage - 1.8% LB UBS Commercial Mortgage Trust - CTF Cl. A1 7.95% due 07/15/09 ................................... 1,723 1,862 LB UBS Commercial Mortgage Trust - Ser. 2003-C1 Cl. A1 2.72% due 01/17/08 ................................... 2,607 2,552 ------- 4,414 Personal Products - 0.6% Colgate Palmolive Co. 3.98% due 04/29/05 ................................... 1,500 1,519 Pharmaceuticals - 0.8% Pfizer, Inc. - Notes 3.625% due 11/01/04 .................................. 2,000 2,012 Real Estate Investment Trust - 0.9% CarrAmerica Realty Corp. - Notes 6.625% due 03/01/05 .................................. 1,167 1,194 United Dominion Realty Trust, Inc. 4.5% due 03/03/08 .................................... $ 1,000 $ 1,011 ------- 2,205 U.S. Government Agencies - 26.1% Federal Home Loan Bank - Notes 7.5% due 06/01/12 .................................... 585 624 Federal Home Loan Mortgage Corp. - Bonds 3.907% due 11/01/33 .................................. 1,739 1,712 4.0% due 03/15/26 .................................... 6,693 6,671 7.0% due 08/01/12 .................................... 490 520 7.0% due 02/01/14 .................................... 1,276 1,353 8.5% due 05/01/15 .................................... 1,428 1,532 Federal Home Loan Mortgage Corp. - Bonds Ser. 2516 Cl. AX 8.5% due 01/15/16 .................................... 1,816 1,996 Federal Home Loan Mortgage Corp. - Notes 2.375% due 04/15/06 .................................. 6,500 6,443 6.5% due 12/01/09 .................................... 894 946 7.0% due 12/01/10 .................................... 351 373 7.0% due 12/01/13 .................................... 2,074 2,202 7.5% due 11/01/09 .................................... 866 908 8.0% due 06/01/10 .................................... 229 245 Federal National Mortgage Assoc. - Bonds 3.638% due 09/01/33 .................................. 2,230 2,238 3.64% due 01/01/33 ................................... 2,284 2,294 6.0% due 01/01/17 .................................... 1,853 1,933 6.0% due 01/01/17 .................................... 1,529 1,595 6.5% due 04/01/17 .................................... 4,069 4,300 6.5% due 08/01/17 .................................... 4,284 4,527 7.0% due 10/01/15 .................................... 919 977 8.0% due 07/01/14 .................................... 1,202 1,289 8.0% due 09/25/16 .................................... 710 761 Federal National Mortgage Assoc. - Notes 2.25% due 05/15/06 ................................... 6,000 5,925 3.875% due 03/15/05 .................................. 2,000 2,028 6.0% due 12/15/05 .................................... 5,000 5,240 6.0% due 01/01/11 .................................... 629 659 7.0% due 07/15/05 .................................... 2,000 2,096 7.5% due 08/01/09 .................................... 842 895 Government National Mortgage Assoc. - Bonds 8.0% due 12/15/25 .................................... 1,462 1,599 8.5% due 11/15/15 .................................... 1,052 1,141 Government National Mortgage Assoc. - Notes 7.0% due 12/15/08 .................................... 923 978 ------- 66,000 U.S. Governmental - 3.1% U.S. Treasury - Notes 2.625% due 11/15/06 .................................. 4,000 3,972 3.375% due 12/15/08 .................................. 4,000 3,949 ------- 7,921 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Whole Loan CMOs - 5.3% Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl A1 3.156% due 11/10/39 ................................ $3,320 $ 3,232 CWMBS, Inc. - Ser. 2002 Mortgage Pass Thru Certs Cl. 2A3 5.0% due 12/25/17 .................................. 1,839 1,848 GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C 1.58% due 05/25/34 ................................. 1,000 1,000 Merrill Lynch Mortgage Investments, Inc. - Ser. 2003 A1 Cl. IA 3.981% due 12/25/32 ................................ 1,320 1,330 Merrill Lynch Mortgage Investments, Inc. - Ser. 2003- C Cl .B1 1.75% due 06/25/28 ................................. 2,000 2,033 Sequoia Mortgage Trust - Ser. 2004-4 Cl. A 1.0% due 05/20/34 .................................. 3,932 3,917 -------- 13,360 Wireless Telecommunications Services - 0.6% AT&T Wireless Services, Inc. - Sr. Notes 7.35% due 03/01/06 ................................. 1,300 1,387 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $232,490) 92.0% 232,246 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 6.3% State Street Navigator Securities Lending Portfolio .......................................... $15,939 15,939 SHORT-TERM INVESTMENTS - 7.3% Investment in joint trading account 1.344% due 07/01/04 (Cost $18,322) ..................................... 18,322 18,322 ------- -------- TOTAL INVESTMENTS- (Cost $266,751) 105.6% 266,507 Payables, less cash and receivables- (5.6)% (14,038) ------- -------- NET ASSETS- 100.0% $252,469 ======= ======== (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $990 or 0.4% of net assets of the Portfolio. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Short-Term Bond (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment secutities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For period ended June 30, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $15,655 $15,939 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the rate of 0.60% on an annual basis of the Fund's net assets. In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, with respect to the Fund. Independence Investment LLC is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $57,882 $48,745 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $286,274 $3,450 $(517) $2,933 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss, premium amortization and market discount accretion on debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $-- $2,933 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $8,761 $54 $552 2002 7,972 -- 489 Included in the Fund's distributions from ordinary income is $1,302 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. Inception: May 1, 1996 -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund Wellington Management Company, LLP Steven C. Angeli -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 3.22%, underperforming its benchmark, the Russell 2000 Growth Index. Relative to Morningstar peers, the Fund has an average rating of 3 with an above average/high risk profile. . The Fund underperformed its benchmark primarily due to unfavorable security selection decisions especially within the health care and consumer discretionary sectors, while sector allocation decisions contributed modestly to performance. . For the period, nearly all sectors contributed positively to absolute Fund returns, with the consumer discretionary sector the only to detract. The Fund's exposure to the telecommunications sector was the largest contributor to absolute returns. . At quarter end relative to its Index, the Fund held the most significant overweight to the telecommunications sector, while it was underweight the information technology and health care sectors. . The manager employs bottom-up, fundamental research to identify attractively valued growth stocks. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- American Tower Corp. 2.5% Crown Castle International Corp. 2.2% Acxiom Corp. 2.1% Aeroflex, Inc. 2.0% MEMC Electronic Materials, Inc. 2.0% SBS Technologies, Inc. 1.8% Sirva, Inc. 1.7% Forward Air Corp. 1.6% Service Corp. International 1.6% MPS Group, Inc. 1.5% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Small Cap Emerging Small Cap Emerging Growth Fund Growth Benchmark/4/ ------------------ ------------------- YTD/3/ 3.22% 5.69% 1 Year 30.53 31.56 3 Years 0.67 5.97 5 Years -2.24 5.59 Since Inception (5/1/96) 2.43 8.37 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Small Growth MORNINGSTAR RISK/1/: . Above Average (VL/VUL) . High (VA) MORNINGSTAR RATING/1/: . *** (VL/VUL) . *** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 25% Health Care 18% Industrials 17% Consumer Discretionary 16% Financials 9% Telecommunication Services 5% Energy 4% Materials 4% Consumer Staples 1% Utilities 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 404 VL/VUL subaccounts and 600 VA subaccounts in the Morningstar Small Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Small-company investing entails special risks as outlined in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Small Cap Emerging Growth benchmark represents the Russell 2000 Value Index from May 1996 to October 2000, the Russell 2000 from November 2000 to April 2003 and then the Russell 2000 Growth from May 2003 to present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $17,929 of securities loaned (Note B)) ..................................... $ 77,468 Net unrealized appreciation of investments ......................... 8,290 Short-term investments at value .................................... 18,857 -------- Total investments ............................................ 104,615 Cash ............................................................... 111 Receivable for: Investments sold ................................................ 1,612 Dividends ....................................................... 18 -------- Total assets ....................................................... 106,356 -------- LIABILITIES Payables for: Investments purchased ........................................... 3,523 Collateral for securities on loan ............................... 18,406 Accrued operating expenses ...................................... 12 -------- Total liabilities .................................................. 21,941 -------- Net assets ......................................................... $ 84,415 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 10,093 -------- Net asset value per share .......................................... $ 8.36 ======== Composition of net assets: Capital paid-in ................................................. $ 90,572 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (14,121) Undistributed net investment loss ............................... (326) Net unrealized appreciation of investments ...................... 8,290 -------- Net assets ......................................................... $ 84,415 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 10 Dividends ....................................................... 100 Securities lending .............................................. 18 -------- Total investment income ............................................ 128 -------- EXPENSES Investment advisory fee ......................................... 451 Auditors fees ................................................... 5 Custodian fees .................................................. 32 Legal fees ...................................................... 5 Printing & mailing fees ......................................... 7 Trustees' fees .................................................. 1 Other fees ...................................................... 2 -------- Total expenses ..................................................... 503 Less expenses reimbursed ........................................ (10) Less custodian expense reduction offset by commission recapture arrangement (Note C) .................... (39) -------- Net expenses ....................................................... 454 -------- Net investment loss ................................................ (326) -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 8,164 Change in unrealized depreciation on investments ................ (5,581) -------- Net realized and unrealized gain ................................... 2,583 -------- Net increase in net assets resulting from operations ............... $ 2,257 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ..................................... $ (326) $ (384) Net realized gain (loss) ................................ 8,164 (4,652) Change in net unrealized appreciation (depreciation) .... (5,581) 32,639 -------- -------- Net increase in net assets resulting from operations ........................................ 2,257 27,603 Distributions to shareholders from: Net investment income ................................... (71) Realized gains .......................................... (11,472) -------- Decrease in net assets resulting from distributions .. (11,543) From fund share transactions: Proceeds from shares sold ............................... 26,074 50,786 Distributions reinvested ................................ 11,543 Payment for shares redeemed ............................. (30,495) (42,137) -------- -------- Increase (decrease) in net assets from fund share transactions ...................................... (4,421) 20,192 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ...................... (2,164) 36,252 NET ASSETS Beginning of Period ..................................... 86,579 50,327 -------- -------- End of Period (including undistributed net investment loss of $(326) and $0, respectively) ...... $ 84,415 $ 86,579 ======== ======== Analysis of fund share transactions: Sold .................................................... 3,149 6,929 Reinvested .............................................. 1,458 Redeemed ................................................ (3,740) (5,696) -------- -------- Net increase (decrease) in fund shares outstanding ...... (591) 2,691 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Small Cap Emerging Growth Fund ------------------------------------------------------------------- Unaudited Period Ended June 30, Year Ended December 31, 2004 2003(e) 2002 2001 2000(c) ---------------- ------- ------- ------- ------- Net Assets Value at Beginning of Period ....... $ 8.10 $ 6.30 $ 8.79 $ 9.14 $ 10.92 Income from Investment Operations: Net Investment Income (Loss) ............... (0.03) (0.03) 0.01 0.01 0.14 Net Realized and Unrealized Gain (Loss) on Investment(a) ........................ 0.29 3.07 (2.49) (0.35) (1.13) ------- ------- ------- ------- ------- Total From Investment Operations ........... 0.26 3.04 (2.48) (0.34) (0.99) Less Distributions: Distribution from Net Investment Income .... (0.01) (0.01) (0.01) (0.15) Distribution from Net Realized Gains on Investments ............................. (1.23) (0.14) Distribution from Excess of Net Investment Income/Gains ................. (0.20) Distribution from Capital Paid-in .......... (0.30) ------- ------- ------- ------- ------- Total Distributions ........................ (1.24) (0.01) (0.01) (0.79) ------- ------- ------- ------- ------- Net Assets Value at End of Period ............. $ 8.36 $ 8.10 $ 6.30 $ 8.79 $ 9.14 ======= ======= ======= ======= ======= Total Investment Return(b) .................... 3.22%(g) 48.83% (28.21)% (3.78)% (8.89)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .................................. 1.16%(d)(f)(h) 1.11%(d)(f) 1.00%(d) 1.00%(d) 0.92%(d) Ratio of Net Investment Income (Loss) to Average Net Assets ...................... (0.77)%(h) (0.59)% 0.19% 0.06% 1.25% Portfolio Turnover Rate .................... 79.33%(g) 235.48% 45.03% 60.73% 189.57% Net Assets End of Period (000s Omitted) ....... $84,415 $86,579 $50,327 $71,193 $70,031
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) The Fund entered into a new sub-advisory agreement with Capital Guardian Trust Company during the period shown. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.18% for the period ending June 30, 2004, and 1.21%, 1.04%, 1.02%, and 95%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (e) The fund entered into a new sub-advisory agreement with Wellington Management Company during the period shown. (f) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (g) Not annualized. (h) Annualized. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP EMERGING GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 3.0% Aeroflex, Inc. * ........................................ 120,920 $1,733 Moog, Inc. - Cl. A * .................................... 21,260 789 ------ 2,522 Airlines - 0.9% Gol-Linhas Aereas Inteligentes SA - ADR * ............... 42,890 729 Banks - 1.9% Amcore Financial, Inc. .................................. 25,930 782 Hancock Holding Co. ..................................... 27,740 806 ------ 1,588 Biotechnology - 2.9% Abgenix, Inc. * ......................................... 47,430 556 Alkermes, Inc. * ........................................ 58,550 796 Exelixis, Inc. * ........................................ 65,377 660 Telik, Inc. * ........................................... 19,800 472 ------ 2,484 Commercial Services & Supplies - 5.9% Corporate Executive Board Co. * ......................... 16,880 976 CSG Systems International, Inc. * ....................... 7,560 156 DiamondCluster, Inc. * .................................. 84,700 736 Gevity HR., Inc. ........................................ 49,340 1,292 Navigant Consulting, Inc. * ............................. 37,500 804 Sotheby's Holdings, Inc. - Cl. A * ...................... 59,370 948 The Bisys Group, Inc. * ................................. 2,150 30 ------ 4,942 Commingled Fund - 1.1% iShares Trust * ......................................... 15,370 961 Communications Equipment - 4.2% Harmonic, Inc. * ........................................ 60,980 520 NMS Communications Corp. ................................ 84,480 623 Plantronics, Inc. * ..................................... 20,730 873 Polycom, Inc. * ......................................... 39,520 886 Sierra Wireless, Inc. * ................................. 17,160 635 ------ 3,537 Computers & Peripherals - 2.0% Overland Storage, Inc. * ................................ 14,460 192 SBS Technologies, Inc. * ................................ 94,430 1,518 ------ 1,710 Construction & Engineering - 1.2% Washington Group International, Inc. * .................. 28,560 1,025 Construction Materials - 1.4% Eagle Materials, Inc. ................................... 16,960 1,204 Diversified Financials - 4.6% Affiliated Managers Group, Inc. * ....................... 19,675 991 IndyMac Mortgage Holdings, Inc. ......................... 26,100 825 Jackson Hewitt, Inc. * .................................. 59,780 1,046 Psychiatric Solutions, Inc. * ........................... 41,560 $1,036 ------ 3,898 Electrical Equipment - 1.7% Fuelcell Energy, Inc. ................................... 44,790 523 Techtronic Industries, Ltd. - ADR ....................... 114,200 911 ------ 1,434 Energy Equipment & Services - 0.5% Key Energy Services, Inc. * ............................. 45,250 427 Food Products - 1.0% Peets Coffee & Tea, Inc. * .............................. 33,810 845 Health Care Equipment & Supplies - 4.8% Abaxis, Inc. - Sr. Notes ................................ 30,080 571 DJ Orthopedics, Inc. * .................................. 43,900 1,010 Orthofix International * ................................ 16,440 702 Respironics, Inc. * ..................................... 18,310 1,076 Zoll Medical Corp. * .................................... 18,680 655 ------ 4,014 Health Care Providers & Services - 5.3% Accredo Health, Inc. * .................................. 9,760 380 Covance, Inc. * ......................................... 33,560 1,294 Genesis Healthcare Corp. * .............................. 28,850 838 Service Corp. International ............................. 185,730 1,369 Symbion, Inc. * ......................................... 36,430 636 ------ 4,517 Hotels Restaurants & Leisure - 2.9% Landry's Seafood Restaurants, Inc. * .................... 21,600 646 Rare Hospitality International, Inc. * .................. 28,080 699 Scientific Games Corp. - Sr. Notes ...................... 57,150 1,094 ------ 2,439 Household Durables - 3.0% Fleetwood Enterprises, Inc. * ........................... 87,120 1,268 Helen of Troy, Ltd. * ................................... 10,900 402 Standard Pacific Corp. .................................. 16,960 836 ------ 2,506 Insurance - 6.0% American Equity Investment Life * ....................... 82,280 819 Arch Capital Group, Ltd. * .............................. 32,180 1,283 Healthextras, Inc. * .................................... 46,240 766 Platinum Underwriters Holdings .......................... 34,510 1,050 United Holdings Corp. ................................... 70,150 1,109 ------ 5,027 Internet & Catalog Retail - 1.0% Insight Enterprises, Inc. * ............................. 45,700 812 Internet Software & Services - 1.1% Ask Jeeves, Inc. * ...................................... 17,910 699 SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP EMERGING GROWTH FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Internet Software & Services - Continued Tumbleweed Communications Corp. * ................... 50,630 $ 216 -------- 915 IT Consulting & Services - 3.5% Acxiom Corp. * ...................................... 72,330 1,796 Sapient Corp. ....................................... 189,460 1,139 -------- 2,935 Machinery - 0.9% ESCO Technologies, Inc. * ........................... 14,410 769 Media - 3.6% GrayTelevison, Inc. ................................. 62,430 867 Lin TV Corp. - Cl. A * .............................. 37,310 791 Sirius Satellite Radio, Inc. * ...................... 323,940 998 Tivo, Inc. * ........................................ 58,090 412 -------- 3,068 Metals & Mining - 2.3% Arch Coal, Inc. ..................................... 29,550 1,081 GrafTech International, Ltd. * ...................... 83,440 873 -------- 1,954 Oil & Gas - 3.9% Cabot Oil & Gas Corp. - Cl. A ....................... 30,010 1,269 Patina Oil & Gas Corp. .............................. 31,930 954 Whiting Petroleum Corp. * ........................... 42,240 1,062 -------- 3,285 Pharmaceuticals - 3.0% Atherogenics, Inc. * ................................ 39,080 743 Medicinesco ......................................... 31,690 967 NPS Pharmaceuticals, Inc. * ......................... 15,180 319 Salix Pharmaceuticals, Ltd. * ....................... 14,470 477 -------- 2,506 Road & Rail - 6.1% Arkansas Best Corp. ................................. 36,270 1,194 Forward Air Corp. * ................................. 37,640 1,408 Sirva, Inc. * ....................................... 64,920 1,493 Yellow Roadway Corp. * .............................. 26,150 1,042 -------- 5,137 Semiconductor Equipment & Products - 5.1% MEMC Electronic Materials, Inc. * ................... 172,470 1,704 MPS Group, Inc. * ................................... 107,690 1,305 ON Semiconductor Corp. * ............................ 161,560 811 Pixelworks, Inc. * .................................. 32,400 497 -------- 4,317 Software - 7.0% Agile Software Corp. ................................ 67,320 589 Cognex Corp. ........................................ 31,240 1,202 Embarcadero Technologies, Inc. * .................... 55,270 683 Network Associates, Inc. * .......................... 9,500 172 Safenet, Inc. * ..................................... 16,730 $ 463 Serena Software, Inc. * ............................. 45,340 866 Skillsoftpub Co., Ltd. - ADR * ...................... 3,960 30 THQ, Inc. * ......................................... 40,840 935 Verint Systems, Inc. * .............................. 28,610 979 -------- 5,919 Specialty Retail - 1.9% AC Moore Arts & Crafts, Inc. * ...................... 30,750 846 Linens 'n Things, Inc. .............................. 25,430 745 -------- 1,591 Textiles & Apparel - 2.5% Kenneth Cole Productions, Inc. - Cl. A * ............ 29,430 1,009 Quiksilver, Inc. * .................................. 47,470 1,130 -------- 2,139 Wireless Telecommunications Services - 5.4% American Tower Corp. - Cl. A ........................ 142,490 2,166 Crown Castle International Corp. * .................. 127,110 1,875 Dobson Communications Corp. ......................... 172,200 561 -------- 4,602 -------- TOTAL COMMON STOCK- (Cost $77,468) 101.6% 85,758 Par Value (000's) -------- INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 21.8% State Street Navigator Securities Lending Portfolio ........................................ $ 18,406 18,406 SHORT-TERM INVESTMENTS - 0.5% Investment in joint trading account 1.344% due 07/01/04 (Cost $451) ...................................... 451 451 -------- -------- TOTAL INVESTMENTS- (Cost $96,325) 123.9% 104,615 Payables, less cash and receivables- (23.9)% (20,200) -------- -------- NET ASSETS- 100.0% $ 84,415 ======== ======== * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Small Cap Emerging Growth Fund, (formerly John Hancock Small Cap Equity), (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 30, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $1,589 1.50% $1 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $17,929 $18,406 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $11,459, $2,741 and $7,997 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $100 Million $100 Million ------------------ ------------ 1.05% 1.00% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, the reimbursements paid from John Hancock and JHVLICO were $10 to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $39. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company LLP, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHV LAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $66,696 $69,332 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $92,836 $15,219 $(1,438) $13,781 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax return. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $22,197 $13,781 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $ -- $-- $11,543 2002 114 -- -- Inception: May 1, 1996 -------------------------------------------------------------------------------- Small Cap Growth Fund Wellington Management Company, LLP S. Angeli -------------------------------------------------------------------------------- . Year-to-date, the Fund returned 3.80%, underperforming its benchmark, the Russell 2000 Growth Index. Relative to Morningstar peers, the Fund has a below average rating of 2 with an average risk profile. . On May 1st, the Fund's sub-adviser and investment strategy were changed. Wellington implemented an investment strategy for the Fund that is substantially the same as the investment strategy it now employs for the Small Cap Emerging Growth Fund. . Since May 1st, the Fund underperformed its benchmark primarily due to unfavorable security selection decisions, while sector allocation exposures contributed modestly to performance. . At quarter end relative to its Index, the Fund held the most significant overweight to the telecommunications sector, while it was underweight the information technology and health care sectors. . The manager employs bottom-up, fundamental research to identify attractively valued growth stocks. The Fund's sector allocations are broadly diversified but are primarily driven by stock selection. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- American Tower Corp. 2.6% Crown Castle International Corp. 2.4% Acxiom Corp. 2.2% Aeroflex, Inc. 2.1% MEMC Electronic Materials, Inc. 2.0% SBS Technologies, Inc. 1.9% Forward Air Corp. 1.8% Sirva, Inc. 1.8% United Holdings Corp. 1.8% MPS Group, Inc. 1.7% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Small Cap Russell 2000(R) Growth Fund Growth Index ----------- --------------- YTD/3/ 3.80% 5.69% 1 Year 19.84% 31.56 3 Years -4.08 -0.22 5 Years -1.02 -0.45 Since Inception (5/1/96) 4.35 2.59 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Small Growth MORNINGSTAR RISK/1/: . Average (VL/VUL) . Average (VA) MORNINGSTAR RATING/1/: . ** (VL/VUL) . ** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Information Technology 25% Industrials 19% Health Care 17% Consumer Discretionary 14% Financials 9% Energy 5% Telecommunication Services 5% Materials 4% Consumer Staples 1% Utilities 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 404 VL/VUL subaccounts and 600 VA subaccounts in the Morningstar Small Growth category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Small-company investing entails special risks as outlined in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $36,059 of securities loaned (Note B)) ..................................... $137,541 Net unrealized appreciation of investments ......................... 9,719 Short-term investments at value .................................... 38,679 -------- Total investments ............................................ 185,939 Cash ............................................................... 63 Receivable for: Investments sold ................................................ 3,473 Dividends ....................................................... 25 -------- Total assets ....................................................... 189,500 -------- LIABILITIES Payables for: Fund shares purchased ........................................... 5,874 Collateral for securities on loan ............................... 36,852 Accrued operating expenses ...................................... 42 Other payables .................................................. 2 -------- Total liabilities .................................................. 42,770 -------- Net assets ......................................................... $146,730 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 13,589 -------- Net asset value per share .......................................... $ 10.80 ======== Composition of net assets: Capital paid-in ................................................. $215,773 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (78,254) Undistributed net investment loss ............................... (508) Net unrealized appreciation of investments ...................... 9,719 -------- Net assets ......................................................... $146,730 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Growth Fund (000's Omitted) INVESTMENT INCOME Interest ..................................................... $ 15 Dividends .................................................... 241 Securities lending ........................................... 27 -------- Total investment income ............................................ 283 -------- EXPENSES Investment advisory fee ...................................... 777 Auditors fees ................................................ 10 Custodian fees ............................................... 29 Legal fees ................................................... 9 Printing & mailing fees ...................................... 13 Trustees' ................................................... 2 Other fees ................................................... 3 -------- Total expenses ..................................................... 843 Less custodian expense reduction offset by commission recapture arrangement (Note C) ................. (52) -------- Net expenses ....................................................... 791 -------- Net investment loss ................................................ (508) -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 21,219 Change in unrealized depreciation on investments ................ (15,277) -------- Net realized and unrealized gain ................................... 5,942 -------- Net increase in net assets resulting from operations ...................................................... $ 5,434 ======== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- Small Cap Growth Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ............................................................. $ (508) $ (1,144) Net realized gain (loss) ........................................................ 21,219 (6,450) Change in net unrealized appreciation (depreciation) ............................ (15,277) 40,426 -------- -------- Net increase in net assets resulting from operations ......................... 5,434 32,832 Distributions to shareholders from: Realized gains .................................................................. (2,029) -------- Decrease in net assets resulting from distributions .......................... (2,029) From fund share transactions: Proceeds from shares sold ....................................................... 16,213 49,341 Distributions reinvested ........................................................ 2,029 Payment for shares redeemed ..................................................... (24,194) (53,619) -------- -------- Decrease in net assets from fund share transactions .......................... (7,981) (2,249) -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .............................................. (2,547) 28,554 NET ASSETS Beginning of Period ............................................................. 149,277 120,723 -------- -------- End of Period (including undistributed net investment loss of $(508) and $0, respectively) ................................................................ $146,730 $149,277 ======== ======== Analysis of fund share transactions: Sold ............................................................................ 1,496 5,339 Reinvested ...................................................................... 197 Redeemed ........................................................................ (2,256) (5,826) -------- -------- Net decrease in fund shares outstanding ............................................ (760) (290) ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each fund share of beneficial interest outstanding throughout the period indicated:
Small Cap Growth Fund ----------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ------------------------------------------------ 2004(h) 2003 2002 2001 2000 ------------- -------- -------- -------- -------- Net Assets Value at Beginning of Period .......... $ 10.40 $ 8.25 $ 11.77 $ 13.47 $ 19.12 Income from Investment Operations: Net Investment Loss ........................... (0.06) (0.09) (0.11) (0.08) (0.02) Net Realized and Unrealized Gain (Loss) on Investment(a) .............................. 0.46 2.38 (3.41) (1.62) (4.16) -------- -------- -------- -------- -------- Total From Investment Operations .............. 0.40 2.29 (3.52) (1.70) (4.18) Less Distributions: Distribution from Net Realized Gains on Investments ................................. (0.14) (0.12) Distribution from Capital Paid-in ............. (1.35) -------- -------- Total Distributions ........................... (0.14) (1.47) -------- -------- -------- -------- -------- Net Assets Value at End of Period ................ $ 10.80 $ 10.40 $ 8.25 $ 11.77 $ 13.47 ======== ======== ======== ======== ======== Total Investment Return(b) ....................... 3.80%(e) 27.88% (29.95)% (12.61)% (21.43)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ..................................... 1.14%(f)(g) 1.15%(d) 1.13% 0.91%(d) 0.82% Ratio of Net Investment Loss to Average Net Assets ..................................... (0.69)%(f) (0.87)% (0.83)% (0.55)% (0.50)% Portfolio Turnover Rate ....................... 135.17%(e) 108.43% 77.38% 91.48%(c) 97.73% Net Assets End of Period (000's Omitted) ......... $146,730 $149,277 $120,723 $189,401 $234,542
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Excludes merger activity. (d) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.22% and .94% for the year ended December 31, 2003 and 2001, respectively. (e) Not annualized. (f) Annualized. (g) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (h) The Fund entered into a new sub-advisory agreement with Wellington Management Co., LLP, during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 3.1% Aeroflex, Inc. * ..................................... 214,200 $ 3,069 Moog, Inc. - Cl. A * ................................. 38,990 1,447 ------- 4,516 Airlines - 0.9% Gol-Linhas Aereas Inteligentes SA - ADR * ............ 73,360 1,247 Banks - 1.0% Amcore Financial, Inc. ............................... 50,130 1,512 Biotechnology - 2.9% Abgenix, Inc. * ...................................... 75,570 886 Alkermes, Inc. * ..................................... 102,790 1,398 Exelixis, Inc. * ..................................... 112,990 1,140 Telik, Inc. * ........................................ 35,420 845 ------- 4,269 Commercial Services & Supplies - 7.5% Corporate Executive Board Co. * ...................... 29,900 1,728 CSG Systems International, Inc. * .................... 27,810 576 DiamondCluster, Inc. * ............................... 138,530 1,204 Gevity HR., Inc. ..................................... 87,450 2,290 Navigant Consulting, Inc. * .......................... 85,660 1,836 Sotheby's Holdings, Inc. - Cl. A * ................... 113,160 1,806 The Bisys Group, Inc. * .............................. 4,200 59 Apollo Group * ....................................... 16,710 1,464 ------- 10,963 Commingled Fund - 1.3% iShares Trust * ...................................... 30,500 1,906 Communications Equipment - 4.5% Harmonic, Inc. * ..................................... 112,140 956 NMS Communications Corp. ............................. 161,230 1,190 Plantronics, Inc. * .................................. 39,310 1,655 Polycom, Inc. * ...................................... 74,400 1,667 Sierra Wireless, Inc. * .............................. 30,060 1,113 ------- 6,581 Computers & Peripherals - 2.1% Overland Storage, Inc. * ............................. 26,300 349 SBS Technologies, Inc. * ............................. 171,420 2,755 ------- 3,104 Construction & Engineering - 1.3% Washington Group International, Inc. * ............... 55,070 1,976 Construction Materials - 1.6% Eagle Materials, Inc. ................................ 31,950 2,269 Diversified Financials - 3.6% Affiliated Managers Group, Inc. * .................... 37,915 1,910 IndyMac Mortgage Holdings, Inc. ...................... 48,500 1,533 Jackson Hewitt, Inc. * ............................... 103,110 1,804 Psychiatric Solutions, Inc. * ........................ 940 23 ------- 5,270 Electrical Equipment - 0.7% Techtronic Industries, Ltd. - ADR .................... 124,000 $ 990 Energy Equipment & Services - 0.5% Key Energy Services, Inc. * .......................... 82,900 783 Food Products - 1.0% Peets Coffee & Tea, Inc. * ........................... 59,490 1,487 Health Care Equipment & Supplies - 4.8% Abaxis, Inc. ......................................... 48,660 923 DJ Orthopedics, Inc. * ............................... 73,990 1,702 Orthofix International * ............................. 32,160 1,374 Respironics, Inc. * .................................. 29,050 1,707 Zoll Medical Corp. * ................................. 38,150 1,338 ------- 7,044 Health Care Providers & Services - 5.6% Accredo Health, Inc. * ............................... 17,400 678 Covance, Inc. * ...................................... 58,800 2,268 Genesis Healthcare Corp. * ........................... 60,300 1,751 Service Corp. International .......................... 327,400 2,413 Symbion, Inc. * ...................................... 67,000 1,170 ------- 8,280 Hotels Restaurants & Leisure - 3.1% Landry's Seafood Restaurants, Inc. * ................. 39,600 1,184 Rare Hospitality International, Inc. * ............... 53,080 1,322 Scientific Games Corp. - Cl. A ....................... 104,160 1,993 ------- 4,499 Household Durables - 1.5% Helen of Troy, Ltd. * ................................ 18,800 693 Standard Pacific Corp. ............................... 31,320 1,544 ------- 2,237 Insurance - 6.3% American Equity Investment Life * .................... 146,410 1,457 Arch Capital Group, Ltd. * ........................... 50,870 2,029 Healthextras, Inc. * ................................. 81,450 1,349 Platinum Underwriters Holdings ....................... 57,810 1,759 United Holdings Corp. ................................ 165,430 2,614 ------- 9,208 Internet & Catalog Retail - 1.0% Insight Enterprises, Inc. * .......................... 80,930 1,437 Internet Software & Services - 1.2% Ask Jeeves, Inc. * ................................... 34,470 1,345 Tumbleweed Communications Corporation * .............. 101,500 433 ------- 1,778 IT Consulting & Services - 3.6% Acxiom Corp. * ....................................... 127,900 3,176 Sapient Corp. ........................................ 347,580 2,089 ------- 5,265 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Machinery - 0.9% ESCO Technologies, Inc. * .............................. 25,540 $ 1,363 Media - 3.9% Cumulus Media, Inc. - Cl. A * .......................... 11 0 GrayTelevison, Inc. .................................... 102,160 1,419 Lin TV Corp. - Cl. A * ................................. 70,840 1,502 Sirius Satellite Radio, Inc. * ......................... 644,700 1,986 Tivo, Inc. * ........................................... 121,920 864 -------- 5,771 Metals & Mining - 2.7% Arch Coal, Inc. ........................................ 61,700 2,258 GrafTech International, Ltd. * ......................... 163,120 1,706 -------- 3,964 Oil & Gas - 4.3% Cabot Oil & Gas Corp. - Cl. A .......................... 55,390 2,343 Patina Oil & Gas Corp. ................................. 73,000 2,181 Whiting Petroleum Corp. * .............................. 72,940 1,834 -------- 6,358 Pharmaceuticals - 2.8% Atherogenics, Inc. * ................................... 53,290 1,014 Medicinesco ............................................ 53,970 1,647 NPS Pharmaceuticals, Inc. * ............................ 31,430 660 Salix Pharmaceuticals, Ltd. * .......................... 25,010 824 -------- 4,145 Road & Rail - 6.4% Arkansas Best Corp. .................................... 67,600 2,225 Forward Air Corp. * .................................... 71,730 2,683 Sirva, Inc. * .......................................... 114,200 2,627 Yellow Roadway Corp. * ................................. 46,400 1,849 -------- 9,384 Semiconductor Equipment & Products - 4.4% MEMC Electronic Materials, Inc. * ...................... 304,900 3,012 MPS Group, Inc. * ...................................... 208,210 2,524 Pixelworks, Inc. * ..................................... 55,810 855 -------- 6,391 Software - 6.6% Agile Software Corp. ................................... 130,010 1,137 Cognex Corp. ........................................... 61,690 2,374 Embarcadero Technologies, Inc. * ....................... 103,000 1,273 Network Associates, Inc. * ............................. 16,200 294 Safenet, Inc. * ........................................ 32,580 902 Skillsoftpub Co., Ltd. - ADR * ......................... 8,600 65 THQ, Inc. * ............................................ 72,000 1,649 Verint Systems, Inc. * ................................. 57,180 1,957 -------- 9,651 Specialty Retail - 1.0% Linens 'n Things, Inc. ................................. 48,030 1,408 Textiles & Apparel - 2.9% K-Swiss, Inc. - Cl. A .................................. 21,340 $ 431 Kenneth Cole Productions, Inc. - Cl. A * ............... 52,340 1,794 Quiksilver, Inc. * ..................................... 86,600 2,062 -------- 4,287 Wireless Telecommunications Services - 5.4% American Tower Corp. - Cl. A ........................... 251,000 3,829 Crown Castle International Corp. * ..................... 240,450 3,547 Dobson Communications Corp. ............................ 166,000 541 -------- 7,917 -------- TOTAL COMMON STOCK- (Cost $137,541) 100.4% 147,260 Par Value (000's) ------- INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 25.1% State Street Navigator Securities Lending Portfolio ......................................... $36,852 36,852 SHORT-TERM INVESTMENTS - 1.2% Investment in joint trading account 1.344% due 07/01/04 (Cost $1,827) ..................................... 1,827 1,827 ------- -------- TOTAL INVESTMENTS- (Cost $176,220) 126.7% 185,939 Payables, less cash and receivables- (26.7)% (39,209) ------- -------- NET ASSETS- 100.0% $146,730 ======= ======== * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Small Cap Growth Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 04, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $697 1.53% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $36,059 $36,852 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $2,089, $10,299, $43,738, $35,469 and $7,507 which expire in 2007, 2008, 2009, 2010 and 2011, respectively. Included in the above, certain losses may be limited under sections 382 - 384 of the Internal Revenue Code, as amended. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Excess Over First $100 Million $100 Million ------------------ ------------ 1.05% 1.00% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. For the period ended June 30, 2004, there were no reimbursements paid to the Fund. As of May 3, 2004, John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $52. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $197,637 $200,981 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral held for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $164,391 $28,438 $(3,813) $24,625 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) or investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $99,102 $24,625 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $-- $-- $2,029 2002 -- -- -- Inception: August 31, 1999 -------------------------------------------------------------------------------- Small Cap Value Fund T. Rowe Price Associates, Inc. Preston G. Athey Wellington Management Company, LLP S. O'Brien/T.McCormack -------------------------------------------------------------------------------- . The Fund employs a multi-manager approach with two sub-advisers independently managing portions of the Fund and each using distinct investment strategies. . At quarter-end, T. Rowe Price managed approximately 57% and Wellington managed approximately 43%. Fund Commentary . Year to date, the Fund returned 9.96%, outperforming its benchmark, the Russell 2000 Value Index. Relative to Morningstar peers, the Fund has an above average rating of 4/5 with a below average risk profile. T. Rowe Price . Outperformed its benchmark primarily due to favorable stock selection broadly across sectors with sector allocation exposures also adding value. . Exposures to the industrial and financial sectors were the largest contributors to absolute performance. . The manager selects stocks using proprietary fundamental equity research and seeks companies with attractive valuation relative to industry peers and historical norms. Wellington . Underperformed its benchmark primarily due to unfavorable security selection especially within industrials, while sector allocation exposures added modest value. . Exposure to the consumer discretionary sector was the largest contributor to absolute performance. . The manager employs proprietary fundamental research to identify stocks having distinct value characteristics based on industry-specific valuation criteria. Inception: August 31, 1999 -------------------------------------------------------------------------------- Small Cap Value Fund T. Rowe Price Associates, Inc. Preston G. Athey Wellington Management Company, LLP S. O'Brien/T.McCormack -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- O'Reilly Automotive, Inc. 1.5% United Stationers, Inc. 1.4% Cable Design Technologies Corp. 1.4% AptarGroup, Inc. 1.3% Texas Regional Bancshares, Inc. 1.2% Casey's General Stores, Inc. 1.2% Genesee & Wyo., Inc. 1.1% Universal Corp. 1.1% Black Hills Corp. 1.0% Reinsurance Group of America 1.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Small Cap Small Cap Value Value Fund Benchmark/4/ ---------- --------------- YTD/3/ 9.96% 7.83% 1 Year 31.27 35.18 3 Years 12.66 12.16 Since Inception (8/31/99) 19.67 14.65 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Small Value MORNINGSTAR RISK/1/: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING/1/: . ***** (VL/VUL) . **** (VA) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR/INDUSTRY ALLOCATION (as of June 30, 2004) % of Assets ------ Financials 25% Industrials 21% Consumer Discretionary 17% Materials 9% Information Technology 8% Energy 6% Consumer Staples 5% Health Care 5% Utilities 4% Telecommunication Services 0% -------------------------------------------------------------------------------- /1/ Source: MorningStar, Inc. Data as of 6/30/04. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 57 VL/VUL subaccounts and 129 VA subaccounts in the Morningstar Small Value category. This represents the Morningstar 3 year rating. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Small-company investing entails special risks as outlined in the prospectus. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. /4/ The Small Cap Value benchmark is the Russell 2500(TM) Value Index from September 1999 to December 2000 and the Russell 2000(R) Value Index January 2001- present. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted) ASSETS Long term investments at cost (including $30,822 of securities loaned (Note B)) ...................................... $164,638 Net unrealized appreciation of investments .......................... 42,336 Short-term investments at value ..................................... 34,785 -------- Total investments ................................................ 241,759 Receivable for: Investments sold ................................................. 416 Dividends ........................................................ 276 -------- Total assets ........................................................ 242,451 -------- LIABILITIES Payables for: Investments purchased ............................................ 353 Collateral for securities on loan ................................ 31,412 Accrued operating expenses ....................................... 55 -------- Total liabilities ................................................... 31,820 -------- Net assets .......................................................... $210,631 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ...................................................... 11,623 -------- Net asset value per share ........................................... $ 18.12 ======== Composition of net assets: Capital paid-in .................................................. $157,543 Accumulated net realized gain on investments, futures and foreign currency transactions ..................... 10,735 Undistributed net investment income .............................. 17 Net unrealized appreciation of investments ....................... 42,336 -------- Net assets ....................................................... $210,631 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 21 Dividends ........................................................ 1,938 Securities lending ............................................... 29 ------- Total investment income ............................................. 1,988 ------- EXPENSES Investment advisory fee .......................................... 956 Auditors fees .................................................... 25 Custodian fees ................................................... 39 Legal fees ....................................................... 12 Printing & mailing fees .......................................... 16 Trustees' fees ................................................... 5 Other fees ....................................................... 3 ------- Total expenses ...................................................... 1,056 Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (14) ------- Net expenses ........................................................ 1,042 ------- Net investment income ............................................... 946 ------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................. 10,670 Change in unrealized appreciation on investments ................................................... 7,219 ------- Net realized and unrealized gain .................................... 17,889 ------- Net increase in net assets resulting from operations ....................................................... $18,835 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted)
Unaudited Six-Month Period Ended Year Ended June 30, December 31, 2004 2003 ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 946 $ 978 Net realized gain ......................................... 10,670 7,581 Change in net unrealized appreciation ..................... 7,219 39,529 -------- -------- Net increase in net assets resulting from operations ... 18,835 48,088 Distributions to shareholders from: Net investment income ..................................... (929) (980) Realized gains ............................................ (7,128) -------- -------- Decrease in net assets resulting from distributions .... (929) (8,108) From fund share transactions: Proceeds from shares sold ................................. 41,268 59,731 Distributions reinvested .................................. 929 8,108 Payment for shares redeemed ............................... (39,245) (38,116) -------- -------- Increase in net assets from fund share transactions .... 2,952 29,723 -------- -------- NET INCREASE IN NET ASSETS ................................... 20,858 69,703 NET ASSETS Beginning of Period ....................................... 189,773 120,070 -------- -------- End of Period (including undistributed net investment income of $17 and $0, respectively) .................... $210,631 $189,773 ======== ======== Analysis of fund share transactions: Sold ...................................................... 2,374 4,095 Reinvested ................................................ 54 495 Redeemed .................................................. (2,268) (2,697) -------- -------- Net increase in fund shares outstanding ...................... 160 1,893 ======== ========
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Small Cap Value Fund ---------------------------------------------------------------------- Unaudited Period Ended Year Ended December 31, June 30, ----------------------------------------------------- 2004 2003 2002(h) 2001(g) 2000 ------------ -------- -------- -------- -------- Net Assets Value at Beginning of Period .................. $ 16.56 $ 12.55 $ 13.76 $ 11.70 $ 10.13 Income from Investment Operations: Net Investment Income ................................. 0.08 0.09 0.08 0.09 0.01 Net Realized and Unrealized Gain (Loss) on Investment(a) ...................................... 1.56 4.66 (0.96) 2.14 3.37 -------- -------- -------- -------- ------- Total From Investment Operations ...................... 1.64 4.75 (0.88) 2.23 3.38 Less Distributions: Distribution from Net Investment Income ............... (0.08) (0.09) (0.09) (0.09) (0.01) Distribution from Net Realized Gains on Investments ... (0.65) (0.24) (0.08) (1.80) -------- -------- -------- -------- ------- Total Distributions ................................... (0.08) (0.74) (0.33) (0.17) (1.81) -------- -------- -------- -------- ------- Net Assets Value at End of Period ........................ $ 18.12 $ 16.56 $ 12.55 $ 13.76 $ 11.70 ======== ======== ======== ======== ======= Total Investment Return(b) ............................... 9.96%(c) 37.97% (6.43)% 19.10% 34.19% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...... 1.06%(d)(f) 1.05%(e)(f) 1.04%(e) 1.05%(e) 1.05 Ratio of Net Investment Income to Average Net Assets .. 0.94%(d) 0.67% 0.62% 0.87% 0.13% Portfolio Turnover Rate ............................... 22.67%(c) 29.95% 41.46% 60.36% 220.80% Net Assets End of Period (000s Omitted) .................. $210,631 $189,773 $120,070 $103,224 $29,436
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.06%, 1.04%, 1.08%, and 1.29%, for the years ended December 31, 2003, 2002, 2001, and 2000, respectively. (f) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (g) The Fund entered into a new sub-advisory agreement with T. Rowe Price Associates, Inc. during the period shown. (h) The fund entered into a new sub-advisory agreement with Wellington Management Company during the period shown. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Value Name of Issuer Shares (000's) -------------- ------- ------- COMMON STOCK Aerospace & Defense - 0.9% Curtiss Wright Corp. - Cl. B ........................... 25,600 $ 1,377 EDO Corp. .............................................. 22,800 550 ------- 1,927 Air Freight & Couriers - 1.1% Hub Group Inc. * ....................................... 27,600 941 United Technologies Worldwide, Inc. .................... 25,700 1,354 ------- 2,295 Airlines - 0.5% Frontier Airlines, Inc. * .............................. 94,000 1,023 Auto Components - 0.8% Modine Manufacturing Co. ............................... 32,500 1,035 Spartan Motors, Inc. ................................... 52,100 638 ------- 1,673 Banks - 6.0% Amcore Financial, Inc. ................................. 29,800 899 Century Bancorp, Inc. - Cl. A .......................... 14,800 487 East West Bancorp, Inc. * .............................. 51,700 1,587 First Midwest Bancorp, Inc. ............................ 26,900 947 First Republic Bank * .................................. 42,900 1,848 New Alliance Bancshares, Inc. * ........................ 88,700 1,238 Silicon Valley Bancshares * ............................ 48,900 1,939 Sky Financial Group, Inc. .............................. 48,300 1,194 Texas Regional Bancshares, Inc. ........................ 55,300 2,539 ------- 12,678 Beverages - 0.6% Coca Cola Bottling Co. ................................. 11,200 648 Robert Mondavi Corp. - Cl. A * ......................... 16,200 600 ------- 1,248 Biotechnology - 0.3% Diversa Corp. * ........................................ 55,000 557 Building Products - 1.4% Insituform Technologies, Inc. - Cl. A * ................ 53,100 864 Simpson Manufacturing, Inc. * .......................... 27,100 1,521 Trex, Inc. * ........................................... 16,700 630 ------- 3,015 Chemicals - 1.8% Airgas, Inc. * ......................................... 49,500 1,183 Arch Chemicals, Inc. ................................... 35,900 1,035 MacDermid, Inc. ........................................ 18,600 630 Material Sciences Corp. * .............................. 47,000 500 Symyx Technologies, Inc. * ............................. 14,100 340 ------- 3,688 Commercial Services & Supplies - 4.4% Casella Waste Systems, Inc. - Cl. A * .................. 76,400 1,005 Electro Rent Corp. * ................................... 86,000 901 G & K Services, Inc. - Cl. A ........................... 32,600 1,310 Healthcare Services Group, Inc. ........................ 43,350 663 Landauer, Inc .......................................... 16,300 $ 728 McGrath Rent Corp. ..................................... 37,600 1,389 United Stationers, Inc. * .............................. 71,200 2,828 Waste Connections, Inc. * .............................. 17,700 525 ------- 9,349 Commingled Fund - 0.8% First Financial Fund, Inc. * ........................... 54,200 962 Ishares Russell ........................................ 4,700 810 ------- 1,772 Communications Equipment - 1.8% Black Box Corp. ........................................ 20,600 973 Cable Design Technologies Corp. * ...................... 264,500 2,804 ------- 3,777 Computers & Peripherals - 0.2% Intergraph Corp. * ..................................... 17,700 458 Construction Materials - 1.1% Ameron International Corp. ............................. 23,300 795 Florida Rock Industries, Inc. .......................... 36,850 1,554 ------- 2,349 Containers & Packaging - 1.5% AptarGroup, Inc. ....................................... 59,500 2,600 Myers Industries, Inc. ................................. 45,700 644 ------- 3,244 Diversified Financials - 2.5% Allied Capital Corp. ................................... 62,400 1,524 American Capital Strategies, Ltd. ...................... 63,400 1,776 Assured Guaranty, Ltd. * ............................... 82,200 1,393 Financial Federal Corp. ................................ 14,400 508 ------- 5,201 Electric Utilities - 3.2% Black Hills Corp. ...................................... 67,600 2,129 Cleco Corp. ............................................ 58,300 1,048 El Paso Electric Co. * ................................. 83,900 1,296 Otter Tail Power Co. ................................... 20,700 556 PNM Resources, Inc. .................................... 83,000 1,724 ------- 6,753 Electrical Equipment - 2.4% C&D Technologies, Inc. ................................. 37,200 663 Deswell Industries, Inc. ............................... 46,100 1,111 Franklin Electric Co., Inc. ............................ 30,100 1,137 The Genlyte Corp. * .................................... 18,600 1,170 Woodward Governor Co. .................................. 12,500 901 ------- 4,982 Electronic Equipment & Instruments - 1.6% Analogic Corp. ......................................... 9,400 399 Exar Corp. * ........................................... 46,500 682 Littelfuse, Inc. * ..................................... 26,400 1,119 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Electronic Equipment & Instruments - Continued Methode Electronics, Inc. - Cl. A ....................... 32,600 $ 423 Technitrol, Inc. * ...................................... 33,100 725 ------- 3,348 Energy Equipment & Services - 1.9% Atwood Oceanics, Inc. * ................................. 15,000 626 Carbo Ceramics, Inc. .................................... 9,000 614 Lone Star Technologies, Inc. * .......................... 46,500 1,282 Tetra Technologies, Inc. * .............................. 37,600 1,010 West Hampshire Energy Services, Inc. * .................. 24,900 488 ------- 4,020 Food & Drug Retailing - 1.4% Casey's General Stores, Inc. * .......................... 137,700 2,520 Wild Oats Markets, Inc. * ............................... 32,900 463 ------- 2,983 Food Products - 1.2% John B Sanfilippo & Son, Inc. * ......................... 31,000 828 Riviana Foods, Inc. Delaware ............................ 14,300 374 Sensient Technologies Corp. ............................. 41,800 898 Volume Services America Holdings, Inc. .................. 24,000 325 ------- 2,425 Gas Utilities - 1.3% Atmos Energy Corp. ...................................... 33,400 855 New Jersey Resources Corp. .............................. 23,700 985 WGL Holdings, Inc. ...................................... 29,000 833 ------- 2,673 Health Care Equipment & Supplies - 1.0% Arrow International, Inc. ............................... 17,800 532 PolyMedica Corporation * ................................ 50,800 1,577 ------- 2,109 Health Care Providers & Services - 3.6% Amerigroup Corp. * ...................................... 41,300 2,032 Amsurg Corp. ............................................ 40,049 1,006 Capital Senior Living Corp. * ........................... 122,200 588 Corvel Corp. ............................................ 19,600 556 Maximus, Inc. * ......................................... 51,900 1,840 Owens & Minor, Inc. ..................................... 62,400 1,616 ------- 7,638 Hotels Restaurants & Leisure - 1.9% CEC Entertainment, Inc. * ............................... 24,150 713 Interstate Hotels & Resorts * ........................... 81,000 436 Rare Hospitality International, Inc. * .................. 38,100 949 Ruby Tuesday, Inc. ...................................... 35,700 980 Sonic Corp. * ........................................... 37,600 855 ------- 3,933 Household Durables - 4.1% CSS Industries, Inc. * .................................. 32,600 1,142 Mathews International Corp. * ........................... 31,900 1,051 Meritage Corp. * ........................................ 14,000 $ 963 Skyline Corp. ........................................... 26,500 1,077 Stanley Furniture Co., Inc. * ........................... 25,600 1,078 WCI Communities, Inc. * ................................. 83,800 1,870 Yankee Candle, Inc. * ................................... 47,200 1,381 ------- 8,562 Industrial Conglomerates - 0.7% Carlisle Cos., Inc. ..................................... 23,000 1,432 Insurance - 7.9% Delphi Financial Group, Inc. - Cl. A * .................. 35,950 1,600 IPC Holdings, Ltd. ...................................... 34,200 1,263 Markel Corp. * .......................................... 3,100 860 Max Re Capital, Ltd. .................................... 67,000 1,305 Platinum Underwriters Holdings .......................... 53,300 1,622 Proassurance Corp. * .................................... 51,200 1,746 Reinsurance Group of America ............................ 52,200 2,122 Scottish Annuity & Life ................................. 86,200 2,004 The Midland Co. ......................................... 49,400 1,465 Triad Guaranty, Inc. * .................................. 24,200 1,409 Universal American Financial Corp. * .................... 122,400 1,344 ------- 16,740 Internet Software & Services - 0.3% Websense, Inc. * ........................................ 18,000 670 Leisure Equipment & Products - 0.5% SCP Pool Corp. * ........................................ 25,000 1,125 Machinery - 4.4% Albany International Corp. - Cl . A ..................... 42,800 1,436 IDEX Corp. .............................................. 38,600 1,326 JLG Industries, Inc. .................................... 75,100 1,043 Kadant, Inc. * .......................................... 63,800 1,476 Nordson Corp. ........................................... 34,800 1,509 Quixote Corp. ........................................... 48,000 963 Thomas Industries, Inc. ................................. 44,600 1,481 ------- 9,234 Marine - 0.5% Kirby Corp. * ........................................... 27,900 1,085 Media - 1.9% Advo, Inc. * ............................................ 20,100 662 Courier Corp. ........................................... 36,200 1,511 Journal Register Co. * .................................. 51,200 1,024 Saga Communications, Inc. - Cl. A * ..................... 45,100 823 ------- 4,020 Metals & Mining - 2.1% Aber Diamond Corp. ...................................... 17,400 516 Carpenter Technology Corp. * ............................ 47,400 1,614 Gibraltar Steel Corp. ................................... 36,000 1,182 Meridian Gold, Inc. * ................................... 85,100 1,104 ------- 4,416 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- --------- --------- (000's) COMMON STOCK - Continued Multi-Utilities - 0.7% Vectren Corp. * ..................................... 29,700 $ 745 Weststar Energy, Inc. ............................... 39,100 779 -------- 1,524 Multiline Retail - 0.7% Stein Mart, Inc. * .................................. 87,400 1,421 Oil & Gas - 4.0% Encore Acquisition Co. .............................. 75,000 2,092 Forest Oil Corp. * .................................. 51,700 1,412 Magnum Hunter Resources, Inc. ....................... 86,100 894 Penn Virginia Corp. ................................. 37,600 1,358 Plains Exploration & Production Co. * ............... 39,900 732 St. Mary Land & Exploration Co. * ................... 23,700 845 Todco - Cl. A * ..................................... 24,600 381 Vintage Petroleum, Inc. ............................. 36,200 614 -------- 8,328 Paper & Forest Products - 1.7% Chesapeake Corp. .................................... 18,800 501 Deltic Timber Corp. ................................. 24,400 937 Potlatch Corp. ...................................... 32,800 1,366 Wausau-Mosinee Paper Corp. .......................... 41,200 713 -------- 3,517 Personal Products - 0.5% NBTY, Inc. * ........................................ 36,200 1,064 Real Estate Investment Trust - 7.5% Acadia Realty Trust ................................. 55,100 757 Bedford Property Investors, Inc. .................... 49,700 1,453 East Group Properties, Inc. ......................... 34,500 1,162 Gables Residential Trust ............................ 33,100 1,125 Getty Realty Corp. NEW .............................. 29,500 742 Glenborough Realty Trust, Inc. ...................... 23,300 428 Innkeepers USA Trust ................................ 121,000 1,247 Kilroy Realty Corp. ................................. 46,900 1,599 LaSalle Hotel Properties ............................ 49,400 1,205 Maguire Properties, Inc. ............................ 21,900 542 PS Business Parks, Inc. ............................. 18,900 761 RAIT Investment Trust ............................... 26,600 656 Realty Income Corp. ................................. 25,600 1,068 Sun Communities, Inc. ............................... 31,200 1,175 Ventas, Inc. ........................................ 30,900 722 Washington Real Estate Investment Trust ............. 40,100 1,178 -------- 15,820 Road & Rail - 3.9% Dollar Thrifty Automotive Group, Inc. * ............. 28,200 774 Genesee & Wyo., Inc. - Cl. A ........................ 98,350 2,331 Landstar Systems, Inc. * ............................ 27,700 1,465 Overnite Corp. * .................................... 46,500 1,367 USF Corp. ........................................... 38,200 $ 1,342 Werner Enterprises, Inc. * .......................... 42,100 888 -------- 8,167 Semiconductor Equipment & Products - 1.9% Atmi, Inc. * ........................................ 19,600 535 ESS Technology, Inc. * .............................. 65,300 699 MPS Group, Inc. * ................................... 98,700 1,196 Mykrolis Corp. * .................................... 53,600 934 Pericom Semiconductor Corp. * ....................... 50,400 540 -------- 3,904 Software - 1.0% Ansys, Inc. ......................................... 13,900 653 Progress Software Corp. * ........................... 39,100 847 SPSS, Inc. .......................................... 39,100 703 -------- 2,203 Specialty Retail - 6.7% Aaron Rents, Inc. ................................... 54,500 1,806 Building Materials Holdings Corp. - Sr. Notes ....... 63,300 1,198 Cato Corp. - Cl. A .................................. 27,900 626 Gildan Activewear, Inc. - Cl. A * ................... 53,100 1,524 Hancock Fabrics, Inc. ............................... 51,200 653 Haverty Furniture Co., Inc. ......................... 72,300 1,264 Hibbett Sporting Goods, Inc. * ...................... 42,300 1,157 O'Reilly Automotive, Inc. * ......................... 66,600 3,010 Shoe Carnival, Inc. * ............................... 57,500 863 Stage Stores, Inc. * ................................ 19,900 750 TBC Corp. * ......................................... 56,800 1,352 -------- 14,203 Textiles & Apparel - 0.6% Culp, Inc. * ........................................ 33,700 262 Cutter & Buck, Inc. * ............................... 63,500 654 Unifi, Inc. * ....................................... 111,700 328 -------- 1,244 Tobacco - 1.5% Standard Commercial Corp. * ......................... 52,100 941 Universal Corp. * ................................... 43,900 2,236 -------- 3,177 -------- TOTAL COMMON STOCK- (Cost $164,638) 98.3% 206,974 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 14.9% State Street Navigator Securities Lending Portfolio ........................................ $ 31,412 31,412 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Par Name of Issuer Value Value -------------- ------- -------- (000's) (000's) SHORT-TERM INVESTMENTS - 1.6% Investment in joint trading account 1.344% due 07/01/04 (Cost $3,373) ........................................ $3,373 $ 3,373 ------ -------- TOTAL INVESTMENTS- (Cost $199,423) 114.8% 241,759 Payables, less cash and receivables- (14.8)% (31,128) ------ -------- NET ASSETS- 100.0% $210,631 ====== ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Small Cap Growth Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transactions are recorded on the date of purchase or sale. 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. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the period ended June 04, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ----------------- ---------------- $1,342 1.51% $1 Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At June 30, 2004, the market value of the securities loaned and the market value of the collateral for the Fund was as follows: Value of Securities Loaned Value of Collateral -------------------------- ------------------- $30,822 $ 31,412 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 June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At June 30, 2004, the Fund had no open forward foreign currency contracts. Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the rate of 0.95% on an annual basis of the Fund's net assets. In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. The Fund entered into a commission recapture program, which enables it to pay some of its operational expenses by recouping a portion of the commissions it pays to a broker that is not a related party of the Fund. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. The impact of this arrangement was a reduction of $14. John Hancock has entered into Sub-Advisory Agreements with T. Rowe Price Associates, Inc. and Wellington Management Company, and under its supervision, are responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $49,196 $44,780 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $ 170,416 $37,355 $(2,688) $34,667 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily related to certain securities sold at a loss and to certain distributions received from investments in Real Estate Investment Trusts. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. 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 ------------- ------------- ------------- -------------- $67 $449 $-- $34,667 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $2,961 $5,147 $ -- 2002 885 1,001 1,231 Inception: May 1, 2003 -------------------------------------------------------------------------------- Total Return Bond Fund Pacific Investment Management Company Llc William H. Gross -------------------------------------------------------------------------------- . Year to date, the Fund returned 0.23%, outperforming its benchmark, the Lehman Brothers Aggregate Bond Index. . The Fund outperformed its benchmark primarily due to sector allocation decisions (especially an overweight to non-dollar securities), while duration / yield curve decisions detracted. . The Fund's exposure to TIPS (U.S. inflation-index bonds) contributed the most to absolute performance. . The manager uses proprietary research, economic analysis and quantitative tools seeking to add value across all key decisions (duration, sector, security and derivatives) and opportunistically invests broadly across key fixed income sectors including high yield and non-U.S. sectors. -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- Federal Republic of Germany 16.5% Government National Mortgage Assoc. 15.4% Bear Stearns Trust 9.6% U.S. Treasury 7.9% Federal Home Loan Mortgage Corp. 6.7% CWMBS, Inc. 6.2% Federal National Mortgage Assoc. 5.8% Small Business Administration 3.2% NAAC Reperforming Loan Remic Trust 2.6% United Mexican States 1.9% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS/2/ Lehman Brothers Total Return Aggregate Bond Bond Fund Index ------------ --------------- YTD/3/ 0.23% 0.15% 1 Year 0.56 0.33 Since Inception (5/1/03) 1.90 1.70 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MORNINGSTAR CATEGORY/1/: . Intermediate Term Bond MORNINGSTAR RISK/1/: . (VL/VUL) N/A . (VA) N/A MORNINGSTAR RATING/1/: . (VL/VUL) N/A . (VA) N/A -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND COMPOSITION (as of June 30, 2004)/4/ % of Credit Quality Assets -------------- ------ AAA/Government/Agency 67.11% AA 16.42% A 3.23% BBB 10.40% BB & lower 2.66% Not Rated/Other 0.18% Weighted Average Yield 5.08% -------------------------------------------------------------------------------- /1/ Source: Morningstar Inc. Data as of 6/30/04, this fund is not yet rated. /2/ Total returns are for the period ended June 30, 2004. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. /3/ Year to date returns are not annualized. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $39,194 Net unrealized depreciation of investments .......................... (530) Short-term investments at value ..................................... 20,060 ------- Total investments ............................................. 58,724 Cash ................................................................ 26 Foreign currency at value (cost $14) ................................ 14 Receivable for: Interest ......................................................... 289 Unrealized appreciation in forward currency contracts ............ 13 Other assets ..................................................... 5 ------- Total assets ........................................................ 59,071 ------- LIABILITIES Payables for: Investments purchased ............................................ 9,173 Net payable for swap contracts ................................... 123 Written options at value (premium received $77) .................. 21 ------- Total liabilities ................................................... 9,317 ------- Net assets .......................................................... $49,754 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 4,997 ------- Net asset value per share ........................................... $ 9.96 ======= Composition of net assets: Capital paid-in .................................................. $50,065 Accumulated net realized loss on investments, futures and foreign currency transactions ................................. 297 Undistributed net investment income .............................. 8 Net unrealized appreciation (depreciation) of: Investments ................................................... (530) Written Options ............................................... 56 Swap contracts ................................................ (123) Translation of assets and liabilities in foreign currencies ... (19) ------- Net assets .......................................................... $49,754 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 (Unaudited) -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................... $ 674 EXPENSES Investment advisory fee ............................................ 166 Auditors fees ...................................................... 2 Custodian fees ..................................................... 20 Legal fees ......................................................... 2 Printing & mailing fees ............................................ 3 Trustees' fees ..................................................... 1 Other fees ......................................................... 1 ----- Total expenses ........................................................ 195 ----- Less expenses reimbursed ........................................... (15) ----- Net expenses .......................................................... 180 ----- Net investment income ................................................. 494 ----- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments ..................................................... 245 Foreign currency transactions ................................... 83 Change in unrealized appreciation (depreciation) on: Investments ..................................................... (783) Written options ................................................. 53 Swap contracts .................................................. (92) Translation of assets and liabilities in foreign currencies ..... 57 ----- Net realized and unrealized loss ...................................... (437) ----- Net increase in net assets resulting from operations .................. $ 57 ===== See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted)
Unaudited Six-Month Year Ended Period Ended December 31, June 30, 2004 2003 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ....................................................... $ 494 $ 404 Net realized gain ........................................................... 328 142 Change in net unrealized appreciation (depreciation) ........................ (765) 149 ------- ------- Net increase in net assets resulting from operations ..................... 57 695 Distributions to shareholders from: Net investment income ....................................................... (490) (400) Realized gains .............................................................. (173) ------- ------- Decrease in net assets resulting from distributions ...................... (490) (573) From fund share transactions: Proceeds from shares sold ................................................... 14,002 43,263 Distributions reinvested .................................................... 490 573 Payment for shares redeemed ................................................. (6,311) (1,952) ------- ------- Increase in net assets from fund share transactions ...................... 8,181 41,884 ------- ------- NET INCREASE IN NET ASSETS ..................................................... 7,748 42,006 NET ASSETS Beginning of Period ......................................................... 42,006 ------- ------- End of Period (including undistributed net investment income of $8 and $4, respectively) ............................................................ $49,754 $42,006 ======= ======= Analysis of fund share transactions: Sold ........................................................................ 1,385 4,324 Reinvested .................................................................. 49 57 Redeemed .................................................................... (623) (195) ------- ------- Net increase in fund shares outstanding ........................................ 811 4,186 ======= =======
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Total Return Bond Fund ----------------------------------------- Unaudited Period from May 1, to Period Ended December 31, June 30, 2004 2003(e) ------------- ---------------------- Net Assets Value at Beginning of Period ........................................ $ 10.04 $ 10.00 Income from Investment Operations: Net Investment Income ....................................................... 0.10 0.12 Net Realized and Unrealized Gain (Loss) on Investment(a) .................... (0.08) 0.08 ------- ------- Total From Investment Operations ............................................ 0.02 0.20 Less Distributions: Distribution from Net Investment Income ..................................... (0.10) (0.12) Distribution from Net Realized Gains on Investments ......................... (0.04) ------- ------- Total Distributions ......................................................... (0.10) (0.16) ------- ------- Net Assets Value at End of Period .............................................. $ 9.96 $ 10.04 ======= ======= Total Investment Return (b)..................................................... 0.23%(c) 1.99%(c) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................ 0.76%(d)(f) 0.77%(d) Ratio of Net Investment Income to Average Net Assets ........................ 2.10%(d) 1.89%(d) Portfolio Turnover Rate ..................................................... 469.81%(c) 537.79%(c) Net Assets End of Period (000s Omitted) ........................................ $49,754 $42,006
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Commencement of investment operations. (f) Expense ratio is net of expense reimbursements. Had such reimbursements not been made, the expense ratio would have been .83% for the period ending June 30, 2004. SCHEDULE OF INVESTMENTS (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND Par Market Value Value Name of Issuer (000's) (000's) -------------- ------- ------- PUBLICLY-TRADED BONDS Auto Loan - 0.2% Ford Motor Credit Co. - Bonds 7.75% due 03/15/05 ...................................... $ 90 $ 93 Banks - 0.5% Banc America Mortgage Securities, Inc. - Ser 2004-2 Cl. 5A1 6.5% due 10/25/19 ........................ 257 262 Diversified Financials - 0.5% CIT Group, Inc. - Sr. Notes 7.75% due 04/02/12 ...................................... 200 228 Citigroup, Inc. 1.275% due 12/28/04 ..................................... 1,000 9 ------ 237 Diversified Telecommunication Services - 2.1% AT&T Broadband Corp. - Notes 8.375% due 03/15/13 .................................. 200 235 AT&T Corp. - Sr. Notes 7.8% due 11/15/11 .................................... 150 154 Bellsouth Corp. - Notes 6.0% due 10/15/11 .................................... 150 157 France Telecom 8.25% due 03/14/08 ................................... 200 270 France Telecom SA - Notes 9.25% due 03/01/11 ................................... 200 232 ------ 1,048 Electric/Gas - 1.1% Dominion Resources, Inc. - Notes 5.7% due 09/17/12 .................................... 150 153 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 ................................... 200 200 Progress Energy, Inc. - Sr. Notes 6.85% due ............................................ 100 108 PSEG Power LLC - Sr. Notes 6.95% due 06/01/12 ................................... 100 109 ------ 570 Finance - 5.0% AIG SunAmerica Institutional Funding 1.2% due 01/26/05 .................................... 45,000 414 Deutsche Telekom International Finance 6.375% due 07/11/06 .................................. 400 517 General Motors Acceptance Corp. 1.995% due 05/18/06 .................................. 700 701 Tobacco Settlement Financing Corp. - Ser. A 6.25% due 06/01/42 ................................... 500 411 Tobacco Settlement Revenue Management - Ser. B 6.375% due 05/15/28 .................................. 200 171 UFJ Finance Aruba - GTD Notes 6.75% due 07/15/13 ................................... 50 52 Verizon Global Funding Corp. - Notes 7.25% due 12/01/10 ................................... $ 200 $ 224 ------ 2,490 Food Products - 0.2% Kraft Foods, Inc. - Notes 6.25% due 06/01/12 ...................................... 100 105 Foreign Governmental - 16.5% Federal Republic of Brazil - Bonds 11.0% due 08/17/40 ...................................... 250 233 Federal Republic of Germany 4.5% due 07/04/09 ....................................... 3,200 4,054 5.0% due 07/04/12 ....................................... 1,600 2,062 5.25% due 01/04/11 ...................................... 200 262 Republic of Brazil 2.063% due 04/15/09 ..................................... 29 27 Republic of Brazil - Ser. L 2.125% due 04/15/06 ..................................... 171 169 Republic of Panama 9.625% due 02/08/11 ..................................... 350 384 Republic of Peru - Bonds 9.125% due 02/21/12 ..................................... 225 230 Russian Federation 8.75% due 07/24/05 ...................................... 50 53 United Mexican States 1.84% due 01/13/09 ...................................... 500 508 6.375% due 01/16/13 ..................................... 230 229 ------ 8,211 Hotels Restaurants & Leisure - 0.4% MGM Mirage, Inc. - Ser. B 6.0% due 10/01/09 ....................................... 200 196 Media - 0.7% Time Warner, Inc. - Notes 6.875% due 05/01/12 ..................................... 300 324 Municipal - 2.7% De Kalb County Georgia Water & Sewage - Ser. A 5.0% due 10/01/35 ................................ 200 197 Harris County Texas 5.0% due 08/15/33 .................................... 100 97 Massachusetts Saint - Ser. C 5.5% due 11/01/10 .................................... 500 557 University of Texas Permanent University Fund - Ser. B 4.75% due 07/01/30 ................................... 500 471 ------ 1,322 Other Asset Backed - 2.6% NAAC Reperforming Loan Remic Trust - Ser 2004-R1 Cl. A2 144A (a) 7.5% due 03/25/34 .................................... 906 989 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND Par Market Value Value Name of Issuer (000's) (000's) -------------- ------- ------- PUBLICLY-TRADED BONDS - Continued Other Asset Backed - Continued Residential Asset Funding and Mortgage Securities Corp. - Ser. 2001 KS3 Cl. A II 1.33% due 09/25/31 ................................... $ 106 $ 107 Residential Asset Securities Corp. - Ser. 2004 KS6 Cl. AII B1 1.22% due 04/25/13 ................................... 200 200 ------- 1,296 Paper & Forest Products - 0.2% Weyerhaeuser Co. - Notes 6.125% due 03/15/07 ..................................... 75 79 U.S. Government Agencies - 24.1% Federal Home Loan Mortgage Corp. - Bonds 5.5% due 06/01/24 ....................................... 2,000 2,025 6.0% due 10/15/32 ....................................... 484 501 Federal Home Loan Mortgage Corp. - Bonds Ser. 2559 Cl. PB 5.5% due 08/15/30 ....................................... 61 62 Federal National Mortgage Assoc. - Bonds 5.5% due 10/01/32 ....................................... 5.5% due 12/01/33 ....................................... Federal National Mortgage Assoc. - Bonds Ser. 2004-11 Cl. 1A 1.22% due 03/25/34 ...................................... 388 386 Federal National Mortgage Assoc. - Ser. 2004- T1 1A1 6.0% due 01/25/44 ....................................... 917 940 Federal National Mortgage Assoc. - Ser. 2004- W2 Cl. 1A2F 1.44% due 02/25/44 ...................................... 908 904 Government National Mortgage Assoc. - Bonds 5.0% due 05/15/33 ....................................... 5,763 5,596 Government National Mortgage Assoc. - Ser.2002-30 Cl. Z 6.5% due 05/20/32 ....................................... 345 358 Small Business Administration - Ser. 2004 10A 4.504% due 02/10/14 ..................................... 1,291 1,222 ------- 11,994 U.S. Governmental - 6.1% U.S. Treasury - Bonds 7.875% due 02/15/21 .................................. 900 1,162 U.S. Treasury - Notes 2.0% due 01/15/14 .................................... 710 706 3.0% due 07/15/12 .................................... 521 563 5.0% due 08/15/11 .................................... 600 626 ------- 3,057 Whole Loan CMOs - 14.5% Ameriquest Mortgage Securities, Inc. - Ser ................. 2004-X2 Cl. A 144A (a) 1.851% due 06/25/34 ..................................... $ 200 $ 200 Bear Stearns ARM Trust - Ser. 2003 Cl. III A1 5.18% due 04/25/33 ...................................... Bear Stearns ARM Trust - Ser. 2004-3 Cl. IA 2 3.996% due 07/25/34 ..................................... 985 983 Bear Stearns ARM Trust - Ser. 2004-6 Cl. 1A1 4.707% due 07/30/34 ..................................... 1,900 1,909 Bear Stearns Trust - Ser. 2004-2 Cl. 1A1 5.316% due 02/19/05 ..................................... 800 809 CWMBS, Inc. - Ser. 1999-9 Cl. A1 6.5% due 08/25/29 ....................................... 57 57 CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1 6.25% due 12/25/33 ...................................... 531 540 CWMBS, Inc. - Ser. 2003-R4 Cl. 2A 144A (a) 6.5% due 01/25/34 ....................................... 768 789 CWMBS, Inc. - Ser. 2004 12 Cl. 11A2 4.431% due 08/25/34 ..................................... 1,000 1,005 GS Mortgage Securities Corp. - Ser. 2003-1 Cl. A2 1.79% due 01/25/32 ...................................... 200 204 Mellon Residential Funding Corp. - Ser. 2000 TBC2 Cl. A1 1.34% due 06/15/30 ...................................... 115 114 Structured Asset Securities Corp. - Ser. 2003 NP3 Cl. A1 144A (a) 1.6% due 11/25/33 ....................................... 223 223 Structured Asset Securities Corp. - Ser. 2003- S1 Cl. A1 1.25% due 08/25/33 ...................................... 65 65 WAMU - CTF Cl. A 1.0% due 02/27/34 ....................................... 309 309 ------- 7,207 Wireless Telecommunications Services - 0.3% AT&T Wireless Group - Notes 8.125% due 05/01/12 ..................................... 150 173 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $39,194) ....................................... 77.7% 38,664 COMMERCIAL PAPER Auto Loan - 0.6% Ford Motor Credit Co. 1.77% due 09/03/04 ................................... 300 299 Banks - 11.6% Bank Ireland Governor & Co. 1.285% due 09/03/04 .................................. 500 499 Danske Corp. 1.24% due 09/17/04 ................................... 800 798 DNB NOR Bank ASA 1.265% due 09/03/04 .................................. 600 599 SCHEDULE OF INVESTMENTS--Continued (UNAUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I June 30, 2004 -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND Par Market Value Value Name of Issuer (000's) (000's) -------------- ------- ------- COMMERCIAL PAPER - Continued Banks - Continued Lloyds Bank plc 1.185% due 07/21/04 ................................. $ 1,300 $ 1,299 Royal Bank of Scotland plc 1.09% due 08/06/04 .................................. 500 499 Spintab 1.49% due 09/02/04 .................................. 800 798 Svenska Handelsbanken AB 1.25% due 09/01/04 .................................. 100 100 1.07% due 07/21/04 .................................. 300 300 Westpac Trust Securities NZ, Ltd. 1.22% due 08/25/04 .................................. 900 898 -------- 5,790 Finance -19.7% CBA Delaware Finance, Inc. 1.07% due 07/15/04 .................................. 800 800 1.15% due 08/10/04 .................................. 100 100 1.225% due 08/23/04 ................................. 500 499 CDC Commercial 1.085% due 08/04/04 ................................. 500 499 1.10% due 08/17/04 .................................. 900 899 General Electric Capital Corp. 1.30% due 09/08/04 .................................. 1,300 1,297 1.46% due 09/14/04 .................................. 100 100 HBOS Treasury Services plc 1.095% due 08/02/04 ................................. 600 599 1.58% due 10/21/04 .................................. 500 498 1.585% due 10/26/04 ................................. 300 298 ING United Funding LLC 1.345% due 09/09/04 ................................. 100 100 National Australia Funding Delaware, Inc. 1.21% due 07/19/04 .................................. 200 200 Shell Finance 1.23% due 08/11/04 .................................. 1,300 1,298 UBS Finance Delaware LLC 1.195% due 07/21/04 ................................. 1,300 1,299 UniCredit Delaware 1.47% due 09/14/04 .................................. 1,300 1,296 -------- 9,782 U.S Government Agencies - 8.4% Federal Home Loan Bank - Disc. Notes 1.17% due 07/16/04 .................................. 100 100 1.18% due 08/25/04 .................................. 500 499 Federal Home Loan Mortgage Corp. - Disc. Notes 1.44% due 09/14/04 .................................. 200 199 1.475% due 09/30/04 ................................. 100 100 Federal National Mortgage Assoc. - Disc. Notes 1.105% due 09/01/04 ................................. 500 499 1.06% due 07/21/04 .................................. 200 200 1.185% due 08/25/04 ................................. 600 599 U.S.Government Agencies - Continued 1.20% due 09/08/04 .................................. $ 900 $ 897 1.415% due 09/15/04 ................................. 900 897 1.53% due 10/18/04 .................................. 200 199 -------- 4,189 TOTAL COMMERCIAL PAPER- (Cost $20,060) 40.3% 20,060 ------- -------- TOTAL INVESTMENTS- (Cost $59,254) 118.0% 58,724 Payables, less cash and receivables- (18.0)% (8,970) ------- -------- NET ASSETS- 100.0% $ 49,754 ======= ======== (a) Pursuant to Rule 144A under the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, securities aggregated $2,201 or 4.4% of net assets of the Portfolio. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Total Return Bond Fund (the "Fund"), which commenced operations on May 1, 2003, is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of June 30, 2004. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: The Fund determines its net asset value per share once daily as of the close of the customary trading session of the New York Stock Exchange ("Exchange") on each business day of the Fund. The Exchange generally closes at 4:00 p.m. Eastern Standard Time. However, ETF's and certain derivative instruments may be valued using prices as late as 4:15 p.m. Eastern Standard Time. In the event the Exchange closes at any time other than 4:00 p.m. Eastern Standard Time on a particular day, the Fund will determine its net asset value per share as of the close of the Exchange on that day. Investment security transations are recorded on the date of purchase or sale. Debt investment securities having a primary market over-the-counter are valued on the basis of valuations furnished by a pricing service which determines valuations for normal institutional size trading units of debt securities, without exclusive reliance upon quoted prices. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Occasionally, events that affect the values of such securities may occur between the times at which they are generally determined and the close of the New York Stock Exchange. In such events, these securities will then be valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Three types of significant events require valuation of a portfolio security. In each situation, the significant event has rendered the price of the affected security as not "readily available." The first type of significant events involves single issuer specific events that affect only the price of one particular portfolio security. Examples include, but are not limited to: corporate reorganizations, mergers, corporate announcements of earnings, buyouts, and significant litigation involving the issuer of the portfolio security. The second type of significant events involves events that may relate to more than one issuer. These events could include, for example: governmental actions affecting securities in a sector, country or region; a natural disaster; an armed conflict; or a similar situation affecting a country, region or sector. The third category of significant events involves significant fluctuations in domestic or foreign markets that may affect the prices of all portfolio securities belonging to a particular market. There are a number of factors that may indicate a market fluctuation significant event has occurred, including, but not limited to, a swing in the U.S. market indexes, a swing in particular foreign market indexes, or a significant price change in Exchange Traded Funds in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of June 30, 2004 are as follows: Name of Issuer Market Value ------------- ------------ Alpine Securitization Corp., 1.20%, due 07/02/04 $ 29,999 American General Finance Corp., 1.26%, due 07/07/04 29,994 Barton Capital Corp., 1.06%, due 07/01/04 12,000 Barton Capital Corp., 1.20%, due 07/01/04 18,000 Citicorp, 1.25%, due 07/02/04 29,999 Clipper Receivables Corp., 1.50%, due 07/01/04 30,000 ED & F Man Treasury Management, 1.46%, due 07/01/04 11,282 Gemini Securitization Corp., Inc., 1.5%, due 07/01/04 30,000 Goldman Sachs Group, 1.25%, due 07/02/04 19,999 Goldman Sachs Group, 1.27%, due 07/06/04 9,998 National Australia Funding, 1.22%, due 07/02/04 5,700 Receivables Capital Corp., 1.34%, due 07/07/04 1,051 Societe Generale North, 1.32%, due 07/06/04 14,997 Surrey Funding Corp., 1.50%, due 07/01/04 30,000 Three Pillars Funding Corp. 1.30%, due 07/06/04 29,995 -------- Joint Trading Account Totals $303,014 ======== Currency translation: All assets or liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars based on London currency exchange quotations as of 5:00 p.m., London time, on the date of any determination of the net asset value of the Fund. Unrealized exchange adjustments are included in unrealized appreciation (depreciation) of investments. Transactions affecting statement of operations accounts and net realized gain (loss) on investments are translated at the rates prevailing at the dates of transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between trade and settlement dates of security transactions, and the difference between the amounts of net investment income accrued and the U.S. dollar amount actually received. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in the exchange rate. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Discount and premium on debt securities: The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the Trust's record keeper and custodian, and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. For the period ended June 30, 2004, the Fund had no bank borrowings. Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At June 30, 2004, the Fund had no open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. As of June 30, 2004, the Fund had open forward foreign currency contracts which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Principal Amount Unrealized Currency Purchased Covered by Contract Expiration Month Gain (Loss) ------------------ ------------------- ---------------- ----------- Brazilian Real 18 September 04 $-- Chilean Peso 29 August 04 -- Chilean Peso 19 September 04 -- Hong Kong Dollar 10 July 04 -- Hong Kong Dollar 30 September 04 -- Indian Rupee 30 September 04 -- Japanese Yen 504 July 04 2 South Korean Won 10 July 04 -- South Korean Won 20 September 04 -- Mexican Peso 77 August 04 -- Mexican Peso 20 September 04 -- Peruvian Nouveau 20 September 04 -- New Russian Ruble 19 September 04 -- Singapore Dollar 10 July 04 -- Singapore Dollar 20 September 04 -- New Taiwan Dollar 20 September 04 -- South African Rand 21 September 04 -- --- $ 2 === Currency Sold ------------- Euro 1,041 July 04 $11 South African Rand 13 September 04 -- --- $11 --- $13 === Options: The Fund may use option contracts to manage its exposure to the bond market and to fluctuations in interest rates and currency values. Option contracts tend to increase or decrease the Fund's exposure to the underlying instrument or hedge other fund investments. When the Fund purchases an option, the premium paid by the Fund is included in the Fund's Statement of Assets and Liabilities as an investment and subsequently "marked to market" to reflect the option's current market value. Purchased options are valued at the last sale price on the market on which they are principally traded. If the purchased option expires, the Fund realizes a loss in the amount of the premium. If the Fund enters into a closing sale transaction, it realizes a gain or loss, depending on whether the proceeds from the sale are greater or less than the cost of the option. If the Fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium originally paid. The risk associated with purchasing options is limited to the premium originally paid. When the Fund writes an option, the premium received by the Fund is presented in the Fund's Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently "marked to market" to reflect the current market value of the option written. Written options are valued at the last sale price or, in the absence of NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued a sale, the last offering price on the market on which they are principally traded. If an option expires on its stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security which the Fund purchases upon exercise of the option. The risk in writing a call option is that the Fund relinquishes the opportunity to profit if the market price of the underlying security increases and the option is exercised. In writing a put option, the Fund assumes the risk of incurring a loss if the market price of the underlying security decreases and the option is exercised. In addition, there is a risk the Fund may not be able to enter into a closing transaction because of an illiquid secondary market, or if the counterparties do not preform under the contracts' terms. As of June 30, 2004, the Fund had open written options as follows:
Open Contracts Strike Price Expiration Month Market Value --------- ------------ ---------------- ------------ OTC EWPO 3ML 6.0 (Put) 2,000 6.0 October04 $ (1) OTC EWCO 3ML 3.8 (Call) 2,000 3.8 October04 (1) OTC EWPO 3ML 5.5 (Put) 2,100 5.5 October04 (19) OTC EWCO 3ML 3.75 (Call) 3,800 3.75 October04 -- ---- $(21) ====
Swap Agreements: The Fund may invest in swap agreements which involve the exchange of cash payments based on the specified terms and conditions of such agreements. A swap is an agreement to exchange the return generated by one investment for the return generated by another instrument. The value of each swap is determined by the counterparty to the swap agreement using a methodology which discounts the expected future cash receipts or disbursements related to the swap. The Fund may also enter into interest rate swap agreements which involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, (e.g., an exchange of floating rate payments with respect to a notional amount of principal). Interest rate swaps are "marked-to-market" daily. Net market value is reported as an asset or a liability in the Statement of Assets and Liabilities. The cash paid or received on a swap is recognized as income or expense when such a payment is paid or received. Entering into swap agreements involves, to varying degrees, elements of credit risk, market risk and interest rate risk in excess of the amount recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there is not a liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in market conditions or interest rates. Swap agreements which were open for the period ended June 30, 2004 are summarized as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Net Unrealized Appreciation Par Value Interest Rate Swaps: Counter Party (Depreciation) --------- -------------------- -------------- -------------- 9,000 To make or receive semi-annual pay- Morgan Stanley $(266) ments through 12/15/2009 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 400 To make or receive semi-annual pay- Bank of (12) ments through 12/15/2009 based on the America difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 3,500 To make or receive semi-annual pay- Barclays (45) (EURO) ments through 6/17/2010 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months. 300 To make or receive semi-annual pay- Bank of 8 ments through 12/15/2014 based on the America difference between (A) the fixed rate of 5.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 2,600 To make or receive semi-annual pay- JP Morgan 67 ments through 12/15/2014 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 6 Month LIBOR, adjusted every 3months. 3,800 To make or receive semi-annual pay- UBS 55 (GBP) ments through 3/20/2018 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 6 Month LIBOR, adjusted every 6 months. 4,700 To make or receive semi-annual pay- UBS 70 (EURO) ments through 3/20/2018 based on the difference between (A) the fixed rate of 6.00% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months.
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Net Unrealized Appreciation Par Value Credit Default Swaps: Counter Party (Depreciation) --------- ----------------------------------- ------------- -------------- 200 To make annual fixed coupon Merrill Lynch $ -- payments through 3/09/2005 based on the annual fixed rate of 0.97%. In the event of a predefined "credit event notice" of the Russian Federation 5.0%, 3/31/2030 Note, the Fund will receive amounts specified under the terms of the swap agreement. ----- $(123) ===== Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had no capital loss carryforwards on a tax basis to be applied against any future taxable gains. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred approximately $31 in net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending on December 31, 2004. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 11, 2004, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued Between $250 Million and Excess Over First $250 Million $500 Million $500 Million ------------------ ---------------- ------------ 0.70% 0.68% 0.65% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the period ended June 30, 2004, there were no reimbursements paid to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Pacific Investment Management Company, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the period ended June 30, 2004 were as follows: Purchases Sales and Maturities --------- -------------------- $171,383 $160,956 As of June 30, 2004, transactions for written options were as follows: Contracts Premium ($) --------- ----------- Beginning of period 4,000 35 Options opened 5,900 42 Options closed/expired -- -- ----- --- End of period 9,900 77 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: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $46,768 $11,317 $(11,064) $253 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss and sales of certain foreign currency denominated debt securities. Additionally, as a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $3 $-- $-- $253 In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $573 $-- $-- NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION Beginning in August 2004, information regarding how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, 2004, will be available on the SEC's website at http://www.sec.gov. To obtain a written copy without charge, call us toll free at 1-800-576-2227. BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 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
Position with Principal Occupation(s) Name, Address and Age the Trust During Past Five Years --------------------- ------------- ----------------------- Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana- c/o John Hancock Variable Series (Since 1993) 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 (Since 1999) 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 (Since 1999) 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 (Since 2001) 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 (UNAUDITED) June 30, 2004 -------------------------------------------------------------------------------- Trustees Affiliated with the Trust and Officers of the Trust
Position with Principal Occupation(s) Name, Address and Age the Trust During Past Five Years --------------------- ------------- ----------------------- Michele G. Van Leer* (age 46) Chairman and Executive Vice President, Long John Hancock Place Trustee Term Care, John Hancock Life Boston, Massachusetts 02117 (Since 1998) Insurance Company; Senior Vice President, Product Management, John Hancock Life Insurance Company; Vice Chairman, President & Director, John Hancock Variable Life Insurance Company Ronald J. Bocage (age 58) Chief Legal Vice President & Counsel, John John Hancock Place Officer Hancock Life Insurance Company Boston, Massachusetts 02117 (Since 2003) Jude A. Curtis (age 45) Compliance Vice President and Chief Investment John Hancock Place Officer Compliance Officer, John Hancock Boston, Massachusetts 02117 (Since 2000) Life Insurance Company; formerly Second Vice President and Counsel, Office of Business Conduct; John Hancock Life Insurance Company; formerly a Partner at Hale and Dorr LLP (law firm) Janet Wang (age 35) Assistant Compliance Specialist, John John Hancock Place Compliance Officer Hancock Life Insurance Company Boston, Massachusetts 02117 (Since 2003) Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John John Hancock Place (Since 1986) Hancock Life Insurance Company Boston, Massachusetts 02117 Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John John Hancock Place (Since 2003) Hancock Life Insurance Company Boston, Massachusetts 02117 Karen Q. Visconti (age 50) Secretary Director, Product & Market John Hancock Place (Since 1999) Management, John Hancock Life Boston, Massachusetts 02117 Insurance Company Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department, John Hancock Place (Since 1999) 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. This page intentionally left blank This page intentionally left blank [LOGO] John Hancock. WORLDWIDE SPONSOR 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. The investment adviser for each fund is John Hancock Life Insurance Company, but the Trust employs a subadviser for each fund. The subadvisers are identified in the reports contained in this booklet. 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. Read the prospectus carefully before investing or sending money. 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. [LOGO] IMSA INSURANCE MARKET PLACE STANDARDS ASSOCIATION ITEM 2. CODE OF ETHICS Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) Internal Controls. There were no significant changes in Registrant's internal controls or in other factors that could significantly affect these actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Not applicable. (b) Section 302 Certifications. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. John Hancock Variable Series Trust I (Registrant) By: /s/ MICHELE G. VAN LEER ----------------------------------- Michele G. Van Leer Chairman Date: August 13, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. John Hancock Variable Series Trust I (Registrant) By: /s/ MICHELE G. VAN LEER ----------------------------------- Michele G. Van Leer Chairman Date: August 13, 2004 By: /s/ RAYMOND F. SKIBA ----------------------------------- Raymond F. Skiba Treasurer Date: August 13, 2004