-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DU+SXpYcojgFzWS8rhBl1yLDvy6ZBEnMmi7wIn0O0u2jEl/06yoBxELOXi/rmRWa GaYNpHrdG0KLzf+tUuRa3w== 0001193125-05-045466.txt : 20050309 0001193125-05-045466.hdr.sgml : 20050309 20050309152031 ACCESSION NUMBER: 0001193125-05-045466 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050309 DATE AS OF CHANGE: 20050309 EFFECTIVENESS DATE: 20050309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN VARIABLE SERIES TRUST I CENTRAL INDEX KEY: 0000785303 IRS NUMBER: 042889957 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04490 FILM NUMBER: 05669269 BUSINESS ADDRESS: STREET 1: 200 CLARENDON ST STREET 2: P O BOX 111 CITY: BOSTON STATE: MA ZIP: 02117-0111 BUSINESS PHONE: 6175729687 MAIL ADDRESS: STREET 1: 200 CLARENDON ST STREET 2: PO BOX 111 CITY: BOSTON STATE: MA ZIP: 02117-0111 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN VARIABLE SERIES FUND I INC DATE OF NAME CHANGE: 19880502 N-CSR 1 dncsr.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: 12/31/2004 ITEM 1. REPORTS TO STOCKHOLDERS. Annual Report for John Hancock Variable Series Trust I December 31, 2004 Not FDIC Insured Not Bank Guaranteed May Lose Value Not a Deposit Not Insured by Any Federal Government Agency [LOGO] John Hancock 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. .. John Hancock Advisers, LLC uses proprietary research to identify undervalued sectors and securities with an emphasis on U.S. credit sectors including high yield. .. Declaration Management & Research, LLC 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 LLC 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. Fund Commentary Overall Performance: For the year 2004, the Active Bond Fund returned +4.75%, outperforming the +4.34% return of the Lehman Aggregate Bond Index. John Hancock Advisers, LLC Environment: Outperformance can be primarily attributed to the portfolio's overweighting in spread product and underweighting in Treasuries relative to the index. The portfolio's bias toward corporate bonds, both investment grade and non-investment grade, and mortgage-backed securities helped relative performance. Outlook: We anticipate the Federal Reserve Board will continue raising interest rates during the first half of 2005. Expecting rising interest rates and a flatter yield curve, we anticipate maintaining portfolio durations below their respective benchmarks and positioning the maturity structure to benefit from the flattening. We will continue to upgrade the credit quality of the portfolio, focusing on crossover credits where we anticipate a ratings migration up to investment grade. We expect to increase our use of floating rate notes as both a defensive credit play and for yield curve positioning. We are positive on private label AAA Hybrid Adjustable Rate Mortgages as they offer a significant yield advantage for a high quality asset. We are currently adding TIPs, as breakeven spreads between nominals have narrowed. Declaration Management & Research, LLC Environment: Corporate bonds were the best performers. The portfolio remained overweight in corporate credit, and benefited from having a high concentration in lower rated bonds. Larger weightings in media/cable, telecommunications, energy, utilities and consumer cyclicals added to performance. Asset Backed Securities and Commercial Mortgage Backed Securities had strong performance. We remained overweight and benefited from owning a higher concentration of home equity bonds. Outlook: The economy is poised for gradual growth, but there are lingering issues. The Fed is still in tightening mode. Oil prices remain high, but so far this has been moderately absorbed by consumers and some industries. The falling dollar remains a concern. Interest rates will probably trend higher. Corporate bonds should still benefit from improving fundamentals and positive technicals, but profit taking could lead to short-term spread widening. The mortgage market looks relatively expensive and unattractive. Pacific Investment Management Company LLC Environment: For the year, bonds displayed unexpected returns, as all fixed income sectors showed gains. The yield on the 10-year Treasury note fell by 3 basis points, to 4.22% by the end of the year. The Lehman Brothers Aggregate Bond Index, a widely used index for the high-grade bond market, returned 4.34 percent for the year despite several major headwinds; which included expanding U.S. fiscal deficits, a falling U.S. dollar and market perceptions, as the year began, that interest rates were bound to rise from levels near historic lows. 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 - -------------------------------------------------------------------------------- Besides these headwinds, fixed income markets had to weather a tightening cycle by the Federal Reserve that began in June. The central bank raised the federal funds rate five times during the year for a total of 125 basis points. The latest move came on December 14, when the Fed hiked rates by 25 basis points to 2.25 percent. Despite this tightening cycle, bond investors were encouraged by statements from the Fed that it would continue to move at a measured pace. Investors also understood that the Fed was lifting rates from unusually low levels that had been set to ward off deflation. Outlook: Global growth should slow this year as the U.S. recovery cools and Europe and Japan prove unable to pick up the slack. Higher unit labor costs and a weaker dollar should create inflationary pressure, but lingering overcapacity worldwide may limit this effect over a cyclical time frame. The yield on the benchmark 10-year Treasury should range between 4 and 4 1/2%, with the risk of a 25 basis point breakout on the high side. We should remain defensive and look for value in an environment where interest rates are low and core bond sectors have continued to richen. Tactical flexibility will be critical in this setting, such as shifting between U.S. and non-U.S. bonds or between market sub-sectors within the U.S. [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (10-Year Period) Lehman Brothers Active Bond Fund Aggregate Bond Index ---------------- -------------------- Dec-94 $10,000 $1,0000 Jan-95 10,190 10,198 Feb-95 10,434 10,441 Mar-95 10,515 10,504 Apr-95 10,668 10,651 May-95 11,126 11,064 Jun-95 11,221 11,144 Jul-95 11,173 11,120 Aug-95 11,302 11,254 Sep-95 11,416 11,364 Oct-95 11,602 11,511 Nov-95 11,775 11,684 Dec-95 11,954 11,848 Jan-96 12,025 11,926 Feb-96 11,793 11,718 Mar-96 11,722 11,636 Apr-96 11,663 11,571 May-96 11,660 11,548 Jun-96 11,778 11,703 Jul-96 11,816 11,734 Aug-96 11,824 11,714 Sep-96 12,038 11,918 Oct-96 12,294 12,183 Nov-96 12,487 12,391 Dec-96 12,445 12,276 Jan-97 12,491 12,314 Feb-97 12,550 12,345 Mar-97 12,418 12,208 Apr-97 12,587 12,391 May-97 12,729 12,509 Jun-97 12,895 12,657 Jul-97 13,282 12,999 Aug-97 13,152 12,889 Sep-97 13,365 13,079 Oct-97 13,480 13,269 Nov-97 13,555 13,330 Dec-97 13,703 13,465 Jan-98 13,891 13,637 Feb-98 13,879 13,626 Mar-98 13,958 13,672 Apr-98 14,026 13,744 May-98 14,151 13,874 Jun-98 14,286 13,992 Jul-98 14,313 14,021 Aug-98 14,454 14,250 Sep-98 14,785 14,583 Oct-98 14,647 14,506 Nov-98 14,788 14,589 Dec-98 14,831 14,633 Jan-99 14,967 14,736 Feb-99 14,661 14,479 Mar-99 14,765 14,558 Apr-99 14,811 14,605 May-99 14,651 14,476 Jun-99 14,615 14,430 Jul-99 14,585 14,369 Aug-99 14,556 14,362 Sep-99 14,686 14,529 Oct-99 14,716 14,583 Nov-99 14,768 14,581 Dec-99 14,692 14,511 Jan-00 14,630 14,463 Feb-00 14,795 14,638 Mar-00 14,944 14,831 Apr-00 14,887 14,788 May-00 14,874 14,781 Jun-00 15,186 15,088 Jul-00 15,307 15,226 Aug-00 15,540 15,447 Sep-00 15,627 15,544 Oct-00 15,710 15,646 Nov-00 15,919 15,903 Dec-00 16,227 16,199 Jan-01 16,493 16,463 Feb-01 16,630 16,606 Mar-01 16,707 16,689 Apr-01 16,648 16,619 May-01 16,763 16,719 Jun-01 16,815 16,782 Jul-01 17,195 17,158 Aug-01 17,368 17,356 Sep-01 17,364 17,557 Oct-01 17,690 17,924 Nov-01 17,555 17,676 Dec-01 17,441 17,563 Jan-02 17,552 17,706 Feb-02 17,661 17,877 Mar-02 17,436 17,581 Apr-02 17,715 17,922 May-02 17,820 18,074 Jun-02 17,763 18,231 Jul-02 17,732 18,452 Aug-02 18,073 18,764 Sep-02 18,300 19,068 Oct-02 18,163 18,980 Nov-02 18,329 18,974 Dec-02 18,706 19,367 Jan-03 18,763 19,384 Feb-03 19,049 19,652 Mar-03 19,106 19,636 Apr-03 19,354 19,799 May-03 19,697 20,167 Jun-03 19,717 20,127 Jul-03 19,048 19,451 Aug-03 19,191 19,579 Sep-03 19,751 20,098 Oct-03 19,628 19,911 Nov-03 19,714 19,959 Dec-03 19,917 20,162 Jan-04 20,100 20,324 Feb-04 20,291 20,543 Mar-04 20,462 20,697 Apr-04 19,983 20,159 May-04 19,869 20,079 Jun-04 19,958 20,193 Jul-04 20,168 20,393 Aug-04 20,538 20,782 Sep-04 20,583 20,839 Oct-04 20,769 21,014 Nov-04 20,694 20,846 Dec-04 20,870 21,037 Value on 12/31/04: - ------------------ $20,870 Active Bond Fund $21,037 Lehman Brothers Aggregate Bond Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Federal National Mortgage Assoc. 22.0% U.S. Treasury 12.0% Federal Home Loan Mortgage Corp. 8.7% Government National Mortgage Assoc. 5.2% CWMBS, Inc. 3.4% Bear Stearns 2.5% Federal Home Loan Bank 1.2% Bank America Funding Corp. 1.1% Credit Suisse First Boston 0.9% Deutsche Telekom International 0.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Lehman Brothers Active Bond Aggregate Bond Fund Index ----------- --------------- 1 Year 4.75% 4.34% 3 Years 6.17 6.20 5 Years 7.27 7.71 10 Years 7.63 7.72 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 48.92% AAA 17.30% AA 1.31% A 6.51% BBB 18.50% BB 6.25% B 1.26% Below B 0.35% Not rated -0.39% Weighted Average Yield 4.61% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. 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 - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As an Active Bond Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,045.70 Expense paid per $1,000* $ 3.60 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,021.61 Expense paid per $1,000* $ 3.56 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $101,608 of securities loaned (Note B)) .............................................. $ 958,946 Net unrealized appreciation of investments ....................... 13,517 Short-term investments at value .................................. 180,377 ---------- Total investments .......................................... 1,152,840 Cash ............................................................. 322 Receivable for: Investments sold .............................................. 39,427 Interest ...................................................... 9,216 Unrealized appreciation in forward currency contracts ......... 334 Other receivables ............................................. 57 ---------- Total assets ..................................................... 1,202,196 ---------- LIABILITIES Payables for: Investments purchased ......................................... 94,191 Fund shares purchased ......................................... 80 Net payable for swap contracts ................................ 1,725 Accrued operating expenses .................................... 367 Collateral for securities on loan ............................. 103,372 Unrealized depreciation in forward currency contracts ......... 74 Other payables ................................................ 3 ---------- Total liabilities ................................................ 199,812 ---------- Net assets ....................................................... $1,002,384 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ............................................ 104,070 ---------- Net asset value per share ........................................ $ 9.63 ========== Composition of net assets: Capital paid-in ............................................... $ 991,201 Accumulated net realized loss on investments, swaps, options and foreign currency transactions .......................... (2,445) Undistributed net investment income .............................. 1,515 Net unrealized appreciation (depreciation) of: Investments ................................................... 13,517 Swap contracts ................................................ (1,725) Translation of assets and liabilities in foreign currencies ... 321 ---------- Net assets ....................................................... $1,002,384 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $42,969 Dividends ........................................................ 470 Securities lending ............................................... 88 ------- Total investment income ............................................. 43,527 ======= EXPENSES Investment advisory fee .......................................... 6,246 Auditors fees .................................................... 136 Custodian fees ................................................... 378 Fidelity bond fees ............................................... 2 Legal fees ....................................................... 176 Printing & mailing fees .......................................... 119 Trustees' fees ................................................... 32 Other fees ....................................................... 32 ------- Total expenses ...................................................... 7,121 ------- Net investment income ............................................... 36,406 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments and swaps ......................................... 22,158 Foreign currency transactions ................................. (3,216) Options ....................................................... 684 Change in unrealized appreciation (depreciation) on: Investments ................................................... (8,427) Written options ............................................... (29) Swap contracts ................................................ (1,178) Translation of assets and liabilities in foreign currencies ................................................. 1,058 ------- Net realized and unrealized gain .................................... 11,050 ------- Net increase in net assets resulting from operations ................ $47,456 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Active Bond Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 36,406 $ 46,509 Net realized gain ......................................... 19,626 25,335 Change in net unrealized depreciation ..................... (8,576) (4,192) ---------- ---------- Net increase in net assets resulting from operations ... 47,456 67,652 Distributions to shareholders from: Net investment income ..................................... (34,958) (46,318) Realized gains ............................................ (13,106) (25,718) ---------- ---------- Decrease in net assets resulting from distributions .... (48,064) (72,036) From fund share transactions: Proceeds from shares sold ................................. 95,482 111,060 Shares issued in reorganization ........................... 83,358 Distributions reinvested .................................. 48,064 72,036 Payment for shares redeemed ............................... (196,163) (193,915) ---------- ---------- Increase (decrease) in net assets from fund share transactions ..................................... (52,617) 72,539 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS ........................ (53,225) 68,155 NET ASSETS Beginning of Period ....................................... 1,055,609 987,454 ---------- ---------- End of Period (including undistributed net investment income of $1,515 and $0, respectively) ................. $1,002,384 $1,055,609 ========== ========== Analysis of fund share transactions: Sold ...................................................... 9,860 11,585 Issued in reorganization .................................. 8,433 Reinvested ................................................ 4,982 7,389 Redeemed .................................................. (20,273) (19,743) ---------- ---------- Net increase (decrease) in fund shares outstanding ........... (5,431) 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 year end indicated:
Active Bond Fund -------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------- 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 ....................... 0.34 0.43 0.50 0.58 0.64 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................ 0.11 0.18 0.18 0.11 0.28 ---------- ---------- -------- -------- -------- Total From Investment Operations ............ 0.45 0.61 0.68 0.69 0.92 Less Distributions: Distribution from Net Investment Income ..... (0.34) (0.43) (0.53) (0.58) (0.60) Distribution from Net Realized Gains on Investments .............................. (0.12) (0.24) ---------- ---------- -------- -------- -------- Total Distributions ......................... (0.46) (0.67) (0.53) (0.58) (0.60) Capital Contributions ....................... ---------- ---------- -------- -------- -------- Net Assets Value at End of Period .............. $ 9.63 $ 9.64 $ 9.70 $ 9.55 $ 9.44 ========== ========== ======== ======== ======== Total Investment Return(b) ..................... 4.75% 6.48% 7.25% 7.48% 10.45% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................... 0.70% 0.70% 0.69% 0.67% 0.41%(d) Ratio of Net Investment Income to Average Net Assets ................................... 3.56% 4.42% 5.24% 5.97%(e) 6.98% Portfolio Turnover Rate ..................... 444.29% 465.90%(c) 290.73% 206.80%(c) 224.24% Net Assets End of Period (000s Omitted) ........ $1,002,384 $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. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND ** Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.1% Bombadier, Inc. - Notes 144A (a) # 6.3% due 05/01/14 - BB ............................... $ 533 $ 462 Bombardier, Inc. - 144A (a) 6.75% due 05/01/12 - BB .............................. 575 522 Jet Equipment Trust - Notes * (c) 10.91% due 08/15/14 - BBB ............................ 2,100 0 ------- 984 Air Freight & Couriers - 0.1% CNF, Inc. - Sr. Debs 6.7% due 05/01/34 - BBB- ............................. 555 591 Airlines - 0.2% American Airlines, Inc. - Ser. 2001-2 Cl. A2 7.858% due 10/01/11 - A- ............................. 820 847 Continental Airlines - CTF Ser. 1999-1 Cl. A 6.545% due 02/02/19 - A- ............................. 1,071 1,064 Northwest Airlines Corp. - Ser. 1996-1 8.97% due 01/02/15 - CCC+ ............................ 167 113 ------- 2,024 Auto Components - 0.0% Motor Gaming Group, Inc. - Sr. Notes 9.75% due 04/01/10 - B+ .............................. 315 346 Auto Loan - 1.4% Ford Motor Credit Co. - Bonds 7.75% due 03/15/05 - BBB- ............................ 1,330 1,343 Ford Motor Credit Co. - Global Notes 3.24% due 11/16/06 - BBB- ............................ 1,885 1,883 Ford Motor Credit Co. - Notes 6.875% due 02/01/06 - BBB- ........................... 2,480 2,555 7.375% due 10/28/09 - BBB- ........................... 1,691 1,824 General Motors Acceptance Corp. 2.53% due 04/13/06 - BBB- ............................ 2,800 2,790 6.875% due 08/28/12 - BBB- ........................... 590 602 7.5% due 07/15/05 - BBB- ............................. 500 510 General Motors Acceptance Corp. 1.995% due 05/18/06 - BBB- ........................... 1,900 1,891 General Motors Acceptance Corp. - Bonds 7.25% due 03/02/11 - BBB- ............................ 430 450 General Motors Acceptance Corp. - Sr. Notes 5.625% due 05/15/09 - BBB- ........................... 365 365 ------- 14,213 Automobiles - 0.6% Daimler Chrysler NA Holding Corp. - Sr. Notes 6.5% due 11/15/13 - BBB .............................. 500 542 DaimlerChrysler NA 1.87% due 05/24/06 - BBB ............................. 2,020 2,030 General Motors Corp. - Sr. Debs. # 8.375% due 07/15/33 - BBB- ........................... $1,499 $ 1,553 Hertz Corp. - Notes 7.625% due 06/01/12 - BBB- ........................... 775 849 Hertz Corp. - Sr. Notes 4.7% due 10/02/06 - BBB- ............................. 920 930 ------- 5,904 Banks - 3.7% Banc America Mortgage Securities, Inc. - Ser. 2004-2 Cl. 5A1 6.5% due 10/25/19 - AAA .............................. 1,866 1,885 Banc America Mortgage Securities, Inc. - Ser. 2004-D Cl. 2A1 3.649% due 05/25/34 - AAA ............................ 1,766 1,735 Banco Santander Chile - Sr. Notes 144A (a) 2.8% due 12/09/09 - A ................................ 930 931 Bank of New York Institution Capital - Notes 144A (a) 7.78% due 12/01/26 - A- .............................. 2,550 2,779 Bank One Corp. - Notes 6.5% due 02/01/06 - A+ ............................... 700 724 Barclays Bank plc - Notes 144A (a) 6.86% due 06/15/32 - NA .............................. 1,800 2,024 Central American Bank - 144A (a) 6.75% due 04/15/13 - BBB- ............................ 650 718 Colonial Bank Montgomery - Sub. Notes 9.375% due 06/01/11 - BBB- ........................... 1,120 1,329 Corporacion Andina De Fomento - Notes 5.2% due 05/21/13 - A ................................ 750 764 Credit Suisse First Boston - CTF Cl. 2A1 4.671% due 09/25/34 - AAA ............................ 7,439 7,427 Credit Suisse First Boston - Ser. 2003-C3 Cl. F 144A (a) 4.518% due 05/15/38 - BBB+ ........................... 1,190 1,135 Credit Suisse First Boston - Sr. Notes 4.625% due 01/15/08 - A+ ............................. 451 462 CS First Boston Mortgage Securities Corp. - Notes 6.26% due 04/11/30 - AAA ............................. 454 461 Dresdner Bank AG - Sub. Notes 7.25% due 09/15/15 - A- .............................. 600 701 FleetBoston Financial Corp. - Sr. Notes 4.875% due 12/01/06 - A+ ............................. 715 734 HSBC Bank USA 5.875% due 11/01/34 - A+ ............................. 535 542 JP Morgan Chase & Co. - Global Notes 5.125% due 09/15/14 - A .............................. 765 770 JP Morgan Chase & Co. - Sub. Notes 6.75% due 02/01/11 - A ............................... 940 1,056 Key Bank NA 5.8% due 07/01/14 - A- ............................... 680 720 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Banks - Continued NB Capital Trust IV 8.25% due 04/15/27 - A-............................... $ 930 $ 1,035 Popular North America, Inc. 6.125% due 10/15/06 - BBB+............................ 730 761 Popular North America, Inc. 4.7% due 06/30/09 - BBB+.............................. 610 622 Royal Bank of Scotland plc - Notes 7.648% due 08/31/49 - A............................... 2,220 2,703 Wachovia Bank Commercial Mortgage Trust - Ser. 2004 C10 Cl A3 4.39% due 02/15/36 - AAA.............................. 2,000 1,987 Wachovia Bank Commercial Trust - Ser. 2003-C8 Cl. F 144A (a) 5.031% due 11/15/35 - BBB+............................ 600 605 Wachovia Corp. - Sub Notes 5.25% due 08/01/14 - A-............................... 910 933 Westpac Capital Trust III - 144A (a) 5.819% due 12/29/49 - NA.............................. 760 797 Zions Financial Corp. - Notes 6.95% due 05/15/11 - BBB-............................. 656 683 ------- 37,023 Beverages - 0.1% Anheuser Busch Cos., Inc. - Debs. 6.5% due 02/01/43 - A+................................ 550 627 Commonwealth Brands, Inc. - 144A (a) 10.625% due 09/01/08 - B-............................. 365 383 PanAmerican Beverages, Inc. - Sr. Notes Ser. A 7.25% due 07/01/09 - BBB.............................. 430 478 ------- 1,488 CMBS - 0.1% JP Morgan Chase & Co. Commercial Mortgage Securities - Ser. 2004 FL1 A1 144A (a) 1.71% due 04/16/19 - AAA.............................. 946 947 Commercial Services & Supplies - 0.8% Allied Waste North America - Notes 10.0% due 08/01/09 - B+............................... 940 988 Cendant Corp. - Notes 6.25% due 01/15/08 - BBB.............................. 1,260 1,345 6.875% due 08/15/06 - BBB............................. 1,280 1,347 Cendant Corp. - Sr. Notes 6.25% due 03/15/10 - BBB.............................. 500 541 7.125% due 03/15/15 - BBB............................. 268 306 D.R. Horton, Inc. - Notes 5.625% due 09/15/14 - BB+............................. 475 473 RPM International, Inc. - Sr. Notes 6.25% due 12/15/13 - BBB.............................. 905 941 Sotheby's Holdings, Inc. - Notes 6.875% due 02/01/09 - BB-............................. 420 423 Teppco Partners - GTD. Sr. Notes 7.625% due 02/15/12 - BBB............................. 615 710 Trinity Indiana Leasing Co. - 144A (a) 7.755% due 02/15/09 - NA ............................. $ 820 $ 873 ------- 7,947 Communications Equipment - 0.1% Corning, Inc. - Notes 6.3% due 03/01/09 - BB+............................... 460 483 8.3% due 04/04/25 - BB+............................... 775 815 ------- 1,298 Computers & Peripherals - 0.1% NCR Corp. - Sr. Notes 7.125% due 06/15/09 - BBB-............................ 515 569 Construction & Engineering - 0.1% K Hovnanian Enterprises, Inc. - Gtd Sr. Notes 144A (a) 6.25% due 01/15/15 - NA............................... 700 691 KB Home - Sr. Notes 5.75% due 02/01/14 - BB+.............................. 605 601 ------- 1,292 Containers & Packaging - 0.2% BWAY Corp. - Sr. Sub. Notes 10.0% due 10/15/10 - B-............................... 355 380 Owens Brockway Glass Container - Sr. Notes 8.75% due 11/15/12 - BB-.............................. 380 430 Stone Container Corp. - Sr. Notes 8.375% due 07/01/12 - B............................... 790 859 9.75% due 02/01/11 - B................................ 625 685 ------- 2,354 Credit Card - 0.9% Citibank Credit Card Issuance Trust - Notes 4.45% due 04/07/10 - BBB.............................. 2,400 2,428 MBNA Asset Backed Note Trust - Notes 144A (a) 6.65% due 08/15/11 - BBB.............................. 600 651 MBNA Asset Backed Note Trust - Notes Ser. 1998-E 144A (a) 6.6% due 09/15/10 - BBB............................... 1,115 1,196 Midland Funding Corp. II - Bonds Ser. A 11.75% due 07/23/05 - BB-............................. 2,538 2,665 Midland Funding Corp. II - Notes 13.25% due 07/23/06 - BB-............................. 825 907 Sears Credit Account Master Trust II -Ser. 2002-5 Cl. A 2.14% due 11/17/09 - AAA.............................. 1,200 1,201 ------- 9,048 Diversified Financials - 2.8% AXA Financial, Inc. - Sr. Notes 7.75% due 08/01/10 - A................................ 543 633 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Financials - Continued Bear Stearns & Co., Inc. - Notes 5.7% due 11/15/14 - A................................. $1,000 $ 1,056 Capital One Financial Corp. - Notes 7.25% due 05/01/06 - BBB-............................. 515 539 CIT Group, Inc. 1.48% due 05/18/07 - A................................ 445 445 CIT Group, Inc. - Sr. Notes 5.0% due 02/13/14 - A................................. 1,030 1,028 Citigroup, Inc. - Sub. Notes 5.625% due 08/27/12 - A+.............................. 1,000 1,065 6.0% due 10/31/33 - A+................................ 1,475 1,527 Deutsche Mortgage & Asset Receiving Corp. - Notes 6.861% due 03/15/08 - NA.............................. 1,855 2,011 ERAC USA Finance Co. - Notes 144A (a) 7.95% due 12/15/09 - BBB+............................. 1,130 1,312 General Electric Capital Corp. 2.97% due 07/26/06 - AAA.............................. 800 797 Goldman Sachs Group, Inc. - Sr. Notes 5.25% due 04/01/13 - A+............................... 1,175 1,205 Hartford Financial Services Group, Inc. - Sr. Notes 4.625% due 07/15/13 - A-.............................. 425 412 Hyatt Equities LC - Notes 144A (a) 6.875% due 06/15/07 - BBB............................. 2,035 2,141 Merrill Lynch & Co, Inc. 5.0% due 01/15/15 - A+................................ 905 902 Morgan Stanley - Sub. Notes 4.75% due 04/01/14 - A................................ 770 750 Morgan Stanley & Co., Inc. - Notes # 4.25% due 05/15/10 - A+............................... 1,665 1,665 Morgan Stanley Capital, Inc. - Ser. 2004 TP13 Cl. A2 3.94% due 09/13/45 - NA............................... 1,375 1,357 Morgan Stanley Dean Witter Capital - Ser. 2001 Cl. A1 4.57% due 12/18/32 - NA............................... 1,263 1,274 Newcourt Credit Group, Inc. - Notes Sr. B 6.875% due 02/16/05 - A............................... 1,455 1,462 Pemex Project Funding Trust - Notes 9.125% due 10/13/10 - BBB-............................ 2,510 3,006 Qwest Captial Funding, Inc. - Notes 7.75% due 08/15/06 - B................................ 955 1,005 TFM SA de CV - Sr. Disc. Debs. 11.75% due 06/15/09 - B............................... 555 564 URC Holdings Corp. - Sr. Notes 144A (a) 7.875% due 06/30/06 - AA-............................. 1,600 1,702 ------- 27,858 Diversified Telecommunication Services - 2.6% AT&T Broadband Corp. - Notes 8.375% due 03/15/13 - BBB............................. 1,199 1,479 AT&T Corp. - Sr. Notes 7.8% due 11/15/11 - BB+............................... $1,060 $ 1,220 Bellsouth Corp. - Notes 5.2% due 09/15/14 - A................................. 260 265 Deutsche Telekom International - Notes 8.5% due 06/15/10 - BBB+.............................. 1,120 1,334 France Telecom 8.25% due 03/14/08 - BBB+............................. 1,700 2,577 France Telecom SA - Notes 8.7% due 03/01/06 - BBB+.............................. 450 472 9.25% due 03/01/11 - BBB+............................. 2,540 3,030 10.0% due 03/01/31 - BBB+............................. 319 432 Innova S DE R.L. 9.375% due 09/19/13 - B+.............................. 485 552 Innova S DE R.L. - Notes # 12.875% due 04/01/07 - B+............................. 285 285 Qwest Corp. - Notes 144A (a) 8.875% due 03/15/12 - BB-............................. 625 722 SBC Communications, Inc. - Notes 5.1% due 09/15/14 - A................................. 570 575 6.15% due 09/15/34 - A................................ 255 263 SBC Communications, Inc. Global Notes 6.45% due 06/15/34 - A................................ 780 836 Sprint Capital Corp. 6.875% due 11/15/28 - BBB-............................ 530 580 Sprint Capital Corp. - Notes 7.125% due 01/30/06 - BBB-............................ 2,380 2,475 8.75% due 03/15/32 - BBB-............................. 346 461 Sprint Capital Corp. - Notes 6.125% due 11/15/08 - BBB-............................ 854 916 Tele-Communications, Inc. 9.8% due 02/01/12 - BBB............................... 465 599 Telecom De Puerto Rico, Inc. - Sr. Notes 6.65% due 05/15/06 - BBB+............................. 1,445 1,499 Telefonosde Mexico - Sr. Notes 8.25% due 01/26/06 - BBB-............................. 3,184 3,343 Verizon Pennsylvania, Inc. - Debs. Ser. A 5.65% due 11/15/11 - A+............................... 1,800 1,895 ------- 25,810 Electric Utilities - 1.2% American Electric Power ,Inc. - Sr. Notes Ser. D 5.25% due 06/01/15 - BBB.............................. 550 555 DTE Energy Co. - Notes 6.45% due 06/01/06 - BBB-............................. 875 911 Empresa Electrica Guacolda SA - Notes 144A (a) 8.625% due 04/30/13 - BBB-............................ 574 655 Empresa Nacional De Electricid - Notes 8.35% due 08/01/13 - BBB-............................. 1,015 1,176 Enersis SA - Notes 7.375% due 01/15/14 - BB+............................. 645 705 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- -------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electric Utilities - Continued FirstEnergy Corp. - Notes Ser. B 6.45% due 11/15/11 - BB+ ........................... $ 490 $ 532 FirstEnergy Corp. - Notes Ser. C 7.375% due 11/15/31 - BB+ .......................... 292 333 Pepco Holdings, Inc. - Notes 3.75% due 02/15/06 - BBB ........................... 1,030 1,035 Progress Energy, Inc. - Sr. Notes 6.75% due 03/01/06 - BBB- .......................... 1,637 1,699 Progress Energy, Inc. - Sr. Notes 7.0% due 10/30/31 - BBB- ........................... 325 360 Public Service Co. New Mexico - Sr. Unsec. Notes 4.4% due 09/15/08 - BBB ............................ 680 686 TXU Australia Holdings, Ltd. - GTD Sr. Notes 144A (a) 6.15% due 11/15/13 - A- ............................ 814 879 TXU Australia Holdings, Ltd. - Sr. Notes 6.75% due 12/01/06 - A- ............................ 455 480 TXU Energy Co. LLC - Sr. Notes 7.0% due 03/15/13 - BBB ............................ 887 991 TXU Energy Co. LLC - Sr. Notes 144A (a) 2.38% due 01/17/06 - BBB ........................... 330 331 Wisconsin Power & Light Co. - Debs. 6.25% due 07/31/34 - BBB+ .......................... 725 774 ------- 12,102 Electric/Gas - 1.6% AES Eastern Energy - Notes 9.0% due 01/02/17 - BB+ ............................ 874 997 EL Paso Electric Co. - Bonds Ser. E 9.4% due 05/01/11 - BBB ............................ 1,225 1,352 Ipalco Enterprises, Inc. - Notes 8.625% due 11/14/11 - BB- .......................... 705 790 Kansas City Power & Light Co. - Sr. Notes Ser. A 6.0% due 03/15/07 - BBB ............................ 585 611 Monterrey Power SA de CV - Sr. Sec. Bonds 144A (a) 9.625% due 11/15/09 - BBB- ......................... 677 799 Noram Energy Corp. - Debs 6.5% due 02/01/08 - BBB ............................ 2,275 2,439 Pacific Gas & Electric Co. 6.05% due 03/01/34 - BBB ........................... 750 779 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 - BBB ........................... 1,375 1,376 PNPP II Funding Corp. - Bonds 9.12% due 05/30/16 - BB+ ........................... 924 1,085 PSEG Energy LLC - Sr. Notes 7.75% due 04/16/07 - BB- ........................... 705 745 PSEG Power LLC - Sr. Notes 6.875% due 04/15/06 - BBB .......................... 857 893 Sempra Energy - Notes 4.75% due 05/15/09 - BBB+ .......................... 445 454 Southern California Edison Co. - Ser. 2004B 6.0% due 01/15/34 - BBB ............................ $ 477 $ 507 TXU Corp. - Sr. Notes Ser. R 144A (a) 6.55% due 11/15/34 - BBB- .......................... 700 693 Waterford 3 Funding - Entergy - Bonds 8.09% due 01/02/17 - BBB- .......................... 2,454 2,715 ------- 16,235 Electrical Equipment - 0.1% HQI Transelec Chile SA - Notes 7.875% due 04/15/11 - A- ........................... 985 1,139 Electronic Equipment & Instruments - 0.1% Ametek, Inc. - Sr. Notes 7.2% due 07/15/08 - BBB ............................ 910 982 Energy Equipment & Services - 0.2% Salton Sea Funding Corp. - Sr. Notes Ser. E 8.3% due 05/30/11 - BB ............................. 469 520 Salton Sea Funding Corp. - Sr. Sec. Bonds. Ser. C 7.84% due 05/30/10 - BB ............................ 1,428 1,518 ------- 2,038 Finance - 5.8% ACE INA Holding, Inc. - GTD. Sr. Notes 5.875% due 06/15/14 - BBB+ ......................... 870 891 AIG SunAmerica Institutional Funding 1.2% due 01/26/05 - AAA ............................ 346,000 3,370 Arch Capital Group, Ltd. - Sr. Notes 7.35% due 05/01/34 - BBB- .......................... 1,215 1,295 Bank America Funding Corp. - Ser. 2004- A Cl. 1A3 5.08% due 09/20/34 - AAA ........................... 10,876 10,834 Beaver Valley Funding Corp. 9.0% due 06/01/17 - BB- ............................ 1,630 1,930 BVPS II Funding Corp. - Bonds 8.89% due 06/01/17 - BB+ ........................... 969 1,143 CNOOC Finance 2003, Ltd. - GTD Notes 144A (a) 5.5% due 05/21/33 - BBB+ ........................... 555 513 Colonial Realty, Ltd. Partnership - Sr. Notes 6.25% due 06/15/14 - BBB- .......................... 565 594 Deutsche Telekom International Finance 6.375% due 07/11/06 - BBB+ ......................... 3,200 4,561 8.75% due 06/15/30 - BBB+ .......................... 2,005 2,647 Doral Financial Corp. - Sr. Notes 2.909% due 07/20/07 - BBB- ......................... 1,580 1,584 Duke Capital LLC. - Sr. Notes 8.0% due 10/01/19 - BBB- ........................... 965 1,178 Duke Capital LLC. - Sr. Notes 6.75% due 02/15/32 - BBB- .......................... 600 653 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued ERAC USA Finance Co. - Gtd. Notes 144A (a) 6.7% due 06/01/34 - BBB+ ............................. $ 300 $ 326 ESI Tractebel Acquisition Corp. - Ser. B 7.99% due 12/30/11 - BB .............................. 125 132 Financing Corp. - Notes 9.4% due 02/08/18 - NA ............................... 420 602 10.35% due 08/03/18 - NA ............................. 3,025 4,639 Fund American Cos, Inc. - GTD Sr. Notes 5.875% due 05/15/13 - BBB- ........................... 723 736 GCIC Funding Corp. - Bonds 144A (a) 5.129% due 01/15/14 - BBB ............................ 1,065 1,066 General Electric Capital Corp. - Notes 6.75% due 03/15/32 - AAA ............................. 740 866 Glencore Funding LLC - Notes 144A (a) 6.0% due 04/15/14 - BBB- ............................. 1,350 1,306 Household Financial Corp. - Global Notes 4.625% due 01/15/08 - A .............................. 700 717 Household Financial Corp. - Notes 6.375% due 10/15/11 - A .............................. 550 607 HSBC Finance Corp. - Notes 6.75% due 05/15/11 - A ............................... 1,270 1,425 International Lease Finance Corp. 1.0% due 01/15/10 - AA- .............................. 665 665 International Lease Finance Corp. - Notes 5.875% due 05/01/13 - AA- ............................ 800 849 MDP Acquisitions plc - Sr. Notes 9.625% due 10/01/12 - B .............................. 360 401 Meditrust Medium - Notes 7.3% due 01/16/06 - BB- .............................. 520 536 Mizuho Financial Group Cayman, Ltd. - Sub. Notes 144A (a) 5.79% due 04/15/14 - BBB+ ............................ 532 559 NiSource Finance Corp. - Gtd. Notes 3.2% due 11/01/06 - BBB .............................. 875 867 NiSource Finance Corp. - Sr. Notes # 6.15% due 03/01/13 - BBB ............................. 596 646 Odyssey Re Holdings Corp. - Sr. Notes 7.65% due 11/01/13 - BBB- ............................ 2,000 2,206 Prologis Trust - Sr. Notes 7.05% due 07/15/06 - BBB+ ............................ 490 515 Rabobank Capital Fund II - Notes Ser. 144A (a) 5.26% due 12/31/49 - AA .............................. 325 331 Saint George Funding Co. LLC - 144A (a) 8.485% due 12/31/49 - NA ............................. 1,205 1,377 Tate & Lyle International Finance plc - Notes 144A (a) 5.0% due 11/15/14 - BBB .............................. 425 421 Tobacco Settlement Financing Corp. 6.0% due 06/01/37 - BBB .............................. $1,000 $ 913 5.875% due 05/15/39 - BBB ............................ 315 284 Tobacco Settlement Revenue Management - Ser. B 6.375% due 05/15/30 - BBB ............................ 1,480 1,423 Trinet Corporate Realty Trust, Inc. - Notes 7.7% due 07/15/17 - BB+ .............................. 420 483 UFJ Finance Aruba - GTD Notes 6.75% due 07/15/13 - BBB ............................. 1,000 1,114 WPP Finance UK - Notes 144A (a) # 5.875% due 06/15/14 - BBB+ ........................... 740 770 ------- 57,975 Food & Drug Retailing - 0.1% Delhaize America, Inc. - Notes 8.125% due 04/15/11 - BB+ ............................ 385 450 The Kroger Co. - Sr. Notes 8.15% due 07/15/06 - BBB ............................. 570 609 ------- 1,059 Food Products - 0.6% Corn Products International, Inc. - Sr. Notes 8.45% due 08/15/09 - BBB- ............................ 3,205 3,718 Kraft Foods, Inc. - Global Notes 5.625% due 11/01/11 - BBB+ ........................... 985 1,043 Smithfield Foods, Inc. - Sr. Notes 7.0% due 08/01/11 - BB ............................... 465 495 Tyson Foods, Inc. - Notes 7.25% due 10/01/06 - BBB ............................. 415 440 ------- 5,696 Foreign Government - 1.3% Federal Republic of Brazil 2.063% due 04/15/12 - BB- ............................ 265 252 Republic of Brazil 2.063% due 04/15/09 - BB- ............................ 132 131 8.0% due 04/15/14 - BB- .............................. 2,507 2,565 Republic of Brazil - Ser. L 2.125% due 04/15/06 - BB- ............................ 752 753 Republic of Chile - Notes 1.5% due 01/28/08 - A ................................ 1,200 1,208 Republic of Columbia - Notes 9.75% due 04/09/11 - BB+ ............................. 548 627 Republic of Panama 9.625% due 02/08/11 - BB ............................. 500 591 Republic of Panama - Bonds 9.375% due 01/16/23 - BB ............................. 1,250 1,442 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Foreign Government - Continued Republic of Peru - Bonds 9.125% due 02/21/12 - BB ............................. $ 490 $ 571 Republic of Peru - Bonds # 9.125% due 01/15/08 - BB ............................. 1,250 1,425 Russian Federation 8.75% due 07/24/05 - BB+ ............................. 1,800 1,850 United Mexican States 8.375% due 01/14/11 - BBB- ........................... 500 587 United Mexican States - Notes Ser. A 8.3% due 08/15/31 - BBB- ............................. 500 586 ------- 12,588 Gas Utilities - 0.5% Kinder Morgan Energy Partners - Sr. Notes 7.3% due 08/15/33 - BBB+ ............................. 615 712 Michigan Consolidated Gas Co. - Sr. Notes 5.7% due 03/15/33 - BBB .............................. 750 750 Southern California Edison Co. - Ser. 2003-B 8.0% due 02/15/07 - BBB ............................ 2,300 2,508 Texas New Mexico Power Co. - Sr. Notes 6.125% due 06/01/08 - BB+ ............................ 870 895 ------- 4,865 Health Care Providers & Services - 0.3% Anthem, Inc. - Notes 3.5% due 09/01/07 - BBB+ ............................. 720 716 Columbia/HCA Healthcare Corp. - Notes 9.0% due 12/15/14 - BB+ .............................. 755 893 Global Health Sciences, Inc. - Sr. Notes * (c) 11.0% due 05/01/08 - NA .............................. 75 2 HCA-The Healthcare Corp. - Notes 8.75% due 09/01/10 - BB+ ............................. 1,000 1,145 ------- 2,756 Home Equity Loan - 0.5% Centex Home Equity Loan Trust - Ser. 2004A CTF Cl. AF 4 4.51% due 09/27/32 - AAA ............................. 1,255 1,251 Contimortgage Home Equity Loan - CTF Cl. A5 8.1% due 08/15/25 - AAA .............................. 78 83 Countrywide Home Loan Corp. 5.5% due 08/01/06 - A ................................ 700 722 Residential Asset Mortgage Products, Inc. - Ser. 2003-RS10 Cl. AI5 4.91% due 01/25/31 - AAA ............................. 1,260 1,274 Residential Asset Mortgage Products, Inc. - Ser. 2004-RS7 CTF Cl. A I2 4.0% due 09/25/25 - AAA .............................. 1,410 1,414 ------- 4,744 Hotels Restaurants & Leisure - 0.8% Harrah's Operating Co., Inc. - Notes 7.875% due 12/15/05 - BB+ ............................ $2,300 $ 2,395 Harrah's Operating, Inc. - Sr. Notes 7.125% due 06/01/07 - BBB- ........................... 900 964 Mandalay Resort Group - Sr. Notes 6.375% due 12/15/11 - BB+ ............................ 640 670 Meditrust - Notes 7.0% due 08/15/07 - BB- .............................. 375 393 MGM Mirage, Inc. - Ser. B 6.0% due 10/01/09 - BB+ .............................. 832 857 Mohegan Tribal Gaming Authority - Sr. Sub Notes 8.0% due 04/01/12 - B+ ............................... 400 437 Starwood Hotels & Resorts - Sr. Notes 7.375% due 05/01/07 - BB+ ............................ 590 630 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes 7.875% due 05/01/12 - BB+ ............................ 1,000 1,140 Waterford Gaming LLC - Sr. Notes 144A (a) 8.625% due 09/15/12 - B+ ............................. 250 269 Wynn Las Vegas LLC - Bonds 144A (a) 6.625% due 12/01/14 - B+ ............................. 770 762 ------- 8,517 Industrial Conglomerates - 0.5% British Brunswick Holdings, Inc. - Sr. Notes 13.0% due 05/01/08 - NA .............................. 120 7 General Electric Co. - Notes 5.0% due 02/01/13 - AAA .............................. 2,472 2,536 Pacific & Atlantic Holdings, Inc. (c) 1.0% due 05/31/09 - NA ............................... 2 0 Pacific & Atlantic Holdings, Inc. - Sr. Notes 144A (a) * (c) 10.5% due 12/31/07 - NA .............................. 31 9 Tyco International Group SA - Notes 5.8% due 08/01/06 - BBB .............................. 520 538 6.0% due 11/15/13 - BBB .............................. 1,350 1,471 ------- 4,561 Insurance - 1.1% Allstate Corp. - Sr. Notes 5.35% due 06/01/33 - A+ .............................. 555 526 AON Capital # 8.205% due 01/01/27 - BBB- ........................... 385 406 Assurant, Inc. - Sr. Notes 6.75% due 02/15/34 - BBB+ ............................ 475 514 Cincinnati Financial Corp. - Sr. Notes 144A (a) 6.125% due 11/01/34 - A .............................. 455 460 CNA Financial Corp. - Notes 5.85% due 12/15/14 - BBB- ............................ 560 559 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Insurance - Continued Endurance Specialty Holdings, Ltd. - Sr. Notes 7.0% due 07/15/34 - BBB .............................. $ 540 $ 556 Marsh & McLennan Cos., Inc. - Sr. Notes # 5.375% due 03/15/07 - BBB+ ........................... 845 862 5.375% due 07/15/14 - BBB ........................... 325 318 Mass. Mutual Life Insurance Co. - Notes 144A (a) 7.625% due 11/15/23 - AA ............................. 2,235 2,758 New York Life Insurance Co. - Notes 144A (a) 5.875% due 05/15/33 - AA- ............................ 755 781 Ohio Casualty Corp. - Notes 7.3% due 06/15/14 - BB ............................... 520 552 Oil Casualty Insurance, Ltd. - Debs. 144A (a) 8.0% due 09/15/34 - BBB .............................. 840 847 W.R. Berkley Corp. - Sr. Notes 6.15% due 08/15/19 - BBB+ ............................ 713 717 Wellpoint Health Networks, Inc. - Notes 6.375% due 01/15/12 - BBB+ ........................... 685 754 Wellpoint, Inc. - Notes 144A (a) 5.0% due 12/15/14 - BBB+ ............................. 425 424 XL Capital, Ltd. - Sr. Notes 5.25% due 09/15/14 - A ............................... 310 311 ------- 11,345 Machinery - 0.1% Case Corp. - Notes 7.25% due 08/01/05 - BB- ............................. 365 374 Caterpillar, Inc. - Sr. Debs. 7.25% due 09/15/09 - A ............................... 700 792 ------- 1,166 Media - 1.7% British Sky Broadcasting Group - GTD Notes 7.3% due 10/15/06 - BBB- ............................. 725 770 Continental Cablevision, Inc. - Sr. Notes 9.5% due 08/01/13 - BBB .............................. 1,372 1,485 Cox Communications, Inc. - Notes # 4.625% due 06/01/13 - BBB- ........................... 310 297 Cox Communications, Inc. - Notes 144A (a) 3.04% due 12/14/07 - BBB- ............................ 450 451 Cox Enterprises, Inc. - Notes 144A (a) 7.875% due 09/15/10 - BB+ ............................ 765 861 Grupo Televisa SA De CV - Notes # 8.0% due 09/13/11 - BBB- ............................. 2,080 2,408 Interpublic Group Cos., Inc. - Notes # 6.25% due 11/15/14 - BB+ ............................. 700 708 Lenfest Communications, Inc. - Notes 8.375% due 11/01/05 - BBB ............................ 1,239 1,291 Liberty Media Corp. - Sr. Debs # 8.25% due 02/01/30 - BBB- ............................ $ 650 $ 739 News America Holdings, Inc. 8.25% due 08/10/18 - BBB- ............................ 1,050 1,302 Rogers Cablesystems - Sr. Notes Ser. B 10.0% due 03/15/05 - BB+ ............................. 1,205 1,223 Shaw Communications, Inc. - Sr. Notes 8.25% due 04/11/10 - BB+ ............................. 695 791 Time Warner, Inc. 6.15% due 05/01/07 - BBB+ ........................... 700 741 Time Warner, Inc. - Debs. 7.7% due 05/01/32 - BBB+ ............................. 800 978 Time Warner, Inc. - Sr. Notes # 9.125% due 01/15/13 - BBB+ ........................... 2,071 2,662 XM Satellite Radio, Inc. - Sr. Sec. Notes 12.0% due 06/15/10 - CCC+ ............................ 394 466 ------- 17,173 Metals & Mining - 0.3% Codelco, Inc. - Notes 144A (a) 5.5% due 10/15/13 - A ................................ 490 510 Freeport McMoran Copper & Gold - Sr. Notes 10.125% due 02/01/10 - B ............................. 460 527 Golden Northwest Aluminum * 12.0% due 12/15/06 - NA .............................. 25 2 Kennametal, Inc. - Sr. Notes 7.2% due 06/15/12 - BBB ............................. 770 850 Metallurgy Holdings, Inc. - Notes 1.0% due 07/15/08 - NA .............................. 50 22 Vedanta Resources plc - Bonds 144A (a) 6.625% due 02/22/10 - BB ............................. 775 778 ------- 2,689 Multi-Utilities - 0.2% Centerpoint Energy Houston - Bonds Ser. K # 6.95% due 03/15/33 - BBB ............................. 545 639 Transalta Corp. 5.75% due 12/15/13 - BBB- ............................ 900 927 ------- 1,566 Multiline Retail - 0.2% J.C. Penney, Inc. 7.65% due 08/15/16 - BB+ ............................. 1,275 1,454 May Department Stores Co. - Sr. Notes 6.7% due 07/15/34 - BBB .............................. 432 454 ------- 1,908 Municipal - 1.4% De Kalb County Georgia Water & Sewage - Ser. A 5.0% due 10/01/35 - AA ............................... 2,200 2,260 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Municipal - Continued Golden State Securitization 6.75% due 06/01/39 - BBB ............................. $2,675 $ 2,683 Harris County Texas 5.0% due 08/15/33 - AAA .............................. 600 614 Massachusetts Saint - Ser. C 5.5% due 11/01/10 - AAA .............................. 3,800 4,295 University of Texas Permanent University Fund - Ser. B 4.75% due 07/01/30 - AAA ............................. 4,000 4,000 ------- 13,852 Oil & Gas - 1.1% Amerada Hess Corp. - Notes 7.3% due 08/15/31 - BBB- ............................. 613 684 Chesapeake Energy Corp. - Sr. Notes 7.0% due 08/15/14 - BB- ............................. 365 389 Devon Energy Corp. - Sr. Debs. 7.95% due 04/15/32 - BBB ............................. 750 958 Enterprise Products Operating LP - Sr. Notes 6.875% due 03/01/33 - BB+ ............................ 1,415 1,505 Enterprise Products Operating LP - Sr. Notes 144A (a) 6.65% due 10/15/34 - BB+ ............................. 460 476 Halliburton Co. - Sr. Notes 144A (a) 2.86% due 01/26/07 - BBB ............................. 480 480 Humpuss Funding Corp. - 144A (a) 7.72% due 12/15/09 - NA .............................. 1,166 1,096 LG Caltex Oil Corp. - Notes 144A (a) 5.5% due 08/25/14 - BBB .............................. 471 484 Magellan Midstream Partners LP - Sr. Notes 6.45% due 06/01/14 - BBB ............................. 790 841 Northern Border Pipeline Co. - Sr. Notes 6.25% due 05/01/07 - A- .............................. 610 644 Occidental Petroleum Corp. 10.125% due 09/15/09 - BBB+ .......................... 538 664 Ocean RigNorway AS - Sr. Sec. Notes 10.25% due 06/01/08 - CCC ............................ 255 263 PanEnergy Corp. - Notes 7.0% due 10/15/06 - BBB- ............................. 375 395 Pemex Project Funding Master Trust - Notes 6.125% due 08/15/08 - BBB- ........................... 700 742 Roseton Danskamme - Ser. B 7.67% due 11/08/16 - ................................. 580 555 Valero Energy Corp. - Notes 8.375% due 06/15/05 - BBB ............................ 700 714 XTO Energy, Inc. - Sr. Notes 144A (a) 5.0% due 01/31/15 - BBB- ............................. 435 432 ------- 11,322 Other Asset Backed - 3.6% Ameriquest Mortgage Securities, Inc. - Ser. 2003-IA1 4.965% due 11/25/33 - AAA ............................ $1,125 $ 1,142 Argent Securities, Inc. - Ser. 2004 W1 M3 1.0% due 02/25/34 - A- ............................... 1,600 1,615 Bass Trust - Ser. 2004 CB4 Cl. A3 4.632% due 07/25/08 - AAA ............................ 815 826 Bear Stearns Asset Backed Securities - Ser. 2003 AC4 Cl. A 5.0% due 09/25/33 - AAA .............................. 1,260 1,263 Bear Stearns Asset Backed Securities - Ser. 2004-AC5 Cl. A1 5.25% due 10/25/34 - AAA ............................. 1,040 1,051 Bear Stearns Asset Backed Securities - Ser. 2004-HE9 Cl. 1A1 1.0% due 03/25/23 - AAA .............................. 807 807 CWABS, Inc. - CTF Cl. A 1 FLTG 2.15% due 01/25/35 - AAA ............................. 678 678 CWABS, Inc. - Ser. 2004-10 Cl. AF3 3.842% due 02/01/05 - AAA ............................ 1,465 1,448 CWABS, Inc. Ser. 2003-5 Cl. AF 2 3.042% due 04/25/25 - AAA ............................ 1,300 1,298 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 3.531% due 12/25/33 - AAA ............................ 900 899 Equity One ABS, Inc. - Ser. 2004-1 Cl. M2 5.115% due 04/25/34 - A .............................. 750 738 Equity One ABS, Inc. - Ser. 2004-1 Cl. M3 5.26% due 04/25/34 - A- .............................. 750 738 Equity One ABS, Inc. - Ser. 2004-2 Cl. AV2 1.55% due 07/25/34 - AAA ............................. 928 926 Homestar Mortgage Acceptance Corp. - Ser. 2004-4 Cl. A1 1.79% due 01/25/22 - AAA ............................. 1,643 1,642 Indymac ABS, Inc. - Ser 2004 A Cl. A2 2.341% due 07/25/34 - AAA ............................ 1,723 1,723 J.P. Morgan Mortgage Trust - Ser. 2004 A2 Cl. 2 A2 4.07% due 05/25/34 - AAA ............................. 1,616 1,590 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 1.0% due 03/25/35 - AA- .............................. 1,200 1,200 Morgan Stanley ABS Capital - Ser. 2004 HE9 Cl. A 3A 2.358% due 10/25/34 - AAA ............................ 1,872 1,872 NAAC Reperforming Loan Remic Trust - Ser. 2004-R1 Cl. A2 144A (a) 7.5% due 03/25/34 - AAA .............................. 7,548 8,093 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Other Asset Backed - Continued Option One Loan Trust - Ser. 2004-1 CTF Cl. M 1 1.7% due 01/25/34 - AA+ .............................. $ 800 $ 801 Renaissance Home Equity Loan Trust - Ser. 2004 4 AF 2 (c) 3.856% due 01/25/35 - NA ............................. 1,795 1,795 Residential Asset Funding and Mortgage Securities - Ser. 2004 Cl. AII B2 1.32% due 09/25/33 - AAA ............................. 1,685 1,685 Residential Asset Funding and Mortgage Securities Corp. - Ser. 2001 KS3 Cl. A II 1.33% due 09/25/31 - AAA ............................. 598 598 Residential Asset Securities Corp. - Ser. 2004 KS6 Cl. AII B1 1.22% due 04/25/13 - AAA ............................. 1,496 1,496 Structured Asset Investment Loan Trust - Ser. 2004-2 Cl. 3 A1 1.95% due 03/25/34 - NA .............................. 630 630 ------- 36,554 Other Mortgage - 0.4% Capital One Secured Note Trust - Notes 2000-3 Cl. C 144A (a) 7.9% due 10/15/10 - BBB .............................. 640 702 Commercial Mortgage Acceptance Corp. - Ser. 1991-C1 A1 6.79% due 06/15/31 - NA .............................. 884 924 LB UBS Commercial Mortgage Trust - CTF A4 4.166% due 04/17/13 - AAA ............................ 1,630 1,575 LB UBS Commercial Mortgage Trust - Ser. 2003-C5 Cl. K 144A (a) 5.25% due 04/15/37 - BBB- ............................ 1,000 971 ------- 4,172 Paper & Forest Products - 0.3% Donohue Forest Products, Inc. - Sr. Notes 7.625% due 05/15/07 - BB- ............................ 885 910 Longview Fibre Co. - Notes 10.0% due 01/15/09 - B+ .............................. 250 273 Weyerhaeuser Co. 7.125% due 07/15/23 - BBB ............................ 1,430 1,620 ------- 2,803 Pharmaceuticals - 0.1% Medco Health Solutions, Inc. - Sr. Notes 7.25% due 08/15/13 - BBB ............................. 730 815 Real Estate Development - 0.0% Rouse Co. - Notes 5.375% due 11/26/13 - BB+ ............................ 465 446 Real Estate Investment Trust - 1.1% American Health Properties, Inc. - Notes 7.5% due 01/15/07 - BBB+ ............................. $ 1,405 $ 1,497 Amresco Residential Securities - Notes 6.51% due 08/25/27 - AAA ............................. 1,755 1,798 Boston Properties, Ltd. Partnership - Sr. Notes 6.25% due 01/15/13 - BBB ............................. 800 868 Duke Realty Limited Partnership - Notes 2.781% due 12/22/06 - BBB+ ........................... 1,515 1,514 Health Care Reit, Inc. - Notes 6.0% due 11/15/13 - BBB- ............................. 770 797 Healthcare Realty Trust IN - Sr. Notes 8.125% due 05/01/11 - BBB- ........................... 700 815 iStar Financial, Inc. - Sr. Notes 7.0% due 03/15/08 - BBB- ............................. 410 443 Socgen Real Estate Co. LLC - Ser. A 144A (a) 7.64% due 12/29/49 - A ............................... 1,910 2,095 Spieker Properties, L.P. - Notes 7.125% due 12/01/06 - BBB+ ........................... 1,490 1,594 ------- 11,421 Road & Rail - 0.1% CSX Corp. - Notes 1.0% due 08/03/06 - BBB .............................. 865 865 Specialty Retail - 0.2% Gap, Inc. - Notes 10.55% due 12/15/08 - BB+ ............................ 550 670 Hughes Supply, Inc. - Sr. Notes 144A (a) 5.5% due 10/15/14 - BBB- ............................. 705 696 Office Depot, Inc. - Sr. Notes 6.25% due 08/15/13 - BBB- ............................ 695 741 ------- 2,107 Tobacco - 0.2% Altria Group, Inc. - Notes 7.0% due 11/04/13 - BBB .............................. 343 372 Philip Morris Cos., Inc. - Notes 6.95% due 06/01/06 - BBB ............................. 1,530 1,589 ------- 1,961 U.S. Government Agencies - 35.9% Federal Home Loan Bank - Bonds 5.0% due 01/01/80 - AAA .............................. 736 748 5.0% due 12/01/17 - AAA .............................. 499 507 5.0% due 04/01/18 - AAA .............................. 10,142 10,308 Federal Home Loan Mortgage Corp. - Bonds 3.972% due 06/01/34 - AAA ............................ 9,762 9,590 4.25% due 03/15/31 - AAA ............................. 1,518 1,514 4.5% due 05/01/19 - AAA .............................. 1,752 1,747 4.5% due 10/01/19 - AAA .............................. 1,602 1,597 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 5.0% due 12/15/28 - AAA .............................. $ 2,880 $ 2,923 5.0% due 08/01/33 - AAA .............................. 4,137 4,117 5.0% due 1/15/2034 - AAA (b) ......................... 2,000 1,986 5.5% due 06/01/24 - AAA .............................. 16,202 16,571 5.5% due 07/15/31 - AAA .............................. 1,117 1,133 6.0% due 10/15/32 - AAA .............................. 3,128 3,176 6.0% due 08/01/34 - AAA .............................. 1,173 1,213 6.0% due 08/01/34 - AAA .............................. 975 1,008 6.0% due 08/01/34 - AAA .............................. 2,960 3,059 6.0% due 09/01/34 - AAA .............................. 3,637 3,759 6.0% due 10/01/34 - AAA .............................. 1,796 1,856 6.5% due 08/01/32 - AAA .............................. 6.5% due 12/01/34 - AAA .............................. 1,215 1,275 Federal Home Loan Mortgage Corp. - Bonds Ser. 2836 Cl. QD 5.0% due 09/15/27 - AAA .............................. 1,960 1,997 Federal Home Loan Mortgage Corp. - Cl. ZA 6.5% due 09/15/31 - AAA .............................. 4,938 5,349 Federal Home Loan Mortgage Corp. - Debs 4.5% due 07/15/13 - AAA .............................. 2,000 2,008 Federal Home Loan Mortgage Corp. - Notes 4.375% due 02/04/10 - AAA ............................ 4,135 4,139 4.5% due 08/01/19 - AAA .............................. 1,263 1,260 4.5% due 11/01/19 - AAA .............................. 975 973 Federal Home Loan Mortgage Corp. - Ser. 2489 Cl. PE 6.0% due 08/15/32 - AAA .............................. 11,000 11,431 Federal Home Loan Mortgage Corp. - Ser. 2640 Cl. WA 3.5% due 03/15/33 - AAA .............................. 640 629 Federal National Mortgage Assoc. - Bonds 4.25% due 03/25/33 - AAA ............................. 556 555 4.5% due 01/25/18 - AAA (b) .......................... 8,895 8,864 4.5% due 07/01/18 - AAA .............................. 10,940 10,930 4.5% due 07/01/19 - AAA .............................. 900 898 4.5% due 10/01/19 - AAA .............................. 1,805 1,800 5.0% due 10/25/16 - AAA .............................. 2,318 2,371 5.0% due 11/01/17 - AAA .............................. 601 611 5.0% due 12/25/17 - AAA (b) .......................... 2,500 2,539 5.0% due 05/01/18 - AAA .............................. 3,812 3,877 5.0% due 06/01/18 - AAA .............................. 2,947 2,997 5.0% due 08/01/19 - AAA .............................. 3,779 3,841 5.0% due 09/01/19 - AAA .............................. 2,092 2,127 5.0% due 10/01/19 - AAA .............................. 3,049 3,100 5.0% due 10/01/19 - AAA .............................. 765 778 5.0% due 10/01/19 - AAA .............................. 5,453 5,544 5.0% due 08/25/27 - AAA .............................. 6,373 6,448 5.0% due 01/25/33 - AAA (b) .......................... 9,500 9,423 5.0% due 08/01/33 - AAA .............................. 4,265 4,240 5.0% due 03/01/34 - AAA .............................. 2,940 2,918 5.0% due 04/01/34 - AAA .............................. $ 2,615 $ 2,600 5.0% due 04/01/34 - AAA .............................. 1,875 1,864 5.5% due 02/01/18 - AAA .............................. 8,193 8,475 5.5% due 11/25/32 - AAA .............................. 2,665 2,729 5.5% due 12/25/32 - AAA (b) .......................... 9,835 9,983 5.5% due 11/01/33 - AAA .............................. 6,888 6,998 5.5% due 01/01/34 - AAA .............................. 13,572 13,790 5.5% due 03/01/34 - AAA .............................. 2,368 2,405 5.5% due 05/01/34 - AAA .............................. 2,144 2,178 5.5% due 09/01/34 - AAA .............................. 8,734 8,872 5.5% due 10/01/34 - AAA .............................. 3,723 3,782 5.5% due 11/01/34 - AAA .............................. 2,147 2,181 6.0% due 09/01/14 - AAA .............................. 924 970 6.0% due 01/25/32 - AAA (b) .......................... 11,040 11,413 6.0% due 03/01/33 - AAA .............................. 6,918 7,163 6.0% due 08/01/34 - AAA .............................. 2,403 2,487 6.5% due 01/25/32 - AAA (b) .......................... 5,520 5,787 6.5% due 11/01/32 - AAA .............................. 782 821 6.5% due 02/01/33 - AAA .............................. 3,339 3,505 6.5% due 09/01/34 - AAA .............................. 2,574 2,701 6.5% due 11/01/34 - AAA .............................. 1,211 1,271 7.0% due 09/01/10 - AAA .............................. 541 574 7.0% due 01/01/12 - AAA .............................. 176 187 7.0% due 02/01/16 - AAA .............................. 549 583 7.0% due 04/01/17 - AAA .............................. 838 888 7.0% due 05/01/17 - AAA .............................. 138 146 Federal National Mortgage Assoc. - Bonds Cl. 2 5.5% due 11/01/33 - AAA .............................. 2,763 598 Federal National Mortgage Assoc. - Bonds Cl. PE 3.5% due 07/25/33 - AAA .............................. 1,213 1,184 Federal National Mortgage Assoc. - Bonds Cl. QZ 5.5% due 11/25/32 - AAA .............................. 1,464 1,431 Federal National Mortgage Assoc. - Bonds Ser. 2002-82 Cl QL 5.0% due 05/25/27 - AAA .............................. 1,540 1,555 Federal National Mortgage Assoc. - Bonds Ser. 2003-49 Cl. JE 3.0% due 04/25/33 - AAA .............................. 1,427 1,373 Federal National Mortgage Assoc. - Bonds Ser. 2003-58 AD 3.25% due 07/25/33 - AAA ............................. 1,635 1,600 Federal National Mortgage Assoc. - Bonds Ser. 2004-11 Cl. 1A 1.22% due 03/25/34 - AAA ............................. 3,579 3,559 Federal National Mortgage Assoc. - Bonds Ser. 2004-W2 Cl. 1A2F 1.44% due 02/25/44 - AAA ............................. 6,171 6,150 Federal National Mortgage Assoc. - Debs 6.625% due 11/15/30 - AAA ............................ 1,000 1,192 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- (000's) (000's) ------- -------- PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued Federal National Mortgage Assoc. - Notes 2.5% due 06/15/08 - # AAA ........................... $ 2,000 $ 1,929 3.25% due 08/15/08 - AAA ............................ 2,000 1,974 4.375% due 03/15/13 - AAA ........................... 3,550 3,540 Federal National Mortgage Assoc. - Ser. 2003-116 Cl. FA 1.85% due 11/25/33 - AAA ............................ 8,482 8,528 Government National Mortgage Assoc. - Bonds 5.0% due 05/15/33 - AAA ............................. 33,212 33,275 5.5% due 10/15/33 - AAA ............................. 2,731 2,792 6.0% due 02/15/33 - AAA ............................. 67 69 6.0% due 03/15/33 - AAA ............................. 4,380 4,543 6.0% due 05/15/33 - AAA ............................. 4,081 4,232 6.0% due 12/20/33 - AAA ............................. 721 747 6.5% due 09/15/28 - AAA ............................. 336 355 6.5% due 09/15/29 - AAA ............................. 202 213 6.5% due 08/15/31 - AAA ............................. 442 465 6.5% due 10/15/32 - AAA ............................. 2,914 3,071 6.5% due 01/15/33 - AAA ............................. 85 90 Government National Mortgage Assoc. - Bonds Ser. 2003 Cl. XA 3.75% due 05/16/33 - AAA ............................ 452 445 Small Business Administration - Ser. 2004 20K 4.88% due 11/01/24 - AAA ............................ 800 803 -------- 359,800 U.S. Government - 11.6% U.S. Treasury - Bonds 5.375% due 02/15/31 - # AAA ......................... 9,591 10,371 6.25% due 08/15/23 - # AAA .......................... 3,045 3,565 U.S. Treasury - Notes 0.875% due 04/15/10 - # AAA ......................... 11,385 11,274 1.625% due 02/28/06 - # AAA ......................... 1,589 1,567 2.0% due 01/15/14 - # AAA ........................... 16,011 16,572 2.0% due 07/15/14 - # AAA ........................... 2,066 2,131 2.375% due 08/31/06 - # AAA ......................... 5,500 5,445 3.0% due 02/15/09 - # AAA ........................... 5,546 5,444 3.0% due 07/15/12 - # AAA ........................... 2,229 2,488 3.5% due 12/15/09 - # AAA ........................... 2,115 2,105 3.625% due 07/15/09 - # AAA ......................... 1,571 1,576 3.875% due 01/15/09 - # AAA ......................... 1,746 1,957 4.25% due 01/15/10 - # AAA .......................... 6,920 8,027 4.25% due 11/15/14 - # AAA .......................... 10,024 10,050 4.375% due 08/15/12 - # AAA ......................... 5,100 5,222 4.75% due 05/15/14 - # AAA .......................... 315 328 4.875% due 02/15/12 - # AAA ......................... 20,300 21,456 5.0% due 08/15/11 - # AAA ........................... 6,400 6,813 -------- 116,391 Whole Loan CMOs - 9.2% Ameriquest Mortgage Securities, Inc. - Ser. 2004-X2 Cl. A 144A (a) 1.851% due 06/25/34 - AAA ........................... $ 1,352 $ 1,351 Banc America Commercial Mortgage, Inc. - CTF 144A (a) 5.276% due 03/11/41 - BBB ........................... 1,000 1,001 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. F 144A (a) 5.279% due 11/10/39 - BBB+ .......................... 650 647 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. G 144A (a) 5.377% due 11/10/39 - BBB ........................... 650 647 Banc America Commerical Mortgage, Inc. - Ser. 2004-4 Cl. A3 4.128% due 07/10/42 - AAA ........................... 1,635 1,634 Bank One Issuance Trust - Notes 4.54% due 09/15/10 - BBB ............................ 1,300 1,319 Bear Stearns ARM Trust - Ser. 2004 10 Cl. I2A3 (c) 1.0% due 01/25/35 - AAA ............................. 2,382 2,403 Bear Stearns ARM Trust - Ser. 2004-6 CTF Cl. I A1 4.743% due 09/25/34 - AAA ........................... 5,855 5,894 Bear Stearns ARM Trust - Ser. 2004-7 Cl. 1A1 5.036% due 10/25/34 - AAA ........................... 10,288 10,441 Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2004-PWR5 Cl. X1 144A (a) * 0.076% due 07/11/42 - NA ............................ 36,450 704 Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2004-T16 Cl. X1 (c) 0.12% due 08/13/46 - AAA ............................ 33,695 650 Bear Stearns Trust - Ser. 2004-9 Cl. II A1 5.518% due 08/25/34 - AAA ........................... 715 727 Citigroup Mortgage Loan Trust - Ser. 2004 UST1 Cl. A4 4.426% due 08/25/34 - AAA ........................... 1,061 1,061 Commerce 2004-CNL - Notes Cl. A2 144A (a) 1.0% due 09/15/14 - AAA ............................. 970 972 CWALT, Inc. - Ser. 2004 J7 Cl. 1A2 4.673% due 08/25/34 - AAA ........................... 870 870 CWALT, Inc. - Ser. 2004-24CB Cl. 1 A1 6.0% due 11/25/34 - AAA ............................. 1,883 1,935 CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1 6.25% due 12/25/33 - AAA ............................ 4,037 4,134 CWMBS, Inc. - Ser. 2003-R4 Cl. 1A3 144A (a) 6.0% due 11/25/26 - AAA ............................. 15,500 15,979 CWMBS, Inc. - Ser. 2003-R4 Cl. 2A 144A (a) 6.5% due 01/25/34 - AAA ............................. 6,571 6,814 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Whole Loan CMOs - Continued CWMBS, Inc. - Ser. 2004 12 Cl. 11A2 4.431% due 08/25/34 - AAA ........................... $ 6,478 $ 6,539 Global Signal Trust -Ser. 2004-1 Cl. D144A (a) 5.098% due 01/15/34 - BBB ........................... 900 902 Global Signal Trust II - Ser. 2004 2 Cl. D 144A (a) (c) 5.093% due 12/15/14 - NA ............................ 560 560 Greenwich Capital - Ser. 2003-C1 Cl. A4 4.111% due 07/05/12 - AAA ........................... 770 743 Greenwich Capital Commercial Funding Corp. - Ser. 2003-C2 Cl. A2 4.022% due 07/05/10 - AAA ........................... 1,890 1,887 GS Mortgage Securities Corp. - Ser. 2003-1 Cl. A2 1.79% due 01/25/32 - AAA ............................ 955 963 GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C 1.58% due 05/25/34 - AAA ............................ 1,000 1,002 GS Mortgage Securities Corp. - Ser. 2004-7 Cl. 2A1 4.191% due 06/01/34 - AAA ........................... 1,708 1,685 IMPAC Secured Assets Corp. - Ser. 2004 1 Cl. A3 3.71% due 03/25/34 - AAA ............................ 1,015 1,003 Mellon Residential Funding Corp. - Ser. 2000 TBC2 Cl. A1 1.34% due 06/15/30 - AAA ............................ 998 995 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004 1 Cl. 2A1 4.779% due 12/25/34 - NA ............................ 1,248 1,253 Merrill Lynch Mortgage Trust - Ser. 2004 Cl. XC (c) 0.059% due 09/12/41 - AAA ........................... 28,900 545 Merrill Lynch Mortgage Trust - Ser. 2004 Cl. A4 * 4.864% due 08/12/39 - NA ............................ 1,620 1,623 Residential Asset Mortgage Products - Ser. 2004-RS9 Cl. AII1 2.0% due 09/25/13 - AAA ............................. 1,775 1,775 Residential Funding -Ser. 2004-S2 Cl. A1 5.25% due 03/25/34 - AAA ............................ 3,267 3,265 Specialty Underwriting - Ser. 2003 BC4 Cl. A3B 1.0% due 11/25/34 - AAA ............................. 1,825 1,823 Structured Asset Securities Corp. - Ser. 2003 NP3 Cl. A1 144A (a) 1.6% due 11/25/33 - AAA ............................. 723 724 Structured Asset Securities Corp. - Ser. 2004 19XS Cl. A2 4.37% due 10/25/34 - AAA ............................ 1,100 1,093 Structured Asset Securities Corp. - Ser. 2004-16XS Cl. A2 4.91% due 08/25/34 - AAA ............................ 950 954 Structured Asset Securities Corp. - Ser. 2004-6XS Cl. M1 4.92% due 03/25/34 - AA+ ............................ $ 1,100 $ 1,087 Washington Mutual Mortgage Securities Corp. - Ser. 2004 A1 (c) 4.283% due 01/25/35 - NA ............................ 1,945 1,937 Wells Fargo Mortgage Backed Securities - Ser. 2004 Z Cl. 11 A1 (c) 4.605% due 12/25/34 - AAA ........................... 1,228 1,234 -------- 92,775 -------- Wireless Telecommunications Services - 0.4% AT&T Wireless Group - Notes 8.125% due 05/01/12 - A ............................. 525 635 AT&T Wireless, Inc. - Notes 7.875% due 03/01/11 - A ............................. 584 688 AT&T Wireless, Inc. - Sr. Notes 8.75% due 03/01/31 - A .............................. 340 459 Mobile Telesystems Finance - Notes 144A (a) 8.375% due 10/14/10 - BB- ........................... 400 406 9.75% due 01/30/08 - BB- ............................ 765 811 Nextel Communications, Inc. - Sr. Notes 5.95% due 03/15/14 - BB ............................. 915 949 -------- 3,948 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $956,550) 96.7% 970,032 Shares ------ PREFERRED STOCK Commercial Services & Supplies - 0.0% Glass Tech., Inc. - Ser. A * (c) .................... 1 1 Electric/Gas - 0.1% TNP Enterprises, Inc. - Ser. D ...................... 8,840 1,025 U.S. Government Agencies - 0.2% Federal National Mortgage Assoc. .................... 28,100 1,405 -------- TOTAL PREFERRED STOCK- (Cost $2,396) 0.3% 2,431 WARRANTS Commercial Services & Supplies - 0.0% Sunterra Corp. * expires 07/26/07 ................................. 152 0 -------- TOTAL WARRANTS- (Cost $0) 0.0% 0 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- ACTIVE BOND FUND Par Market Name of Issuer Value Value -------------- -------- ---------- (000's) (000's) COMMERCIAL PAPER Auto Loan - 0.5% Ford Motor Credit Co. 2.52% due 04/08/05 ............................. $ 3,900 $ 3,874 General Motors Acceptance Corp. 2.362% due 03/21/05 ............................ 1,400 1,393 ---------- 5,267 Finance - 0.6% Rabobank USA Financial Corp. 2.17% due 01/03/05 ............................. 3,500 3,500 UBS Finance Delaware LLC 2.41% due 03/15/05 ............................. 2,400 2,388 ---------- 5,888 Diversified Financials - 0.7% Morgan Stanley Group 1.59% due 07/06/05 ............................. 7,200 7,199 ---------- TOTAL COMMERCIAL PAPER- (Cost $18,354) 1.8% 18,354 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 10.3% State Street Navigator Securities Lending Portfolio ...................................... 103,372 103,372 SHORT-TERM INVESTMENTS - 5.9% Investment in joint trading account 2.29% due 01/03/05 (Cost $58,651) .............. 58,651 58,651 -------- ---------- TOTAL INVESTMENTS- (Cost $1,139,323) 115.0% 1,152,840 Payables, less cash and receivables- (15.0)% (150,456) -------- ---------- NET ASSETS- 100.0% $1,002,384 ======== ========== # At December 31, 2004 all or portion of this security was out on loan. (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 December 31, 2004, securities aggregated $86,570 or 8.6% of net assets of the Portfolio. (b) To Be Announced. (c) At December 31, 2004 this security was fair valued. * 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. ** Bond ratings are not audited. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Active Bond Fund (the "Fund" or "VST Active Bond") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 December 31, 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 $90 and $10 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 year ended December 31, 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 December 31, 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 - -------------------------- ------------------- $101,608 $103,372 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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 December 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Principal Amount Unrealized Currency Purchased Covered by Contract Expiration Month Gain (Loss) - ------------------ ------------------- ---------------- ----------- Brazilian Real 50 January 05 $ 6 Brazilian Real 31 February 05 2 Brazilian Real 104 March 05 5 Chilean Peso 156 February 05 10 Chilean Peso 102 March 05 7 Euro 529 January 05 9 Pound Sterling 711 January 05 (1) Hong Kong Dollar 80 January 05 -- Indian Rupee 154 March 05 2 Japanese Yen 7,604 January 05 255 South Korean Won 81 January 05 9 South Korean Won 87 February 05 3 South Korean Won 111 March 05 3 South Korean Won 111 March 05 3 Mexican Peso 29 February 05 1 Mexican Peso 168 March 05 1 Peruvian Nouveau 32 February 05 -- Peruvian Nouveau 105 March 05 1 Polish Zloty 65 February 05 5 Polish Zloty 70 March 05 2 New Russian Ruble 60 January 05 2 New Russian Ruble 30 February 05 1 New Russian Ruble 109 March 05 2 Singapore Dollar 81 January 05 2 Singapore Dollar 82 February 05 -- Singapore Dollar 104 March 05 1 New Taiwan Dollar 31 February 05 1 New Taiwan Dollar 103 March 05 2 ---- $334 ==== Currency Sold Euro 8,894 January 05 $(78) Japanese Yen 2,916 January 05 4 Japanese Yen 682 January 05 1 Swedish Krona 1,012 January 05 (1) ---- $(74) ==== 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 December 31, 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 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 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 December 31, 2004, the Fund had no written options. 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 realized gain or loss 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 year ended December 31, 2004 are summarized as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Net Unrealized Appreciation Par Value Interest Rate Swaps Counter Party (Depreciation) - --------- -------------------------------------- -------------- -------------- 61,400 To make or receive semi-annual Morgan Stanley $(601) payments through 6/15/2010 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 6,000 To make or receive semi-annual Bank of (59) payments through 6/15/2010 based on America the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 9,300 To make or receive semi-annual Barclays (894) payments through 6/15/2025 based on the difference between (A) the fixed rate of 6.0% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 3,000 To make or receive monthly payments Citigroup 13 through 4/1/2005 based on floating rate of 1 Month LIBOR minus 0.35%, adjusted every month. 7,600 To make or receive semi-annual Bank of (130) payments through 6/15/2015 based on America the difference between (A) the fixed rate of 5.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 11,100 To make or receive semi-annual Lehman (364) payments through 6/15/2015 based on Brothers the difference between (A) the fixed rate of 5.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 5,800 To make or receive semi-annual JP Morgan (100) payments through 6/15/2015 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months.
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Net Unrealized Appreciation Par Value Interest Rate Swaps Counter Party (Depreciation) - --------- -------------------------------------- ------------- -------------- 73,400 To make or receive semi-annual Barclays $ (336) payments through 6/15/2006 based on the difference between (A) the fixed rate of 3.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 90,000 To make or receive semi-annual Goldman Sachs (412) payments through 6/15/2006 based on the difference between (A) the fixed rate of 3.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 15,200 To make or receive semi-annual UBS (484) (GBP) payments through 3/15/2032 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 6 Month LIBOR, adjusted every 6 months. 19,400 To make or receive semi-annual JP Morgan 1,777 (EURO) payments through 3/15/2032 based on the difference between (A) the fixed rate of 6.00% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months. 196,500 To make or receive semi-annual Barclays (135) (SEK) payments through 6/17/2008 based on the difference between (A) the fixed rate of 4.5% and (B) floating rate of 3 Month STIBOR, adjusted every 3 months.
Net Unrealized Appreciation Par Value Credit Default Swaps: Counter Party (Depreciation) - --------- -------------------------------------- -------------- -------------- 1,000 To make annual fixed coupon payments Morgan Stanley $ -- through 5/24/2005 based on the annual fixed rate of 0.70%. 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. ------- $(1,725) =======
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $519 and $1,733 which expire in 2007 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such as that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparts to perform under the contract. 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 December 31, 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. For the year ended December 31, 2004, there were no reimbursements paid to the Fund. John Hancock has entered into Sub-Advisory Agreements with Declaration Management & Research, LLC, and John Hancock Advisers, LLC. Each is an affiliate of John Hancock, and under John Hancock's supervision, is responsible for a portion of 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, which under John Hancock's supervision, is also responsible for a portion of the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - ---------- -------------------- $4,364,652 $4,194,502 As of December 31, 2004, transactions for written options were as follows: Contracts Premium ($) --------- ----------- Beginning of period 38,000 329 Options opened 49,700 355 Options closed/expired (87,700) (684) ------- ---- End of period -- -- 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $1,140,029 $26,169 $(13,358) $12,811 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $513 $2,252 $12,922 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 - ---- ------------------ ---------------------- ----------------- 2004 $39,829 $8,235 $-- 2003 66,299 5,737 -- 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 Active Bond John Hancock 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 a tax-free exchange as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION--Continued
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Appreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 8,433 $83,358 $2,176 $1,016,994 $1,100,351
NOTE F--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Active Bond Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Active Bond Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1998 - -------------------------------------------------------------------------------- Bond Index Fund Standish Mellon Asset Management Company LLC Gregory Curran - -------------------------------------------------------------------------------- .. 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 including price sensitivity, industry, and quality exposure, of more than 6,900 securities in the benchmark. Fund Commentary Performance: For the year 2004, the Bond Index fund returned 4.05%, underperforming the Lehman Brothers Aggregate Bond Index returning 4.34%. Environment: The Lehman Brothers Aggregate Index returned 4.34% in 2004. The yield curve significantly flattened as the 2-year part of the curve increased over 120 basis points in reaction to Federal Reserve interest rate hikes. The long end of the curve was down approximately 25 basis points. All spread sectors outperformed risk-neutral Treasuries. The credit sector had +159 basis points of excess return followed by asset backed securities and mortgage-backed securities. The portfolio was positioned to closely match all the risk characteristics of the Index, which allowed the portfolio to perform in line with the benchmark before fees and transaction costs. Outlook: The economic outlook for 2005 is for the U.S. and global economies to decelerate from the late 2003/2004 global trade boom. Consensus real U.S. GDP growth is estimated to be 3.5% in 2005, which is achievable, but the risks remain to the downside. Despite slowing economic growth the Fed is expected to raise interest rates towards 3% by mid 2005. Credit valuations are tight and profit growth is slowing. However, an indexed portfolio will not consider these economic forecasts and instead capture the risk and return of the selected benchmark. The portfolio will be structured to replicate the characteristics of the Lehman Brothers Aggregate Bond Index with respect to duration, sector distribution, quality distribution, coupon, maturity, and yield. [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/98 (Fund Inception Date) Bond Index Fund Bond Index Benchmark(1) --------------- ----------------------- 4/30/1998 $10,000 $10,000 5/31/1998 10,102 10,107 6/30/1998 10,211 10,210 7/31/1998 10,220 10,218 8/31/1998 10,461 10,418 9/30/1998 10,757 10,715 10/31/1998 10,689 10,639 11/30/1998 10,703 10,703 12/31/1998 10,720 10,729 1/31/1999 10,795 10,805 2/28/1999 10,521 10,548 3/31/1999 10,584 10,601 4/30/1999 10,609 10,627 5/31/1999 10,485 10,518 6/30/1999 10,450 10,485 7/31/1999 10,420 10,456 8/31/1999 10,414 10,447 9/30/1999 10,497 10,541 10/31/1999 10,514 10,569 11/30/1999 10,513 10,562 12/31/1999 10,445 10,498 1/31/2000 10,425 10,495 2/29/2000 10,551 10,626 3/31/2000 10,713 10,779 4/30/2000 10,666 10,726 5/31/2000 10,640 10,717 6/30/2000 10,855 10,935 7/31/2000 10,956 11,051 8/31/2000 11,122 11,207 9/30/2000 11,165 11,250 10/31/2000 11,244 11,320 11/30/2000 11,445 11,514 12/31/2000 11,678 11,741 1/31/2001 11,840 11,938 2/28/2001 11,942 12,042 3/31/2001 11,993 12,102 4/30/2001 11,938 12,051 5/31/2001 12,008 12,124 6/30/2001 12,047 12,170 7/31/2001 12,310 12,442 8/31/2001 12,436 12,585 9/30/2001 12,595 12,731 10/31/2001 12,850 12,997 11/30/2001 12,670 12,818 12/31/2001 12,584 12,736 1/31/2002 12,674 12,839 2/28/2002 12,793 12,964 3/31/2002 12,554 12,749 4/30/2002 12,795 12,996 5/31/2002 12,895 13,106 6/30/2002 13,008 13,220 7/31/2002 13,192 13,380 8/31/2002 13,418 13,606 9/30/2002 13,634 13,827 10/31/2002 13,582 13,763 11/30/2002 13,552 13,759 12/31/2002 13,836 14,044 1/31/2003 13,834 14,057 2/28/2003 14,030 14,251 3/31/2003 14,019 14,239 4/30/2003 14,119 14,357 5/30/2003 14,367 14,624 6/30/2003 14,335 14,595 7/31/2003 13,850 14,105 8/31/2003 13,932 14,198 9/30/2003 14,305 14,574 10/31/2003 14,161 14,439 11/30/2003 14,187 14,473 12/31/2003 14,334 14,621 1/31/2004 14,445 14,738 2/28/2004 14,589 14,897 3/31/2004 14,705 15,009 4/30/2004 14,321 14,618 5/30/2004 14,252 14,560 6/30/2004 14,335 14,643 7/31/2004 14,472 14,788 8/31/2004 14,750 15,070 9/30/2004 14,785 15,111 10/31/2004 14,902 15,238 11/30/2004 14,780 15,116 12/31/2004 14,913 15,255 Value on 12/31/04: - ------------------ $14,913 Bond Index Fund $15,255 Bond Index Benchmark (1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- U.S. Treasury 23.1% Federal National Mortgage Assoc. 20.5% Federal Home Loan Mortgage Corp. 17.3% Government National Mortgage Assoc. 4.2% Federal Home Loan Bank 2.1% General Electric 1.5% JP Morgan Chase & Co. 1.2% General Motors Acceptance Corp. 1.1% Morgan Stanley 0.9% Wells Fargo 0.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Bond Bond Index Fund Index Fund Benchmark/1/ ---------- ------------ 1 Year 4.05% 4.34% 3 Years 5.83% 6.20% 5 Years 7.38% 7.76% Since Inception (5/1/98) 6.17% 6.54% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 69.44% AAA 5.48% AA 1.83% A 11.96% BBB 11.30% Weighted Average Yield 4.49% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Bond Index Fund benchmark represents 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. Inception: May 1, 1998 - -------------------------------------------------------------------------------- Bond Index Fund Standish Mellon Asset Management Company LLC Gregory Curran - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Bond Index Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,040.40 Expense paid per $1,000* $ 1.28 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,023.88 Expense paid per $1,000* $ 1.27 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted) ASSETS Long term investments at cost (including $43,674 of securities loaned (Note B)) ................................................ $193,908 Net unrealized appreciation of investments ......................... 4,215 Short-term investments at value .................................... 47,725 -------- Total investments ............................................... 245,848 Receivable for: Investments sold ................................................ 256 Fund shares sold ................................................ 48 Interest ........................................................ 2,198 -------- Total assets ....................................................... 248,350 -------- LIABILITIES Payables for: Investments purchased ........................................... 1,965 Collateral for securities on loan ............................... 44,410 Accrued operating expenses ...................................... 40 -------- Total liabilities .................................................. 46,415 -------- Net assets ......................................................... $201,935 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized)... 20,091 -------- Net asset value per share .......................................... $ 10.05 ======== Composition of net assets: Capital paid-in ................................................. $197,747 Accumulated net realized loss on investments .................... (27) Net unrealized appreciation of Investments ...................... 4,215 -------- Net assets ......................................................... $201,935 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 9,712 Securities lending ............................................... 25 ------- Total investment income ............................................. 9,737 ------- EXPENSES Investment advisory fee .......................................... 284 Auditors fees .................................................... 27 Custodian fees ................................................... 148 Fidelity Bond fees ............................................... 1 Legal fees ....................................................... 36 Printing & mailing fees .......................................... 36 Trustees' fees ................................................... 6 Other fees ....................................................... 6 ------- Total expenses ...................................................... 544 Less expenses reimbursed ......................................... (47) ------- Net expenses ........................................................ 497 ------- Net investment income ............................................... 9,240 ------- REALIZED AND UNREALIZED LOSS Net realized gain on investments ................................. 383 Change in unrealized depreciation on investments ................. (1,593) ------- Net realized and unrealized loss .................................... (1,210) ------- Net increase in net assets resulting from operations ................ $ 8,030 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Bond Index Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 9,240 $ 10,717 Net realized gain (loss) ............................................ 383 207 Change in net unrealized depreciation ............................... (1,593) (3,166) -------- --------- Net increase in net assets resulting from operations ............. 8,030 7,758 Distributions to shareholders from: Net investment income ............................................... (9,237) (9,830) Realized gains ...................................................... (337) (1,105) Capital paid-in ..................................................... (91) (689) -------- --------- Decrease in net assets resulting from distributions .............. (9,665) (11,624) From fund share transactions: Proceeds from shares sold ........................................... 39,016 108,981 Distributions reinvested ............................................ 9,665 11,624 Payment for shares redeemed ......................................... (60,772) (109,173) -------- --------- Increase (decrease) in net assets from fund share transactions ... (12,091) 11,432 -------- --------- NET INCREASE (DECREASE) IN NET ASSETS .................................. (13,726) 7,566 NET ASSETS Beginning of Period ................................................. 215,661 208,095 -------- --------- End of Period (including undistributed net investment income of $0 and $0, respectively) ......................................... $201,935 $ 215,661 ======== ========= Analysis of fund share transactions: Sold ................................................................ 3,865 10,603 Reinvested .......................................................... 962 1,136 Redeemed ............................................................ (6,019) (10,661) -------- --------- Net increase (decrease) in fund shares outstanding ..................... (1,192) 1,078 ======== =========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year ended indicated:
Bond Index Fund --------------------------------------------------------------- Year Ended December 31, --------------------------------------------------------------- 2004 2003(e) 2002(e) 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 .................................. 0.46 0.48 0.54 0.57 0.62 Net Realized and Unrealized Gain (Loss) on Investment(a) ....................................... (0.06) (0.12) 0.42 0.17 0.43 -------- -------- -------- -------- ------- Total From Investment Operations ....................... 0.40 0.36 0.96 0.74 1.05 Less Distributions: Distribution from Net Investment Income ................ (0.46) (0.45) (0.53) (0.58) (0.63) Distribution from Net Realized Gains on Investments .... (0.02) (0.05) (0.01) (0.01) Capital paid-in ........................................ (f) (0.03) (0.01) -------- -------- -------- -------- ------- Total Distributions .................................... (0.48) (0.53) (0.55) (0.59) (0.63) -------- -------- -------- -------- ------- Net Assets Value at End of Period ......................... $ 10.05 $ 10.13 $ 10.30 $ 9.89 $ 9.74 ======== ======== ======== ======== ======= Total Investment Return(b) ................................ 4.05% 3.60% 9.95% 7.76% 11.81% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ....... 0.25%(c) 0.24%(c) 0.22%(c) 0.24% 0.25% Ratio of Net Investment Income to Average Net Assets ... 4.56% 4.73% 5.30% 5.77%(d) 6.80% Portfolio Turnover Rate ................................ 17.79% 40.22% 57.31% 68.70% 40.46% Net Assets End of Period (000s Omitted) ................... $201,935 $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 .27%, .24%, .25%, and 27%, for the years ended December 31, 2004, 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) Certain amounts in 2003 and 2002 have been reclassified to permit comparison. (f) Amount is less than $0.01. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND ** Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.2% Boeing Corp. 8.75% due 09/15/31 - A .................................. $ 90 $ 126 Northrop-Grumman Corp. - Debs. 7.75% due 03/01/16 - BBB ................................ 75 92 Raytheon Co. - Notes 6.75% due 08/15/07 - BBB- ............................... 200 216 United Technologies Corp. - Debs. 8.875% due 11/15/19 - A ................................. 50 68 ------- 502 Auto Loan - 1.2% Ford Motor Credit Co. 6.125% due 01/09/06 - BBB- .............................. 800 819 Ford Motor Credit Co. - Bonds 7.375% due 02/01/11 - BBB- .............................. 250 270 General Motors Acceptance Corp. - Notes 6.125% due 09/15/06 - BBB- .............................. 400 410 7.75% due 01/19/10 - BBB- ............................... 400 429 8.0% due 11/01/31 - BBB- ................................ 430 442 Toyota Motor Credit Corp. - Notes 5.5% due 12/15/08 - AAA ................................. 60 64 ------- 2,434 Automobiles - 0.5% DaimlerChrysler NA Holding Co. 7.2% due 09/01/09 - BBB ................................. 650 723 Ford Motor Co. - Bonds # 6.625% due 02/15/28 - BBB- .............................. 350 327 ------- 1,050 Banks - 5.5% African Development Bank - Sub. Notes 6.875% due 10/15/15 - AA+ ............................... 35 41 Bank of America Corp. - Sub. Notes 7.8% due 02/15/10 - A ................................... 350 407 Bank One Corp. 7.875% due 08/01/10 - A ................................. 300 350 Bank One Corp. - Notes 6.875% due 08/01/06 - A+ ................................ 1,000 1,055 Bank America Corp. - Sub. Notes 6.5% due 03/15/06 - A ................................... 150 155 Chase Manhattan Corp. - Sub. Notes 7.125% due 02/01/07 - A ................................. 225 242 Credit Suisse First Boston 6.5% due 01/15/12 - A+ .................................. 400 445 Credit Suisse First Boston, Inc. - Notes 5.875% due 08/01/06 - A+ ................................ 500 520 European Investment Bank - Global Notes # 4.625% due 03/01/07 - AAA ............................... 800 821 Fleet Boston Corp. - Sub. Notes 7.375% due 12/01/09 - A ................................. 100 114 Fleet Financial Group, Inc. - Sub. Debs. # 6.7% due 07/15/28 - A ................................... $ 75 $ 84 HSBC Holdings plc 7.5% due 07/15/09 - A ................................... 150 171 InterAmerican Development Bank - Debs. 8.5% due 03/15/11 - AAA ................................. 200 244 Intermediate American Development Bank - Bonds 6.125% due 03/08/06 - AAA ............................... 1,300 1,346 International Bank of Reconstruction & Development - Notes 5.0% due 03/28/06 - AAA ................................. 750 768 JP Morgan Chase & Co. - Notes 5.25% due 05/30/07 - A+ ................................. 1,000 1,040 NationsBank Corp. - Sub. Notes 7.75% due 08/15/15 - A .................................. 400 480 Royal Bank of Scotland Group plc - Sub. Notes 5.0% due 11/12/13 - A+ .................................. 300 304 Royal Bank of Scotland plc - Sub. Notes 6.4% due 04/01/09 - A+ .................................. 150 163 United Bank National Association of Minneapolis 6.375% due 08/01/11 - A+ ................................ 325 361 Wachovia Corp. - Notes 4.95% due 11/01/06 - A .................................. 1,350 1,388 Wachovia Corp. - Sub. Notes 5.625% due 12/15/08 - A- ................................ 75 80 Wells Fargo Bank NA - Sub. Notes 6.45% due 02/01/11 - AA- ................................ 550 612 ------- 11,191 Beverages - 0.4% Anheuser Busch Cos., Inc. 9.0% due 12/01/09 - A+ .................................. 470 570 Coca-Cola Enterprises, Inc. - Debs. # 8.5% due 02/01/22 - A ................................... 100 133 Pepsi Bottling Group, Inc. - Sr. Notes Ser. B - 7.0% due 03/01/29 - A ................................... 100 121 ------- 824 Chemicals - 0.2% E.I. Du Pont De Nemours 6.5% due 01/15/28 - AA- ................................. 150 173 Eastman Chemical - Debs. 7.6% due 02/01/27 - BBB ................................. 50 59 Rohm & Haas Co. - Notes 7.4% due 07/15/09 - BBB+ ................................ 80 91 ------- 323 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued CMBS - 0.2% JP Morgan Chase & Co. Commercial Mortgage Securities - Ser. 2004 CIBC8 Cl. A4 4.404% due 01/12/39 - AAA ............................... $ 400 $ 388 Commercial Services & Supplies - 0.3% First Data Corp. - Sr. Notes 5.625% due 11/01/11 - A+ ................................ 400 430 Honeywell International, Inc. - Notes 7.5% due 03/01/10 - A ................................... 75 86 ------ 516 Computers & Peripherals - 0.4% International Business Machines Corp. - Debs. 7.0% due 10/30/25 - A+ .................................. 100 119 International Business Machines Corp. - Notes 4.25% due 09/15/09 - A+ ................................. 600 607 ------ 726 Credit Card - 0.8% American Express Co. - Notes # 4.875% due 07/15/13 - A+ ................................ 150 152 MBNA Credit Card Master Note Trust - Ser. 2002-1 Notes Cl. A 4.95% due 06/15/09 - AAA ................................ 1,000 1,032 MBNA Master Credit Card Trust II - Notes 6.5% due 04/15/10 - AAA ................................. 400 433 ------ 1,617 Diversified Financials - 4.2% Bear Stearns & Co., Inc. - Notes 5.7% due 11/15/14 - A ................................... 240 253 Chase Commercial Mortgage Securities Corp. - Ser. 1997-2 Pass Thru Certs Cl. A2 6.6% due 12/19/29 - AAA ................................. 407 433 Chase Commercial Mortgage Securities Corp. - Ser. 200-2 CTF Cl. A2 7.631% due 07/15/32 - NA ................................ 300 348 Citicorp Capital II 8.015% due 02/15/27 - A ................................. 100 111 Citigroup, Inc. - Notes 6.625% due 01/15/28 - AA- ............................... 100 112 Citigroup, Inc. - Sub. Notes 5.875% due 02/22/33 - A+ ................................ 190 193 Citigroup, Inc. - Sub. Notes 144A (a) 5.0% due 09/15/14 - A+ .................................. 472 474 GE Capital Commercial Mortgage Corp. - Ser. 2001-2 Cl. A4 6.59% due 08/11/33 - NA ................................. 550 607 Goldman Sachs Capital 6.345% due 02/15/34 - A- ................................ 160 167 Goldman Sachs Group, Inc. - Notes 7.35% due 10/01/09 - A+ ................................. $ 500 $ 569 Hartford Financial Services Group, Inc. - Sr. Notes 7.75% due 06/15/05 - A- ................................. 150 153 Kreditanstalt Fur Wiederaufbau - Notes 3.25% due 03/30/09 - AAA ................................ 500 491 Merrill Lynch & Co., Inc. 5.45% due 07/15/14 - A+ ................................. 170 176 Merrill Lynch & Co., Inc. - Notes 6.875% due 11/15/18 - A+ ................................ 120 139 Morgan Stanley Capital, Inc. - Pass Thru Certs. Ser. 1999-RM1 6.37% due 12/15/31 - NA ................................. 371 383 Morgan Stanley Group, Inc. 6.1% due 04/15/06 - A+ .................................. 1,065 1,103 Morgan Stanley Group, Inc. 6.75% due 04/15/11 - A+ ................................. 250 280 Prudential Commercial Mortgage Trust - Cl. A2 4.493% due 02/11/36 - AAA ............................... 450 444 Salomon Brothers Commercial & Mortgage Trust - Ser. 2000-C3 Pass Thru Certs Cl. A2 6.592% due 12/18/33 - AAA ............................... 500 553 Salomon Brothers Mortgage Securities Inc. - Pass Thru Certs - Ser. 2000-C1 Cl. A2 7.52% due 12/18/09 - AAA ................................ 300 341 Wells Fargo & Co. - Sub. Notes # 6.875% due 04/01/06 - A+ ................................ 1,100 1,147 ------ 8,477 Diversified Telecommunication Services - 1.2% BellSouth Corp. - Notes # 6.875% due 10/15/31 - A ................................. 200 227 British Telecommunications plc - Notes 8.375% due 12/15/10 - A- ................................ 200 240 8.875% due 12/15/30 - A- ................................ 130 174 France Telecom SA - Notes 8.7% due 03/01/06 - BBB+ ................................ 350 367 10.0% due 03/01/31 - BBB+ ............................... 100 136 GTE Corp. - Debs. 6.94% due 04/15/28 - A+ ................................. 100 111 Telefonica Europe BV - Notes 8.25% due 09/15/30 - A .................................. 100 134 Verizon Global Funding Corp. - Notes 4.375% due 06/01/13 - # A+ .............................. 370 361 Vodafone Group Plc 7.75% due 02/15/10 - A .................................. 500 580 ------ 2,330 Electric Utilities - 0.0% CalEnergy Co., Inc. - Bonds 8.48% due 09/15/28 - BBB- ............................... 60 79 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electric/Gas - 1.4% Alabama Power Co. - Sr. Notes 5.5% due 10/15/17 - A ................................... $ 100 $ 104 5.7% due 02/15/33 - A ................................... 80 82 Cincinnati Gas & Electric Co. - Debs 5.7% due 09/15/12 - BBB ................................. 300 318 Constellation Energy Group, Inc. - Notes 7.0% due 04/01/12 - BBB ................................. 240 274 Dominion Resources, Inc. 8.125% due 06/15/10 - BBB+ .............................. 200 235 Duke Energy Co. - Sr. Notes 5.625% due 11/30/12 - BBB ............................... 400 421 Niagara Mohawk Power Corp. 7.75% due 10/01/08 - A- ................................. 200 225 Oncor Electric Delivery Co. - Sr. Sec. Notes 6.375% due 05/01/12 - BBB ............................... 400 441 Ontario Hydro 6.1% due 01/30/08 - AA .................................. 100 107 Progress Energy, Inc. - Sr. Notes 7.1% due 03/01/11 - BBB- ................................ 500 562 ------ 2,769 Finance - 3.9% Ameritech Capital Funding Corp. 6.875% due 10/15/27 - A ................................. 60 66 Anardarko Finance Co. - Sr. Notes 6.75% due 05/01/11 - BBB+ ............................... 200 225 Countrywide Funding Corp. # 5.5% due 02/01/07 - A ................................... 200 207 Deutsche Telekom International Finance 8.75% due 06/15/30 - BBB+ ............................... 300 396 Devon Financing Corp. United L C - Notes 6.875% due 09/30/11 - BBB ............................... 400 453 Financing Corp. 8.6% due 09/26/19 - NA .................................. 150 205 General Electric Capital Corp. 6.0% due 06/15/12 - AAA ................................. 950 1,036 General Electric Capital Corp. 6.125% due 02/22/11 - AAA ............................... 1,150 1,260 Household Finance Corp. - Notes 8.0% due 07/15/10 - A ................................... 350 412 Household Finance Corp. - Sr. Unsub. Notes 5.875% due 02/01/09 - A ................................. 280 299 KFW International Finance, Inc. - Sr. Notes 5.25% due 06/28/06 - AAA ................................ 300 310 Lehman Brothers Holdings, Inc. - Notes 6.25% due 05/15/06 - A .................................. 500 520 Marsh & McLennan Cos., Inc. - Sr. Notes 4.85% due 02/15/13 - BBB ................................ 240 228 MBNA Corp. # 5.0% due 06/15/15 - BBB ................................. 250 246 National Rural Utilities Cooperative Finance - Notes 5.75% due 08/28/09 - A .................................. 700 748 Sprint Capital Corp. 6.875% due 11/15/28 - BBB- .............................. $ 150 $ 164 7.625% due 01/30/11 - BBB- .............................. 300 348 Sumitomo Bank International Finance NV - Notes 8.5% due 06/15/09 - BBB+ ................................ 100 117 Verizon Global Funding Corp. - Notes 7.25% due 12/01/10 - A+ ................................. 230 264 Washington Mutual Capital I 8.375% due 06/01/27 - BBB ............................... 60 67 Washington Mutual Finance Corp. - Sr. Notes # 6.25% due 05/15/06 - AA- ................................ 300 311 ------ 7,882 Financials - 0.1% Aetna Inc. 7.625% due 08/15/26 - A+ ................................ 100 120 Food & Drug Retailing - 0.4% Albertson's, Inc. - Notes 6.625% due 06/01/28 - BBB ............................... 50 52 Albertson's, Inc. - Sr. Notes 7.5% due 02/15/11 - BBB ................................. 345 400 CVS Corp. - Notes 4.875% due 09/15/14 - A- ................................ 100 100 Safeway, Inc. - Notes # 5.8% due 08/15/12 - BBB ................................. 150 158 ------ 710 Food Products - 0.9% Conagra Foods, Inc. - Notes 7.875% due 09/15/10 - BBB+ .............................. 250 294 Conagra, Inc. - Debs. 9.75% due 03/01/21 - BBB ................................ 75 106 General Mills, Inc. - Notes 6.0% due 02/15/12 - BBB+ ................................ 250 271 Kellogg Co. - Debs. - Ser. B 7.45% due 04/01/31 - BBB+ ............................... 100 126 Kraft Foods, Inc. - Notes 4.625% due 11/01/06 - BBB+ .............................. 300 306 Kraft Foods, Inc. - Notes # 5.25% due 10/01/13 - BBB+ ............................... 325 334 Sara Lee Corp. - Notes 6.25% due 09/15/11 - A+ ................................. 100 111 The Kroger Co. 8.05% due 02/01/10 - BBB ................................ 150 176 ------ 1,724 Foreign Government - 2.4% Government of Canada # 5.25% due 11/05/08 - AAA ................................ 125 132 Government of New Zealand - Debs. 8.75% due 12/15/06 - AA+ ................................ 120 132 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Foreign Government - Continued Hydro-Quebec 8.4% due 01/15/22 - A+ .................................. $ 100 $ 137 Kingdom of Spain 7.0% due 07/19/05 - AAA ................................. 250 256 Malaysia - Bonds 8.75% due 06/01/09 - A- ................................. 50 59 Manitoba Province Canada - Ser. BU 9.625% due 12/01/18 - AA- ............................... 300 438 Province of Ontario - Bonds 6.0% due 02/21/06 - AA .................................. 300 310 Province of Quebec - Debs. 7.5% due 07/15/23 - A+ .................................. 100 127 Province of Quebec # 7.125% due 02/09/24 - A+ ................................ 150 185 Republic of Greece - Notes 6.95% due 03/04/08 - A .................................. 405 445 Republic of Italy - Debs. # 6.875% due 09/27/23 - AA- ............................... 460 548 Republic of Korea - Unsub. Notes # 8.875% due 04/15/08 - A- ................................ 600 697 United Mexican States - Notes 9.875% due 02/01/10 - BBB- .............................. 970 1,192 United Mexican States - Notes Ser. A 8.3% due 08/15/31 - BBB- ................................ 200 234 ------ 4,892 Gas Utilities - 0.2% Sempra Energy - Notes 6.0% due 02/01/13 - BBB+ ................................ 400 427 Home Equity Loan - 0.1% Countrywide Home Loan Corp. 6.25% due 04/15/09 - A .................................. 250 270 Industrial Conglomerates - 0.2% Tyco International Group SA - Notes 6.0% due 11/15/13 - BBB ................................. 350 381 Insurance - 0.3% Allstate Corp. 7.2% due 12/01/09 - A+ .................................. 170 193 AXA - Sub Notes 8.6% due 12/15/30 - BBB+ ................................ 120 158 Hartford Life, Inc. - Debs. 7.65% due 06/15/27 - A- ................................. 50 60 Torchmark, Inc. - Debs. 8.25% due 08/15/09 - A+ ................................. 100 114 Travelers Property Casualty Corp. - Sr. Notes 7.75% due 04/15/26 - BBB+ ............................... 50 59 ------ 584 Machinery - 0.1% Caterpillar, Inc. - Debs. 8.0% due 02/15/23 - A ................................... 50 64 John Deere Capital Corp. - Global Notes 5.1% due 01/15/13 - A- .................................. 170 175 John Deere Capital Corp. - Notes 6.0% due 02/15/09 - A- .................................. $ 60 $ 65 ------ 304 Media - 1.4% Clear Channel Communications, Inc. 7.65% due 09/15/10 - BBB- ............................... 400 455 Comcast Cable Communications - Notes 8.875% due 05/01/17 - BBB ............................... 75 98 News America Holdings, Inc. - Debs. 7.7% due 10/30/25 - BBB- ................................ 100 119 News America Holdings, Inc. - Notes # 8.0% due 10/17/16 - BBB- ................................ 250 305 TCI Communications, Inc. - Sr. Notes 7.125% due 02/15/28 - BBB ............................... 70 79 The Walt Disney Co. - Sr. Notes 6.75% due 03/30/06 - BBB+ ............................... 1,000 1,042 Time Warner Entertainment, Inc. - Sr. Notes 8.375% due 07/15/33 - BBB+ .............................. 200 258 Time Warner, Inc. 7.625% due 04/15/31 - BBB+ .............................. 75 91 Time Warner, Inc. - Debs 7.25% due 10/15/17 - BBB+ ............................... 350 408 Viacom, Inc. 7.875% due 07/30/30 - A- ................................ 50 64 ------ 2,919 Metals & Mining - 0.1% ALCOA, Inc. - Notes 7.375% due 08/01/10 - A- ................................ 200 231 Multi-Utilities - 0.2% United Technologies Corp. - Notes 6.1% due 05/15/12 - A ................................... 180 198 United Utilities plc - Notes # 6.875% due 08/15/28 - BBB+ .............................. 100 112 ------ 310 Multiline Retail - 0.3% Federated Department Stores, Inc. 6.625% due 04/01/11 - BBB+ .............................. 200 224 Target Corp. - Notes 7.5% due 08/15/10 - A+ .................................. 100 117 Wal Mart Stores, Inc. 7.55% due 02/15/30 - AA ................................. 110 143 Wal-Mart Stores, Inc. - Debs. 6.75% due 10/15/23 - AA ................................. 100 116 ------ 600 Municipal - 0.3% Illinois Saint 5.1% due 06/01/33 - AA .................................. 230 221 Massachusetts Special Purpose Trust - Ser. BEC-1 Cl. A5 7.03% due 03/15/12 - AAA ................................ 150 167 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Municipal - Continued Tennessee Valley Authority 6.75% due 11/01/25 - AAA ................................ $ 260 $ 310 ------ 698 Oil & Gas - 0.8% Chevron Texaco Capital Co. - Notes 3.5% due 09/17/07 - AA .................................. 600 603 Norsk Hydro A/S 7.25% due 09/23/27 - A .................................. 75 90 Occidental Petroleum Corp. - Notes 6.75% due 01/15/12 - BBB+ ............................... 265 301 Pemex Project Funding Master Trust - Notes 7.375% due 12/15/14 - BBB- .............................. 260 289 Phillips Petroleum Co. - Debs. 6.65% due 07/15/18 - A- ................................. 50 57 Tosco Corp. 8.125% due 02/15/30 - A- ................................ 110 147 Union Oil Co. of California # 7.5% due 02/15/29 - BBB+ ................................ 60 72 ------ 1,559 Other Asset Backed - 0.1% Detroit Edison Securitization - Bonds Ser. 2001 1 Cl. A6 6.62% due 03/01/16 - AAA ................................ 250 286 Other Mortgage - 1.0% GMAC Commercial Mortgaged Securities, Inc. - CTF - Ser. 1998-C1 Cl. A2 6.7% due 05/15/30 - NA .................................. 900 967 LB Commercial Conduit Mortgage Trust - Ser. 1999-C2 Pass Thru Certs. Cl. A2 7.325% due 09/15/09 - NA ................................ 400 450 LU UBS Commercial Mortgage Trust - Ser. 2000-C5 Pass Thru Certs. Cl. A1 6.41% due 01/15/10 - AAA ................................ 571 603 ------ 2,020 Paper & Forest Products - 0.4% International Paper Co. - Notes 6.75% due 09/01/11 - BBB ................................ 250 280 MeadWestvaco Corp. - Notes # 6.85% due 04/01/12 - BBB ................................ 100 113 Westvaco Corp. - Notes 7.1% due 11/15/09 - BBB+ ................................ 35 39 Weyerhaeuser Co. 7.125% due 07/15/23 - BBB ............................... 130 147 Weyerhaeuser Co. - Notes 6.125% due 03/15/07 - BBB ............................... 198 209 ------ 788 Personal Products - 0.2% Procter & Gamble Co. - Debs. 6.45% due 01/15/26 - AA- ................................ 100 114 Unilever Capital 7.125% due 11/01/10 - A+ ................................ $ 200 $ 230 ------ 344 Pharmaceuticals - 0.6% Abbott Laboratories - Notes 5.625% due 07/01/06 - AA ................................ 250 259 Bristol Myers Squibb Co. - Notes 5.75% due 10/01/11 - A+ ................................. 300 321 Eli Lilly & Co. - Notes # 7.125% due 06/01/25 - AA ................................ 80 97 Schering Plough Corp. - Sr. Notes 5.3% due 12/01/13 - A- .................................. 250 261 Wyeth - Notes 5.25% due 03/15/13 - A .................................. 200 208 ------ 1,146 Real Estate Investment Trust - 0.4% Simon Property Group, Inc. - Notes 6.375% due 11/15/07 - BBB ............................... 700 747 Real Estate Operations - 0.2% EOP Operating LP - Notes 6.8% due 01/15/09 - BBB+ ................................ 150 164 EOP Operating, Ltd. Partenership - Notes 7.0% due 07/15/11 - BBB+ ................................ 250 282 ------ 446 Road & Rail - 0.7% Canadian National Railway Co. - Notes 6.375% due 10/15/11 - BBB+ .............................. 300 333 CSX Corp. - Debs. 7.45% due 05/01/07 - BBB ................................ 125 136 Norfolk Southern Corp. - Notes 7.35% due 05/15/07 - BBB ................................ 855 925 Union Pacific Corp. - Debs. 6.625% due 02/01/29 - BBB ............................... 85 94 ------ 1,488 Specialty Retail - 0.0% Dayton Hudson Corp. - Debs. # 6.75% due 01/01/28 - A+ ................................. 25 29 U.S. Government Agencies - 43.5% Federal Home Loan Bank - Bonds 3.875% due 06/14/13 - # AAA ............................. 1,750 1,689 4.5% due 06/01/18 - AAA ................................. 876 875 Federal Home Loan Bank - Disc. Notes 5.125% due 03/06/06 - AAA ............................... 1,400 1,433 Federal Home Loan Bank - Sr. Notes 5.8% due 09/02/08 - AAA ................................. 225 241 Federal Home Loan Mortgage Corp. - Bonds 4.0% due 09/01/18 - AAA ................................. 225 220 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 4.0% due 10/01/18 - AAA ................................. $ 662 $ 649 4.5% due 08/01/18 - AAA ................................. 1,378 1,377 4.5% due 11/01/18 - AAA ................................. 343 342 4.5% due 04/01/19 - AAA ................................. 267 266 4.5% due 06/01/19 - AAA ................................. 242 241 4.5% due 05/01/24 - AAA ................................. 243 238 4.5% due 08/01/33 - AAA ................................. 331 320 4.5% due 10/01/33 - AAA ................................. 188 181 5.0% due 01/01/18 - AAA ................................. 735 747 5.0% due 02/01/18 - AAA ................................. 881 895 5.0% due 03/01/18 - AAA ................................. 322 327 5.0% due 06/01/23 - AAA ................................. 244 245 5.0% due 04/01/24 - AAA ................................. 381 382 5.0% due 06/01/33 - AAA ................................. 483 481 5.0% due 09/01/33 - AAA ................................. 904 899 5.0% due 10/01/33 - AAA ................................. 1,365 1,358 5.0% due 05/01/34 - AAA ................................. 242 240 5.0% due 06/01/34 - AAA ................................. 237 235 5.0% due 07/01/34 - AAA ................................. 483 480 5.0% due 08/01/34 - AAA ................................. 689 685 5.5% due 06/01/16 - AAA ................................. 190 197 5.5% due 03/01/17 - AAA ................................. 114 118 5.5% due 06/01/17 - AAA ................................. 170 176 5.5% due 01/01/18 - AAA ................................. 307 317 5.5% due 10/01/18 - AAA ................................. 149 154 5.5% due 02/01/23 - AAA ................................. 454 465 5.5% due 04/01/32 - AAA ................................. 128 130 5.5% due 01/01/33 - AAA ................................. 671 683 5.5% due 02/01/33 - AAA ................................. 833 847 5.5% due 04/01/33 - AAA ................................. 845 860 5.5% due 06/01/33 - AAA ................................. 366 373 5.5% due 12/01/33 - AAA ................................. 261 266 5.5% due 01/01/34 - AAA ................................. 349 355 5.5% due 02/01/34 - AAA ................................. 454 461 5.5% due 03/01/34 - AAA ................................. 196 200 5.5% due 05/01/34 - AAA ................................. 235 239 5.5% due 06/01/34 - AAA ................................. 296 301 5.5% due 09/01/34 - AAA ................................. 242 246 5.5% due 12/01/34 - AAA ................................. 400 407 6.0% due 08/01/14 - AAA ................................. 60 63 6.0% due 10/01/14 - AAA ................................. 132 138 6.0% due 07/01/16 - AAA ................................. 100 105 6.0% due 11/01/16 - AAA ................................. 57 60 6.0% due 02/01/17 - AAA ................................. 120 126 6.0% due 02/01/17 - AAA ................................. 105 110 6.0% due 06/01/22 - AAA ................................. 132 137 6.0% due 05/01/29 - AAA ................................. 156 161 6.0% due 08/01/29 - AAA ................................. 110 113 6.0% due 07/01/31 - AAA ................................. 84 87 6.0% due 01/01/32 - AAA ................................. 91 94 6.0% due 02/01/32 - AAA ................................. 523 541 6.0% due 11/01/32 - AAA ................................. 536 555 6.0% due 12/01/32 - AAA ................................. 361 373 6.0% due 02/01/33 - AAA ................................. 216 223 6.0% due 11/01/33 - AAA ................................. $ 199 $ 205 6.0% due 01/01/34 - AAA ................................. 415 429 6.0% due 10/01/34 - AAA ................................. 298 308 6.5% due 11/01/15 - AAA ................................. 16 17 6.5% due 07/01/16 - AAA ................................. 73 78 6.5% due 11/01/16 - AAA ................................. 98 104 6.5% due 05/01/17 - AAA ................................. 58 62 6.5% due 01/01/21 - AAA ................................. 33 35 6.5% due 06/01/21 - AAA ................................. 128 135 6.5% due 09/01/28 - AAA ................................. 33 35 6.5% due 06/01/29 - AAA ................................. 7 7 6.5% due 07/01/29 - AAA ................................. 105 111 6.5% due 11/01/30 - AAA ................................. 44 47 6.5% due 12/01/30 - AAA ................................. 21 22 6.5% due 03/01/31 - AAA ................................. 154 162 6.5% due 05/01/31 - AAA ................................. 175 184 6.5% due 07/01/31 - AAA ................................. 18 19 6.5% due 11/01/31 - AAA ................................. 137 143 6.5% due 12/01/31 - AAA ................................. 282 296 6.5% due 04/01/32 - AAA ................................. 74 78 6.5% due 05/01/32 - AAA ................................. 28 29 6.5% due 08/01/32 - AAA ................................. 316 332 6.5% due 08/01/32 - AAA ................................. 141 148 7.0% due 02/01/16 - AAA ................................. 46 49 7.0% due 04/01/29 - AAA ................................. 125 133 7.0% due 02/01/30 - AAA ................................. 80 85 7.0% due 04/01/31 - AAA ................................. 10 11 7.0% due 05/01/31 - AAA ................................. 36 38 7.0% due 07/01/31 - AAA ................................. 24 26 7.0% due 08/01/31 - AAA ................................. 57 61 7.0% due 04/01/32 - AAA ................................. 122 130 7.1% due 04/10/07 - AAA ................................. 2,500 2,705 7.5% due 02/01/16 - AAA ................................. 16 17 7.5% due 09/01/30 - AAA ................................. 10 10 7.5% due 11/01/30 - AAA ................................. 49 52 7.5% due 03/01/32 - AAA ................................. 95 102 8.0% due 02/01/30 - AAA ................................. 28 30 8.0% due 09/01/30 - AAA ................................. 14 15 8.5% due 10/01/31 - AAA ................................. 44 48 Federal Home Loan Mortgage Corp. - Debs. 5.75% due 04/15/08 - AAA ................................ 2,500 2,670 5.75% due 01/15/12 - AAA ................................ 600 654 6.0% due 06/15/11 - AAA ................................. 1,000 1,102 7.0% due 07/15/05 - AAA ................................. 855 874 6.25% due 07/15/32 - AAA ................................ 50 57 Federal Home Loan Mortgage Corp. - Notes 2.75% due 08/15/06 - AAA ................................ 1,300 1,291 4.0% due 05/01/09 - AAA ................................. 130 130 5.0% due 11/01/07 - AAA ................................. 71 72 5.0% due 10/01/09 - AAA ................................. 93 94 6.0% due 01/01/09 - AAA ................................. 61 62 6.625% due 09/15/09 - AAA ............................... 320 358 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 National Mortgage Assoc. - Bonds 4.0% due 09/01/18 - AAA ................................. $ 196 $ 192 4.0% due 12/01/18 - AAA ................................. 303 297 4.0% due 03/01/19 - AAA ................................. 383 374 4.0% due 04/01/19 - AAA ................................. 97 95 4.5% due 04/01/18 - AAA ................................. 541 541 4.5% due 05/01/18 - AAA ................................. 907 907 4.5% due 10/01/18 - AAA ................................. 745 744 4.5% due 12/01/18 - AAA ................................. 743 742 4.5% due 09/01/33 - AAA ................................. 207 200 4.5% due 10/01/33 - AAA ................................. 516 499 4.5% due 06/01/34 - AAA ................................. 129 125 5.0% due 12/01/17 - AAA ................................. 399 406 5.0% due 04/01/18 - AAA ................................. 799 813 5.0% due 06/01/18 - AAA ................................. 366 373 5.0% due 06/01/19 - AAA ................................. 176 179 5.0% due 07/01/19 - AAA ................................. 941 957 5.0% due 03/01/23 - AAA ................................. 827 841 5.0% due 08/01/23 - AAA ................................. 537 539 5.0% due 11/01/32 - AAA ................................. 395 393 5.0% due 06/01/33 - AAA ................................. 987 981 5.0% due 08/01/33 - AAA ................................. 1,146 1,139 5.0% due 09/01/33 - AAA ................................. 759 755 5.0% due 09/01/33 - AAA ................................. 969 963 5.0% due 12/01/33 - AAA ................................. 591 587 5.0% due 05/01/34 - AAA ................................. 374 372 5.0% due 07/01/34 - AAA ................................. 588 584 5.0% due 11/01/34 - AAA ................................. 400 397 5.5% due 03/01/16 - AAA ................................. 40 42 5.5% due 04/01/16 - AAA ................................. 30 31 5.5% due 02/01/17 - AAA ................................. 203 210 5.5% due 04/01/17 - AAA ................................. 136 141 5.5% due 07/01/17 - AAA ................................. 221 229 5.5% due 09/01/17 - AAA ................................. 360 373 5.5% due 05/01/19 - AAA ................................. 146 151 5.5% due 02/01/23 - AAA ................................. 347 355 5.5% due 01/01/32 - AAA ................................. 665 676 5.5% due 12/01/32 - AAA ................................. 411 418 5.5% due 12/25/32 - AAA (b) ............................. 300 305 5.5% due 02/01/33 - AAA ................................. 440 448 5.5% due 03/01/33 - AAA ................................. 356 362 5.5% due 04/01/33 - AAA ................................. 1,491 1,516 5.5% due 06/01/33 - AAA ................................. 1,008 1,024 5.5% due 08/01/33 - AAA ................................. 1,486 1,510 5.5% due 12/01/33 - AAA ................................. 827 840 5.5% due 01/01/34 - AAA ................................. 724 736 5.5% due 05/01/34 - AAA ................................. 277 282 5.5% due 06/01/34 - AAA ................................. 506 514 5.5% due 08/01/34 - AAA ................................. 281 285 5.5% due 11/01/34 - AAA ................................. 350 355 5.5% due 01/01/35 - AAA ................................. 450 457 6.0% due 05/01/14 - AAA ................................. 28 29 6.0% due 02/01/16 - AAA ................................. $ 86 $ 90 6.0% due 07/01/17 - AAA ................................. 336 352 6.0% due 08/01/17 - AAA ................................. 150 157 6.0% due 01/01/29 - AAA ................................. 122 127 6.0% due 08/01/30 - AAA ................................. 196 203 6.0% due 07/01/31 - AAA ................................. 81 85 6.0% due 11/01/31 - AAA ................................. 247 255 6.0% due 01/01/32 - AAA ................................. 282 292 6.0% due 02/01/32 - AAA ................................. 101 104 6.0% due 03/01/32 - AAA ................................. 304 315 6.0% due 04/01/32 - AAA ................................. 176 182 6.0% due 10/01/32 - AAA ................................. 322 333 6.0% due 12/01/32 - AAA ................................. 173 179 6.0% due 04/01/33 - AAA ................................. 261 270 6.0% due 05/01/33 - AAA ................................. 504 522 6.0% due 02/01/34 - AAA ................................. 229 237 6.0% due 04/01/34 - AAA ................................. 194 200 6.0% due 08/01/34 - AAA ................................. 453 468 6.0% due 09/01/34 - AAA ................................. 385 398 6.125% due 03/15/12 - AAA ............................... 1,000 1,111 6.5% due 02/01/15 - AAA ................................. 31 33 6.5% due 07/01/16 - AAA ................................. 211 224 6.5% due 07/01/17 - AAA ................................. 74 79 6.5% due 03/01/22 - AAA ................................. 182 192 6.5% due 11/01/29 - AAA ................................. 66 69 6.5% due 12/01/30 - AAA ................................. 53 56 6.5% due 01/01/31 - AAA ................................. 5 5 6.5% due 02/01/31 - AAA ................................. 93 97 6.5% due 05/01/31 - AAA ................................. 6.5% due 07/01/31 - AAA ................................. 48 50 6.5% due 08/01/31 - AAA ................................. 59 62 6.5% due 12/01/31 - AAA ................................. 114 120 6.5% due 02/01/32 - AAA ................................. 121 127 6.5% due 04/01/32 - AAA ................................. 425 446 6.5% due 05/01/32 - AAA ................................. 513 539 6.5% due 07/01/32 - AAA ................................. 393 413 6.5% due 01/01/34 - AAA ................................. 208 218 7.0% due 12/01/15 - AAA ................................. 56 59 7.0% due 03/01/16 - AAA ................................. 43 45 7.0% due 01/01/30 - AAA ................................. 70 74 7.0% due 02/01/31 - AAA ................................. 77 82 7.0% due 04/01/31 - AAA ................................. 19 20 7.0% due 05/01/31 - AAA ................................. 73 78 7.0% due 08/01/31 - AAA ................................. 119 126 7.0% due 12/01/31 - AAA ................................. 157 167 7.0% due 02/01/32 - AAA ................................. 93 99 7.0% due 05/01/32 - AAA ................................. 44 47 7.0% due 10/01/32 - AAA ................................. 104 111 7.5% due 10/01/15 - AAA ................................. 41 43 7.5% due 09/01/30 - AAA ................................. 99 107 7.5% due 11/01/30 - AAA ................................. 13 13 7.5% due 06/01/31 - AAA ................................. 101 108 7.5% due 08/01/31 - AAA ................................. 110 118 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 8.0% due 08/01/30 - AAA ................................. $ 23 $ 25 8.0% due 09/01/31 - AAA ................................. 115 125 8.5% due 09/01/30 - AAA ................................. 24 26 7.125% due 01/15/30 - AAA ............................... 209 263 7.25% due 05/15/30 - # AAA .............................. 150 192 Federal National Mortgage Assoc. - Debs. 6.375% due 06/15/09 - AAA ............................... 800 883 6.25% due 05/15/29 - AAA ................................ 915 1,041 6.625% due 11/15/30 - AAA ............................... 130 155 Federal National Mortgage Assoc. - Notes 4.0% due 11/01/10 - AAA ................................. 382 380 5.5% due 01/01/09 - AAA ................................. 68 69 6.0% due 10/01/12 - AAA ................................. 90 94 6.625% due 09/15/09 - AAA ............................... 750 837 5.0% due 01/15/07 - # AAA ............................... 400 414 Government National Mortgage Assoc. - Bonds 4.5% due 05/15/19 - AAA ................................. 95 96 4.5% due 08/15/33 - AAA ................................. 178 174 5.0% due 05/15/18 - AAA ................................. 174 178 5.0% due 08/15/33 - AAA ................................. 400 401 5.0% due 09/15/33 - AAA ................................. 171 172 5.0% due 10/15/33 - AAA ................................. 425 426 5.0% due 06/15/34 - AAA ................................. 291 291 5.5% due 11/15/32 - AAA ................................. 867 887 5.5% due 03/15/33 - AAA ................................. 334 341 5.5% due 04/15/33 - AAA ................................. 329 336 5.5% due 09/15/33 - AAA ................................. 326 334 5.5% due 03/15/34 - AAA ................................. 298 305 5.5% due 06/15/34 - AAA ................................. 159 162 5.5% due 11/15/34 - AAA ................................. 250 255 6.0% due 04/15/17 - AAA ................................. 111 117 6.0% due 07/15/29 - AAA ................................. 152 157 6.0% due 05/15/31 - AAA ................................. 166 173 6.0% due 04/15/32 - AAA ................................. 212 220 6.0% due 11/15/32 - AAA ................................. 367 381 6.0% due 01/15/33 - AAA ................................. 187 193 6.0% due 04/15/33 - AAA ................................. 152 158 6.0% due 11/15/33 - AAA ................................. 230 238 6.0% due 01/15/34 - AAA ................................. 109 113 6.0% due 07/15/34 - AAA ................................. 150 155 6.5% due 01/15/16 - AAA ................................. 34 37 6.5% due 05/15/28 - AAA ................................. 164 173 6.5% due 04/15/31 - AAA ................................. 72 76 6.5% due 05/15/31 - AAA ................................. 237 250 6.5% due 08/15/31 - AAA ................................. 27 28 6.5% due 01/15/32 - AAA ................................. 170 180 6.5% due 02/15/32 - AAA ................................. 165 173 6.5% due 05/15/32 - AAA ................................. 150 158 6.5% due 01/15/33 - AAA ................................. 191 201 7.0% due 08/15/29 - AAA ................................. 71 76 7.0% due 12/15/30 - AAA ................................. $ 159 $ 170 7.0% due 03/15/31 - AAA ................................. 179 190 7.0% due 06/15/31 - AAA ................................. 28 30 7.0% due 08/15/31 - AAA ................................. 55 58 7.0% due 09/15/31 - AAA ................................. 99 105 7.0% due 05/15/32 - AAA ................................. 65 69 7.5% due 08/15/29 - AAA ................................. 79 85 7.5% due 09/15/30 - AAA ................................. 46 49 7.5% due 01/15/31 - AAA ................................. 10 10 7.5% due 06/15/32 - AAA ................................. 100 108 8.0% due 02/15/31 - AAA ................................. 55 59 8.0% due 04/15/31 - AAA ................................. 52 56 8.0% due 07/15/31 - AAA ................................. 1 1 8.5% due 09/15/30 - AAA ................................. 7 8 9.0% due 01/15/31 - AAA ................................. 21 23 ------- 87,920 U.S. Government - 22.6% U.S. Treasury - Bonds 5.375% due 02/15/31 - # AAA ............................. 165 178 5.5% due 08/15/28 - # AAA .............................. 270 292 6.125% due 11/15/27 - # AAA ............................ 520 607 6.125% due 08/15/29 - # AAA ............................. 100 117 6.25% due 05/15/30 - # AAA .............................. 2,300 2,750 6.5% due 11/15/26 - AAA ................................. 300 364 6.625% due 02/15/27 - # AAA ............................. 295 364 6.75% due 08/15/26 - # AAA .............................. 775 967 7.25% due 05/15/16 - # AAA .............................. 1,000 1,252 7.5% due 11/15/16 - # AAA ............................... 2,200 2,811 7.875% due 02/15/21 - # AAA ............................. 900 1,216 8.125% due 08/15/19 - # AAA ............................. 1,000 1,365 8.75% due 08/15/20 - # AAA .............................. 1,400 2,024 8.875% due 08/15/17 - # AAA ............................ 1,450 2,055 9.25% due 02/15/16 - AAA ................................ 800 1,142 10.375% due 11/15/12 - # AAA ............................ 3,300 3,934 11.25% due 02/15/15 - # AAA ............................. 260 409 11.75% due 02/15/05 - # AAA ............................. 250 253 11.75% due 11/15/14 - AAA ............................... 465 631 12.0% due 08/15/13 - # AAA .............................. 1,000 1,289 12.75% due 11/15/10 - AAA ............................... 1,000 1,084 13.25% due 05/15/14 - # AAA ............................. 1,200 1,667 U.S. Treasury - Notes 1.25% due 05/31/05 - # AAA .............................. 100 100 2.0% due 05/15/06 - # AAA ............................... 200 198 3.125% due 04/15/09 - AAA ............................... 600 591 3.25% due 08/15/07 - # AAA .............................. 525 526 3.375% due 11/15/08 - # AAA ............................. 2,700 2,693 3.375% due 12/15/08 - # AAA ............................. 1,000 997 4.25% due 08/15/13 - # AAA .............................. 400 403 4.625% due 05/15/06 - # AAA ............................. 100 102 4.75% due 11/15/08 - # AAA .............................. 1,200 1,257 4.75% due 05/15/14 - # AAA .............................. 230 240 5.0% due 02/15/11 - # AAA ............................... 1,100 1,170 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- BOND INDEX FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government - Continued 5.0% due 08/15/11 - # AAA ............................ $ 2,035 $ 2,166 5.5% due 02/15/08 - # AAA ............................ 500 533 6.0% due 08/15/09 - # AAA ............................ 500 551 6.5% due 10/15/06 - # AAA ............................ 5,550 5,883 7.0% due 07/15/06 - # AAA ............................ 1,450 1,537 -------- 45,718 Wireless Telecommunications Services - 0.2% AT&T Wireless, Inc. - Notes 7.875% due 03/01/11 - A .............................. 300 354 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $193,908) 98.1% 198,123 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 22% State Street Navigator Securities Lending Portfolio ......................................... 44,410 44,410 SHORT-TERM INVESTMENTS - 1.6% Investment in joint trading account 2.29% due 01/03/05 (Cost $3,315) ........................................ 3,315 3,315 ------- -------- TOTAL INVESTMENTS- (Cost $241,633) 121.7% 245,848 Payables, less cash and receivables- (21.7)% (43,913) ------- -------- NET ASSETS- 100.0% $201,935 ======= ======== # At December 31, 2004 all or portion of this security was out on loan. (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 December 31, 2004, securities aggregated $474 or 0.2% of net assets of the Portfolio. (b) To Be Announced. ** Bond ratings are not audited. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $115 2.71% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At December 31, 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 - -------------------------- ------------------- $43,674 $44,410 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, 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, 2004, 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such as that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparts to perform under the contract. 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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $47 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Standish Mellon Asset Management Company, LLC, which under John Hancock's 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 JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $46,456 $35,536 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $241,659 $5,436 $(1,247) $4,189 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss or difference in accretion/amortization. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $-- $4,189 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 - ---- ------------------ ---------------------- ----------------- 2004 $9,264 $ 310 $ 91 2003 9,830 1,105 689 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Bond Index Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Bond Index Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Earnings Growth Fund Fidelity Management & Research Company Joseph Day - -------------------------------------------------------------------------------- .. The manager employs a bottom-up research approach to identify companies with above average, long-term growth potential and that are reasonably priced. Fund Commentary Performance: For the year 2004, the Earnings Growth Fund returned +2.65%, underperforming the +6.30% return of the Russell 1000 Growth Index. Environment: The strong fourth-quarter rally helped equities to post solid returns for 2004 overall, with the S&P 500 Index gaining more than 10%. This marked the first time since 1999 that the U.S. stock market posted gains two years in a row. While Technology issues were squarely in positive territory, the group lagged the broader market, with the technology-heavy NASDAQ Composite Index gaining 8.6%. Small-caps were particularly strong performers for the year, with the Russell 2000 Index gaining another 18% following a gain in 2003 of almost 50%. The Fund underperformed the Russell 1000 Growth Index for the year. Security selection in Technology detracted from results, as the portfolio underweighted a computer hardware company that benefited from the success of its portable digital music devices. Security selection in Consumer Discretionary also detracted from the portfolio's performance. On the flip side, an overweighting in Energy stocks helped relative returns for the year. Specifically, oil service stocks performed well as the price of oil rose during 2004. The Fund also benefited from security selection in Consumer Staples stocks. [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/96 (Fund Inception Date) Earnings Earnings Growth Fund Growth Benchmark (1) ----------- -------------------- Apr-96 $10,000 $10,000 May-96 10,252 10,204 Jun-96 10,020 9,896 Jul-96 9,186 9,128 Aug-96 9,881 9,622 Sep-96 10,473 10,233 Oct-96 10,325 10,113 Nov-96 10,408 10,709 Dec-96 10,269 10,529 Jan-97 9,994 10,994 Feb-97 9,827 10,752 Mar-97 9,079 10,145 Apr-97 9,186 10,393 May-97 10,176 11,325 Jun-97 10,693 11,638 Jul-97 10,907 12,752 Aug-97 10,950 12,627 Sep-97 11,734 13,266 Oct-97 11,371 12,601 Nov-97 11,547 12,734 Dec-97 11,980 12,900 Jan-98 11,743 12,668 Feb-98 12,727 13,859 Mar-98 13,429 14,440 Apr-98 13,656 14,636 May-98 13,098 14,035 Jun-98 14,211 14,432 Jul-98 14,045 13,814 Aug-98 11,448 11,177 Sep-98 12,370 12,022 Oct-98 13,332 12,907 Nov-98 14,295 13,777 Dec-98 16,660 15,204 Jan-99 17,539 15,660 Feb-99 16,892 14,894 Mar-99 19,063 15,724 Apr-99 20,313 16,441 May-99 20,063 16,229 Jun-99 21,164 17,362 Jul-99 20,863 16,810 Aug-99 21,977 16,635 Sep-99 22,828 16,493 Oct-99 26,427 17,768 Nov-99 29,295 19,609 Dec-99 36,370 23,003 Jan-00 37,510 22,999 Feb-00 44,729 27,833 Mar-00 37,380 27,861 Apr-00 32,525 25,156 May-00 30,325 23,322 Jun-00 34,862 25,796 Jul-00 32,535 24,163 Aug-00 36,543 27,807 Sep-00 32,968 26,447 Oct-00 30,025 24,638 Nov-00 21,906 19,284 Dec-00 23,328 20,301 Jan-01 24,488 21,460 Feb-01 18,721 17,747 Mar-01 15,606 15,208 Apr-01 18,495 17,743 May-01 18,248 17,659 Jun-01 17,499 17,668 Jul-01 16,633 16,477 Aug-01 15,130 15,283 Sep-01 12,868 12,757 Oct-01 13,666 14,097 Nov-01 14,501 15,616 Dec-01 14,713 16,209 Jan-02 13,396 15,682 Feb-02 12,497 14,793 Mar-02 13,256 15,922 Apr-02 12,970 15,079 May-02 12,490 14,715 Jun-02 11,117 13,353 Jul-02 10,118 12,619 Aug-02 10,152 12,657 Sep-02 9,438 11,344 Oct-02 10,094 12,385 Nov-02 10,636 13,057 Dec-02 9,948 12,155 Jan-03 9,803 11,859 Feb-03 9,652 11,805 Mar-03 9,912 12,024 Apr-03 10,462 12,913 May-03 10,924 13,557 Jun-03 10,992 13,745 Jul-03 11,177 14,087 Aug-03 11,433 14,438 Sep-03 11,299 14,283 Oct-03 11,823 15,086 Nov-03 11,917 15,244 Dec-03 12,415 15,772 Jan-04 12,586 16,093 Feb-04 12,660 16,196 Mar-04 12,392 15,895 Apr-04 12,308 15,711 May-04 12,429 16,003 Jun-04 12,627 16,203 Jul-04 12,002 15,288 Aug-04 11,930 15,213 Sep-04 11,945 15,357 Oct-04 12,048 15,597 Nov-04 12,353 16,133 Dec-04 12,743 16,766 Value on 12/31/04: - ------------------ $12,743 Earnings Growth Fund $16,766 Earnings Growth Benchmark(1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Microsoft Corp. 5.2% Pfizer, Inc. 3.9% General Electric Co. 3.4% Intel Corp. 3.4% Johnson & Johnson 2.9% Wal-Mart Stores, Inc. 2.7% Procter & Gamble Co. 2.6% Cisco Systems, Inc. 2.6% Gillette Co. 2.5% Dell, Inc. 2.1% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Earnings Earnings Growth Fund Growth Fund Benchmark/1/ ----------- -------------------- 1 Year 2.65% 6.30% 3 Years -4.67% 1.13% 5 Years -18.92% -6.13% Since Inception (5/1/96) 2.83% 6.14% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Information Technology 27.8% Health Care 20.8% Consumer Discretionary 13.8% Industrials 11.7% Consumer Staples 11.6% Financials 7.2% Energy 2.7% Telecommunication Services 2.6% Materials 0.9% Governments 0.9% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Earnings Growth Fund Benchmark represents the Russell Mid Cap Growth Index from May 1996 to April 2002 and then the Russell 1000 Growth Index from May 2002 to present. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Earnings Growth Fund Fidelity Management & Research Company Joseph Day - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As an Earnings Growth Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,009.30 Expense paid per $1,000* $ 5.36 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.80 Expense paid per $1,000* $ 5.39 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $623 of securities loaned (Note B)) .................................... $ 156,164 Net unrealized appreciation of investments ........................ 24,533 Short-term investments at value ................................... 3,688 --------- Total investments ........................................... 184,385 Receivable for: Investments sold ............................................... 19 Dividends ...................................................... 152 --------- Total assets ...................................................... 184,556 --------- LIABILITIES Payables for: Fund shares purchased .......................................... 130 Collateral for securities on loan .............................. 642 Accrued operating expenses ..................................... 39 --------- Total liabilities ................................................. 811 --------- Net assets ........................................................ $ 183,745 ========= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ............................................. 22,087 --------- Net asset value per share ......................................... $ 8.32 ========= Composition of net assets: Capital paid-in ................................................ $ 468,016 Accumulated net realized loss on investments ................... (308,804) Net unrealized appreciation of investments ..................... 24,533 --------- Net assets ........................................................ $ 183,745 ========= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 28 Dividends (net of foreign withholding tax of $1) ........................................................ 3,312 Securities lending ............................................... 27 ------- Total investment income ............................................. 3,367 ------- EXPENSES Investment advisory fee .......................................... 1,791 Auditors fees .................................................... 26 Custodian fees ................................................... 71 Legal fees ....................................................... 32 Printing & mailing fees .......................................... 32 Trustees' fees ................................................... 6 Other fees ....................................................... 6 ------- Total expenses ...................................................... 1,964 Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (18) ------- Net expenses ........................................................ 1,946 ------- Net investment income ............................................... 1,421 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................. 8,176 Change in unrealized depreciation on investments ................................................... (4,961) ------- Net realized and unrealized gain .................................... 3,215 ------- Net increase in net assets resulting from operations ....................................................... $ 4,636 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Earnings Growth Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 1,421 $ 301 Net realized gain ................................................... 8,176 2,598 Change in net unrealized appreciation (depreciation) ................ (4,961) 36,150 -------- -------- Net increase in net assets resulting from operations ............. 4,636 39,049 Distributions to shareholders from: Net investment income ............................................... (1,421) (118) Capital paid-in ..................................................... (3,010) -------- -------- Decrease in net assets resulting from distributions .............. (1,421) (3,128) From fund share transactions: Proceeds from shares sold ........................................... 25,045 40,423 Distributions reinvested ............................................ 1,421 3,128 Payment for shares redeemed ......................................... (42,301) (42,966) -------- -------- Increase (decrease) in net assets from fund share transactions ... (15,835) 585 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .................................. (12,620) 36,506 NET ASSETS Beginning of Period ................................................. 196,365 159,859 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ......................................... $183,745 $196,365 ======== ======== Analysis of fund share transactions: Sold ................................................................ 3,063 5,521 Reinvested .......................................................... 176 388 Redeemed ............................................................ (5,194) (5,896) -------- -------- Net increase (decrease) in fund shares outstanding ..................... (1,955) 13 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Earnings Growth Fund ---------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------- 2004 2003(c)(g) 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) ................ 0.04 0.01 (0.04) (0.06) (0.05) Net Realized and Unrealized Gain (Loss) on Investment(a) ............................. 0.17 1.64 (3.15) (5.70) (10.49) -------- -------- -------- -------- -------- Total From Investment Operations ............ 0.21 1.65 (3.19) (5.76) (10.54) Less Distributions: Distribution from Net Investment Income ..... (0.06) (f) Distribution from Net Realized Gains on Investments .............................. (0.41) Distribution from Excess of Net Investment Income/Gains ............................. (1.61) Distribution from Capital Paid-in ........... (0.13) (1.06) -------- -------- -------- -------- -------- Total Distributions ......................... (0.06) (0.13) (3.08) -------- -------- -------- -------- -------- Net Assets Value at End of Period .............. 8.32 $ 8.17 $ 6.65 $ 9.84 $ 15.60 ======== ======== ======== ======== ======== Total Investment Return(b) ..................... 2.65% 24.80% (32.39)% (36.93)% (35.86)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................... 1.05%(e) 1.05%(d) 1.04% 0.94% 0.85% Ratio of Net Investment Income (Loss) to Average Net Assets ....................... 0.76% 0.17% (0.42)% (0.49)% (0.43)% Portfolio Turnover Rate ..................... 30.41% 124.28% 192.54% 111.69% 140.94% Net Assets End of Period (000s Omitted) ........ $183,745 $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) Amount less than $0.01. (g) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.2% Boeing Co. .............................................. 36,900 $1,910 Precision Castparts Corp. ............................... 4,300 283 ------ 2,193 Air Freight & Couriers - 1.3% United Parcel Service, Inc. - Cl. B ..................... 28,900 2,470 Auto Components - 0.2% Gentex Corp. # .......................................... 8,500 315 Banks - 1.7% Bank of America Corp. ................................... 32,000 1,504 JP Morgan Chase & Co. ................................... 15,840 618 Silicon Valley Bancshares * ............................. 8,700 390 Wachovia Corp. .......................................... 13,600 715 ------ 3,227 Beverages - 1.2% Coca-Cola Co. ........................................... 18,300 762 PepsiCo, Inc. ........................................... 28,800 1,503 ------ 2,265 Biotechnology - 2.5% Amgen, Inc. * ........................................... 14,400 924 Biogen IDEC, Inc. * ..................................... 21,600 1,439 Cephalon, Inc. # * ...................................... 6,200 315 Genetech, Inc. * ........................................ 30,400 1,655 Millennium Pharmaceuticals, Inc. * ...................... 18,000 218 ------ 4,551 Chemicals - 0.9% Dow Chemical Co. ........................................ 10,700 530 Monsanto Co. ............................................ 7,900 439 Praxair, Inc. ........................................... 15,300 675 ------ 1,644 Commercial Services & Supplies - 2.4% Automatic Data Processing, Inc. ......................... 24,200 1,073 Cintas Corp. ............................................ 8,700 382 First Data Corp. ........................................ 20,700 881 Herman Miller, Inc. ..................................... 18,000 497 Paychex, Inc. ........................................... 20,700 705 Waste Management, Inc. .................................. 30,100 901 ------ 4,439 Communications Equipment - 3.9% Cisco Systems, Inc. * ................................... 241,415 4,659 Juniper Networks, Inc. * ................................ 19,400 528 Qualcomm, Inc. .......................................... 46,700 1,980 ------ 7,167 Computers & Peripherals - 5.1% Dell, Inc. * ............................................ 89,600 3,776 EMC Corp. * ............................................. 129,900 1,931 International Business Machines Corp. ................... 37,300 $3,677 ------ 9,384 Credit Card - 0.3% MBNA Corp. .............................................. 20,600 581 Diversified Financials - 2.3% American Express Co. .................................... 39,800 2,244 Citigroup, Inc. ......................................... 12,003 578 Goldman Sachs Group, Inc. ............................... 5,300 552 Morgan Stanley, Dean Witter, Discover & Co. ............. 14,200 788 ------ 4,162 Diversified Telecommunication Services - 2.1% SBC Communications, Inc. ................................ 69,400 1,788 Verizon Communications .................................. 50,500 2,046 ------ 3,834 Electronic Equipment & Instruments - 0.9% Amphenol Corp. - Cl. A * ................................ 10,600 389 Molex, Inc. ............................................. 11,700 351 Thermo Electron Corp. * ................................. 13,500 408 Waters Corp. * .......................................... 12,000 562 ------ 1,710 Energy Equipment & Services - 2.6% Baker Hughes, Inc. ...................................... 22,100 943 BJ Services Co. ......................................... 19,300 898 Nabors Industries, Ltd. * ............................... 18,600 954 Schlumberger, Ltd. ...................................... 30,100 2,015 ------ 4,810 Food & Drug Retailing - 1.4% Sysco Corp. ............................................. 19,600 748 Walgreen Co. ............................................ 46,700 1,792 ------ 2,540 Food Products - 1.8% ConAgra, Inc. ........................................... 19,300 568 Hershey Foods Corp. ..................................... 12,900 717 J.M. Smucker Co. ........................................ 17,400 819 Kellogg Co. ............................................. 13,900 621 WM Wrigley Jr. Co. ...................................... 8,300 574 ------ 3,299 Health Care Equipment & Supplies - 3.0% Alcon, Inc. ............................................. 7,200 580 Bausch & Lomb, Inc. ..................................... 3,400 219 Baxter International, Inc. .............................. 22,900 791 Becton, Dickinson & Co. ................................. 6,900 392 Medtronic, Inc. ......................................... 51,780 2,572 St. Jude Medical, Inc. * ................................ 22,300 935 ------ 5,489 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Health Care Providers & Services - 2.3% Caremark Rx, Inc. * ..................................... 16,900 $ 666 Quest Diagnostics, Inc. ................................. 4,800 459 UnitedHealth Group, Inc. ................................ 34,480 3,035 ------- 4,160 Hotels Restaurants & Leisure - 0.4% McDonald's Crop. ........................................ 21,600 693 Household Durables - 0.2% Leggett & Platt, Inc. ................................... 12,400 353 Household Products - 3.9% Clorox Co. .............................................. 18,700 1,102 Colgate-Palmolive Co. ................................... 24,000 1,228 Procter & Gamble Co. .................................... 86,700 4,775 ------- 7,105 Industrial Conglomerates - 5.6% 3M Co. .................................................. 27,300 2,241 General Electric Co. .................................... 169,800 6,198 Honeywell International, Inc. ........................... 15,400 545 Tyco International, Ltd. ................................ 36,300 1,297 ------- 10,281 Insurance - 2.8% AFLAC, Inc. ............................................. 20,370 812 Ambac Financial Group, Inc. ............................. 6,600 542 American International Group, Inc. ...................... 57,200 3,756 ------- 5,110 Internet & Catalog Retail - 1.6% Amazon.com, Inc. * ...................................... 41,410 1,834 eBay, Inc. * ............................................ 9,300 1,081 ------- 2,915 Internet Software & Services - 0.9% McAfee, Inc. * .......................................... 15,300 443 Yahoo, Inc. * ........................................... 32,200 1,213 ------- 1,656 IT Consulting & Services - 0.5% Affiliated Computer Services, Inc. - Cl. A * ................................................. 16,100 969 Machinery - 1.0% Danaher Corp. ........................................... 22,200 1,275 Parker-Hannifin Corp. ................................... 7,200 545 ------- 1,820 Media - 3.5% Clear Channel Communications, Inc. ...................... 10,700 358 Comcast Corp. - Cl. A * ................................ 18,800 626 EchoStar Communications Corp. - Cl. A ................... 5,025 167 Fox Entertainment Group, Inc. - Cl. A * ................. 22,500 703 Omnicom Group, Inc. ..................................... 9,100 767 The Walt Disney Co. ..................................... 47,300 1,315 Time Warner, Inc. * ..................................... 50,851 $ 989 Univision Communications, Inc. - Cl. A * ................ 12,800 375 Viacom, Inc. - Cl. B .................................... 19,600 713 XM Satellite Radio Holdings, Inc. - Cl. A* .............. 9,800 369 ------- 6,382 Multiline Retail - 4.4% Big Lots, Inc. * ........................................ 29,700 360 J.C. Penney Co., Inc. ................................... 22,100 915 Kohl's Corp. ............................................ 21,100 1,042 Target Corp. ............................................ 17,900 930 Wal-Mart Stores, Inc. ................................... 91,300 4,823 ------- 8,070 Personal Products - 3.1% Avon Products, Inc. ..................................... 20,960 811 Estee Lauder Cos., Inc. - Cl. A ......................... 10,400 476 Gillette Co. ............................................ 99,200 4,442 ------- 5,729 Pharmaceuticals - 12.7% Abbott Laboratories ..................................... 56,700 2,645 Allergan, Inc. .......................................... 6,100 494 Eli Lilly & Co. ......................................... 12,225 694 Johnson & Johnson ....................................... 83,800 5,315 Merck & Co., Inc. ....................................... 44,200 1,420 Pfizer, Inc. ............................................ 264,324 7,108 Schering-Plough Corp. ................................... 129,800 2,710 Wyeth ................................................... 69,500 2,960 ------- 23,346 Semiconductor Equipment & Products - 8.4% Altera Corp. * .......................................... 43,600 903 Analog Devices, Inc. .................................... 53,000 1,957 Applied Materials, Inc. * ............................... 84,095 1,438 Intel Corp. ............................................. 258,500 6,046 KLA-Tencor Corp. * ...................................... 16,045 748 Linear Technology Corp. ................................. 11,100 430 Texas Instruments, Inc. ................................. 122,475 3,015 Xilinx, Inc. ............................................ 28,800 854 ------- 15,391 Software - 7.6% BEA Systems, Inc. * ..................................... 115,100 1,020 Cadence Design Systems, Inc. * .......................... 43,500 601 Intuit, Inc. * .......................................... 18,900 832 Microsoft Corp. ......................................... 353,410 9,439 National Instruments Corp. .............................. 15,300 417 Oracle Corp. * .......................................... 124,000 1,701 ------- 14,010 Specialty Retail - 2.8% CDW Corp. ............................................... 8,300 551 Gap, Inc. ............................................... 19,100 403 Home Depot, Inc. ........................................ 66,800 2,855 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EARNINGS GROWTH FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Specialty Retail - Continued Lowe's Cos., Inc. ....................................... 11,900 $ 685 Staples, Inc. ........................................... 21,200 715 -------- 5,209 Textiles & Apparel - 0.5% Nike, Inc. - Cl. B ...................................... 10,800 979 U.S. Government Agencies - 0.9% Federal Home Loan Mortgage Corp. ........................ 5,100 376 Federal National Mortgage Assoc ......................... 17,509 1,247 -------- 1,623 Wireless Telecommunications Services - 0.4% Nextel Communications, Inc. - Cl. A * ................... 27,200 816 -------- TOTAL COMMON STOCK- (Cost $156,164) 98.3% 180,697 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 0.3% State Street Navigator Securities Lending Portfolio .......................................... $ 642 642 SHORT-TERM INVESTMENTS - 1.7% Investment in joint trading account 2.29% due 01/03/05 (Cost $3,046) ...................................... 3,046 3,046 ------ -------- TOTAL INVESTMENTS- (Cost $159,852) 100.3% 184,385 Payables, less cash and receivables- ............... (0.3)% (640) ------ -------- NET ASSETS- 100.0% $183,745 ====== ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 year ended December 31, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 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 - -------------------------- ------------------- $623 $642 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $199,368, $105,946 and $2,956 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividend and Interest: 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. 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 year ended December 31, 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 in expenses of $18. John Hancock has entered into a Sub-Advisory Agreement with Fidelity Management & Research Company, which under John Hancock's 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $56,442 $70,035 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $160,386 $27,387 $(3,388) $23,999 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $308,270 $23,999 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 - ---- ------------------ ---------------------- ----------------- 2004 $1,421 $-- $ -- 2003 118 -- 3,010 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Included in the Fund's 2004 distributions from ordinary income is $2 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed to shareholders as ordinary income distribution. NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Earnings Growth Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Earnings Growth Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Equity Index Fund SSgA Funds Management, Inc. J. Tucker/J. May - -------------------------------------------------------------------------------- .. The manager attempts to track the performance of the S&P 500 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. Fund Commentary Performance: For the year ending December 31, 2004, the Equity Index Fund returned +10.70%, underperforming the +10.87% return of its benchmark, the S&P 500 Index. Environment: U.S. equity prices moved cautiously during the first three quarters of 2004. Returns on the S&P 500 were relatively flat through September as investors appeared concerned over Iraq, rising interest rates, rising oil prices, and the presidential election. In the fourth quarter, the S&P 500 rallied as oil prices fell and the election was completed. Energy stocks were a strong contributor to the S&P 500 return, aided by the rising price of oil. While the S&P 500 posted strong returns for the year, its medium and small counterparts posted even more impressive gains. The S&P MidCap 400 Index rose 16.5% for the year, and the S&P SmallCap Index rose 22.7%. Outlook: The Equity Index Fund attempts to track the performance of the S&P 500 Index by fully replicating the index, after accounting for expenses. The fund attempts to match the index holdings and weights for each security in order to provide returns close to the index return. [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/96 (Fund Inception Date) Equity Index Fund S&P 500(R) Index (2) ----------------- -------------------- Apr-1996 $10,000 $10,000 May-1996 10,210 10,258 Jun-1996 10,231 10,300 Jul-1996 9,825 9,842 Aug-1996 9,971 10,050 Sep-1996 10,509 10,615 Oct-1996 10,787 10,906 Nov-1996 11,561 11,734 Dec-1996 11,423 11,504 Jan-1997 12,133 12,218 Feb-1997 12,221 12,317 Mar-1997 11,736 11,805 Apr-1997 12,409 12,510 May-1997 13,119 13,278 Jun-1997 13,727 13,870 Jul-1997 14,821 14,971 Aug-1997 13,993 14,139 Sep-1997 14,756 14,913 Oct-1997 14,267 14,415 Nov-1997 14,887 15,082 Dec-1997 15,169 15,342 Jan-1998 15,336 15,512 Feb-1998 16,441 16,631 Mar-1998 17,280 17,482 Apr-1998 17,455 17,658 May-1998 17,151 17,355 Jun-1998 17,850 18,060 Jul-1998 17,664 17,867 Aug-1998 15,096 15,284 Sep-1998 16,067 16,263 Oct-1998 17,369 17,586 Nov-1998 18,419 18,652 Dec-1998 19,485 19,727 Jan-1999 20,296 20,552 Feb-1999 19,669 19,913 Mar-1999 20,464 20,710 Apr-1999 21,252 21,512 May-1999 20,743 21,004 Jun-1999 21,905 22,170 Jul-1999 21,220 21,477 Aug-1999 21,115 21,371 Sep-1999 20,541 20,785 Oct-1999 21,834 22,101 Nov-1999 22,275 22,550 Dec-1999 23,593 23,878 Jan-2000 22,400 22,678 Feb-2000 21,978 22,249 Mar-2000 24,120 24,426 Apr-2000 23,394 23,691 May-2000 22,910 23,205 Jun-2000 23,475 23,777 Jul-2000 23,108 23,405 Aug-2000 24,546 24,859 Sep-2000 23,245 23,546 Oct-2000 23,146 23,447 Nov-2000 21,326 21,598 Dec-2000 21,434 21,704 Jan-2001 22,191 22,474 Feb-2001 20,164 20,425 Mar-2001 18,884 19,131 Apr-2001 20,350 20,618 May-2001 20,490 20,756 Jun-2001 19,989 20,250 Jul-2001 19,792 20,051 Aug-2001 18,550 18,796 Sep-2001 17,055 17,278 Oct-2001 17,379 17,608 Nov-2001 18,706 18,958 Dec-2001 18,866 19,125 Jan-2002 18,590 18,845 Feb-2002 18,229 18,482 Mar-2002 18,908 19,177 Apr-2002 17,756 18,015 May-2002 17,624 17,882 Jun-2002 16,365 16,608 Jul-2002 15,090 15,313 Aug-2002 15,184 15,414 Sep-2002 13,530 13,739 Oct-2002 14,717 14,948 Nov-2002 15,578 15,828 Dec-2002 14,658 14,897 Jan-2003 14,273 14,507 Feb-2003 14,057 14,289 Mar-2003 14,191 14,428 Apr-2003 15,359 15,617 May-2003 16,167 16,440 Jun-2003 16,369 16,650 Jul-2003 16,656 16,943 Aug-2003 16,977 17,274 Sep-2003 16,792 17,090 Oct-2003 17,740 18,058 Nov-2003 17,892 18,217 Dec-2003 18,825 19,172 Jan-2004 19,166 19,525 Feb-2004 19,431 19,796 Mar-2004 19,135 19,497 Apr-2004 18,830 19,191 May-2004 19,087 19,454 Jun-2004 19,454 19,831 Jul-2004 18,807 19,175 Aug-2004 18,883 19,252 Sep-2004 19,083 19,460 Oct-2004 19,373 19,757 Nov-2004 20,156 20,558 Dec-2004 20,841 21,257 Value on 12/31/04: - ----------------- $20,841 Equity Index Fund $21,257 S&P 500(R) Index (2) - -------------------------------------------------------------------------------- Top Ten Holdings (as of December 31, 2004) % of Investments ----------- General Electric Co. 3.4% Exxon Mobil Corp. 2.9% Microsoft Corp. 2.6% Citigroup, Inc. 2.2% Wal-Mart Stores, Inc. 2.0% Pfizer, Inc. 1.8% Bank of America Corp. 1.7% Johnson & Johnson 1.7% American International Group, Inc. 1.5% International Business Machines Corp. 1.5% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Equity Index S&P 500 Fund/1/ Index/2/ ------------ -------- 1 Year 10.70% 10.87% 3 Years 3.37% 3.59% 5 Years -2.45% -2.30% Since Inception (5/1/96) 8.83% 9.09% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 19.9% Information Technology 15.4% Consumer Discretionary 13.9% Industrials 12.7% Health Care 12.2% Consumer Staples 8.2% Energy 6.9% Telecommunication Services 3.3% Utilities 3.2% Materials 3.2% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ 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. /2/ "Standard & Poor's 500(R)" Index 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. "Standard & Poor 500(R)" Index is an unmanaged stock index commonly used as a broad measure of stock market performance. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Equity Index Fund SSgA Funds Management, Inc. J. Tucker/J. May - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As an Equity Index Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,071.20 Expense paid per $1,000* $ 1.13 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,024.04 Expense paid per $1,000* $ 1.11 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $797,537 Net unrealized appreciation of investments ......................... 18,752 Short-term investments at value .................................... 24,612 -------- Total investments ............................................ 840,901 Receivable for: Fund shares sold ................................................ 102 Dividends ....................................................... 1,058 Other receivables ............................................... 68 -------- Total assets ....................................................... 842,129 -------- LIABILITIES Payables for: Investments purchased ........................................... 28 Accrued operating expenses ...................................... 308 Futures contracts variation margin .............................. 21 Other payables .................................................. 23 -------- Total liabilities .................................................. 380 -------- Net assets ......................................................... $841,749 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 54,576 -------- Net asset value per share .......................................... $ 15.42 ======== Composition of net assets: Capital paid-in ................................................. $856,371 Accumulated net realized loss on investments and futures transactions ................................................. (33,937) Net unrealized appreciation of: Investments .................................................. 18,752 Futures ...................................................... 563 -------- Net assets ......................................................... $841,749 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 369 Dividends ....................................................... 14,555 -------- Total investment income ............................................ 14,924 -------- EXPENSES Investment advisory fee ......................................... 961 Auditors fees ................................................... 88 Custodian fees .................................................. 189 Fidelity Bond fees .............................................. 2 Legal fees ...................................................... 111 Printing & mailing fees ......................................... 111 Trustees' fees .................................................. 21 Other fees ...................................................... 81 -------- Total expenses ..................................................... 1,564 Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................... (30) -------- Net expenses ....................................................... 1,534 -------- Net investment income .............................................. 13,390 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments .................................................. (3,028) Financial futures contracts .................................. 2,184 Change in unrealized appreciation (depreciation) on: Investments .................................................. 67,351 Financial futures contracts .................................. (136) -------- Net realized and unrealized gain ................................... 66,371 -------- Net increase in net assets resulting from operations ............... $ 79,761 ======== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Equity Index Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 13,390 $ 8,718 Net realized loss ......................................... (844) (1,233) Change in net unrealized appreciation ..................... 67,215 135,781 --------- -------- Net increase in net assets resulting from operations ... 79,761 143,266 Distributions to shareholders from: Net investment income ..................................... (13,389) (16,969) Capital paid-in ........................................... (335) --------- -------- Decrease in net assets resulting from distributions .... (13,389) (17,304) From fund share transactions: Proceeds from shares sold ................................. 263,005 162,921 Distributions reinvested .................................. 13,389 17,304 Payment for shares redeemed ............................... (182,698) (90,764) --------- -------- Increase in net assets from fund share transactions .... 93,696 89,461 --------- -------- NET INCREASE IN NET ASSETS ................................... 160,068 215,423 NET ASSETS Beginning of Period ....................................... 681,681 466,258 --------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ..................... $ 841,749 $681,681 ========= ======== Analysis of fund share transactions: Sold ...................................................... 18,445 13,034 Reinvested ................................................ 916 1,303 Redeemed .................................................. (12,844) (7,307) --------- -------- Net increase in fund shares outstanding ...................... 6,517 7,030 ========= ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Equity Index Fund -------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------- 2004 2003(e) 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 ................................. 0.27 0.20 0.16 0.19 0.22 Net Realized and Unrealized Gain (Loss) on Investment(a) ................................... 1.23 3.00 (3.48) (2.30) (2.09) -------- -------- -------- -------- -------- Total From Investment Operations ...................... 1.50 3.20 (3.32) (2.11) (1.87) Less Distributions: Distribution from Net Investment Income ............... (0.26) (0.37) (0.11) (0.19) (0.22) Distribution from Net Realized Gains on Investments ... (0.06) (0.49) (0.72) Distribution from Capital Paid-in ..................... (0.01) (0.01) -------- -------- -------- -------- -------- Total Distributions ................................... (0.26) (0.38) (0.17) (0.68) (0.95) -------- -------- -------- -------- -------- Net Assets Value at End of Period ........................ $ 15.42 $ 14.18 $ 11.36 $ 14.85 $ 17.64 ======== ======== ======== ======== ======== Total Investment Return(b) ............................... 10.70% 28.42% (22.31)% (11.98)% (9.15)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...... 0.22%(c) 0.21%(c) 0.23% 0.20% 0.19% Ratio of Net Investment Income to Average Net Assets .. 1.85% 1.59% 1.39% 1.20% 1.12% Portfolio Turnover Rate ............................... 14.37% 4.91% 10.63% 17.61%(d) 34.11% Net Assets End of Period (000s Omitted) .................. $841,749 $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) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.6% B.F. Goodrich Co. ....................................... 8,650 $ 282 Boeing Co. .............................................. 61,137 3,165 General Dynamics Corp. .................................. 14,592 1,526 Lockheed Martin Corp. ................................... 32,432 1,802 Northrop Grumman Corp. .................................. 26,100 1,419 Raytheon Co. ............................................ 32,859 1,276 Rockwell Collins, Inc. .................................. 12,866 507 United Technologies Corp. ............................... 36,785 3,802 ------- 13,779 Air Freight & Couriers - 1.1% Fedex Corp. ............................................. 21,914 2,158 Ryder System, Inc. ...................................... 4,688 224 United Parcel Service, Inc. - Cl. B ..................... 81,300 6,948 ------- 9,330 Airlines - 0.1% Delta Air Lines, Inc. * ................................. 6,679 50 Southwest Airlines Co. .................................. 57,558 937 ------- 987 Auto Components - 0.2% Cooper Tire & Rubber Co. ................................ 5,206 112 Dana Corp. .............................................. 10,930 189 Delphi Automotive Systems Corp. ......................... 40,883 369 Goodyear Tire & Rubber Co. * ............................ 13,231 194 Johnson Controls, Inc. .................................. 13,850 879 Visteon Corp. ........................................... 9,756 95 ------- 1,838 Automobiles - 0.6% Ford Motor Co. .......................................... 133,197 1,950 General Motors Corp. .................................... 41,098 1,646 Harley-Davidson, Inc. ................................... 21,440 1,303 ------- 4,899 Banks - 6.7% AmSouth Bancorp. ........................................ 25,739 667 Bank of America Corp. ................................... 291,190 13,683 Bank of New York Co., Inc. .............................. 56,670 1,894 BB&T Corp. .............................................. 40,337 1,696 Comerica, Inc. .......................................... 12,460 760 Compass Bancshares, Inc. ................................ 8,800 428 Fifth Third Bancorp ..................................... 39,691 1,877 First Horizon National Corp. ............................ 9,000 388 Golden West Financial Corp. ............................. 22,220 1,365 Huntington Bancshares, Inc. ............................. 16,696 414 JP Morgan Chase & Co. ................................... 257,972 10,063 KeyCorp ................................................. 29,617 1,004 M & T Bank Corp. ........................................ 8,500 917 Marshall & Ilsley Corp. ................................. 16,200 716 Mellon Financial Corp. .................................. 30,894 961 National City Corp. ..................................... 48,274 1,813 North Fork Bancorporation, Inc. ......................... 34,050 982 Northern Trust Corp. .................................... 16,024 $ 778 PNC Bank Corp. .......................................... 20,520 1,179 Regions Financial Corp. ................................. 33,608 1,196 Sovereign Bancorp, Inc. ................................. 25,000 564 Suntrust Banks, Inc. .................................... 26,125 1,930 Synovus Financial Corp. ................................. 22,572 645 US Bancorp .............................................. 133,690 4,187 Wachovia Corp. .......................................... 115,852 6,094 Zions Bancorp ........................................... 6,534 444 ------- 56,645 Beverages - 2.2% Adolph Coors Co. - Cl. B ................................ 2,754 209 Anheuser-Busch Cos., Inc. ............................... 56,305 2,856 Brown-Forman Corp. - Cl. B .............................. 8,800 428 Coca-Cola Co. ........................................... 175,117 7,290 Coca-Cola Enterprises, Inc. ............................. 34,148 712 Pepsi Bottling Group, Inc. .............................. 18,518 501 PepsiCo, Inc. ........................................... 122,191 6,378 ------- 18,374 Biotechnology - 1.3% Amgen, Inc. * ........................................... 91,298 5,857 Biogen IDEC, Inc. * ..................................... 24,683 1,644 Chiron Corp. * .......................................... 13,676 456 Genzyme Corp. * ......................................... 16,600 964 Gilead Sciences, Inc. * ................................. 31,300 1,095 MedImmune, Inc. * ....................................... 18,109 491 ------- 10,507 Building Products - 0.1% Masco Corp. ............................................. 31,569 1,153 Chemicals - 1.6% Air Products & Chemicals, Inc. .......................... 16,532 958 Dow Chemical Co. ........................................ 68,348 3,384 E.I. du Pont de Nemours & Co. ........................... 70,999 3,483 Eastman Chemical Co. .................................... 5,712 330 Ecolab, Inc. ............................................ 18,772 659 Engelhard Corp. ......................................... 8,490 260 Great Lakes Chemical Corp. .............................. 2,573 73 Hercules, Inc. * ........................................ 6,957 103 International Flavors & Fragrances, Inc. ................ 6,839 293 Monsanto Co. ............................................ 19,436 1,080 PPG Industries, Inc. .................................... 12,545 855 Praxair, Inc. ........................................... 23,614 1,043 Rohm & Haas Co. ......................................... 16,347 723 Sigma-Aldrich Corp. ..................................... 5,010 303 ------- 13,547 Commercial Services & Supplies - 1.7% Allied Waste Industries, Inc. * ......................... 21,697 201 Apollo Group, Inc. - Cl. A * ............................ 12,900 1,041 Automatic Data Processing, Inc. ......................... 42,508 1,885 Avery Dennison Corp. .................................... 8,060 483 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Commercial Services & Supplies - Continued Cendant Corp. ........................................... 76,907 $ 1,798 Cintas Corp. ............................................ 12,446 546 Convergys Corp. * ....................................... 10,749 161 Equifax, Inc. ........................................... 9,908 279 First Data Corp. ........................................ 60,225 2,562 Fiserv, Inc. * .......................................... 14,181 570 H & R Block, Inc. ....................................... 11,966 586 Monster Worldwide, Inc. * ............................... 8,655 291 Paychex, Inc. ........................................... 27,493 937 Pitney Bowes, Inc. ...................................... 16,859 780 R.R. Donnelley & Sons Co. ............................... 15,971 564 Robert Half International, Inc. ......................... 12,555 370 Sabre Group Holdings, Inc. .............................. 9,967 221 Waste Management, Inc. .................................. 42,267 1,266 ------- 14,541 Communications Equipment - 2.7% ADC Telecommunications, Inc. * .......................... 58,737 157 Andrew Corp. * .......................................... 10,368 141 Avaya, Inc. * ........................................... 32,915 566 Ciena Corp. * ........................................... 44,876 150 Cisco Systems, Inc. * ................................... 478,261 9,230 Comverse Technology, Inc. * ............................. 14,270 349 Corning, Inc. * ......................................... 101,453 1,194 JDS Uniphase Corp. * .................................... 104,891 333 L-3 Communications Holdings, Inc. ....................... 7,700 564 Lucent Technologies, Inc. * ............................. 313,778 1,180 Motorola, Inc. .......................................... 171,989 2,958 Qualcomm, Inc. .......................................... 117,202 4,969 Scientific-Atlanta, Inc. ................................ 11,137 368 Tellabs, Inc. * ......................................... 28,695 247 ------- 22,406 Computers & Peripherals - 3.8% Apple Computer, Inc. * .................................. 28,208 1,817 Dell, Inc. * ............................................ 180,183 7,593 EMC Corp. * ............................................. 175,122 2,604 Gateway, Inc. * ......................................... 27,170 163 Hewlett-Packard Co. ..................................... 217,350 4,558 International Business Machines Corp. ................... 119,927 11,822 Lexmark International Group, Inc. - Cl. A * ............. 9,387 798 NCR Corp. * ............................................. 6,840 473 Network Appliance, Inc. * ............................... 26,073 866 NVIDIA Corp. * .......................................... 11,803 278 Sun Microsystems, Inc. * ................................ 242,126 1,303 ------- 32,275 Construction & Engineering - 0.1% American Standard Cos., Inc. * .......................... 15,600 645 Fluor Corp. ............................................. 5,615 306 ------- 951 Construction Materials - 0.1% United States Steel Corp. ............................... 8,229 $ 422 Vulcan Materials Co. .................................... 7,447 406 ------- 828 Containers & Packaging - 0.2% Ball Corp. .............................................. 8,160 359 Bemis Co., Inc. ......................................... 7,554 220 Pactiv Corp. * .......................................... 10,931 276 Sealed Air Corp. * ...................................... 6,118 326 Temple-Inland, Inc. ..................................... 4,072 279 ------- 1,460 Credit Card - 0.3% MBNA Corp. .............................................. 93,071 2,624 Diversified Financials - 7.4% American Express Co. .................................... 91,324 5,148 Bear Stearns Cos., Inc. ................................. 7,469 764 Capital One Financial Corp. ............................. 17,603 1,482 Charles Schwab Corp. .................................... 99,491 1,190 CIT Group, Inc. ......................................... 15,200 697 Citigroup, Inc. ......................................... 375,727 18,103 Countrywide Credit Industries, Inc. ..................... 40,988 1,517 E*TRADE Group, Inc. * ................................... 27,200 407 Federated Investments, Inc. - Cl. B ..................... 7,900 240 Franklin Resources, Inc. ................................ 18,185 1,267 Goldman Sachs Group, Inc. ............................... 34,900 3,631 Hartford Financial Services Group, Inc. ................. 21,345 1,479 Janus Capgroup, Inc. .................................... 17,419 293 Lehman Brothers Holdings, Inc. .......................... 19,758 1,728 Merrill Lynch & Co., Inc. ............................... 67,507 4,035 Moody's Corp. ........................................... 10,729 932 Morgan Stanley, Dean Witter, Discover & Co. ............. 79,018 4,387 Principal Financial Group. .............................. 22,800 933 Providian Financial Corp. * ............................. 21,315 351 SLM Corp. ............................................... 31,711 1,693 State Street Corp. ...................................... 24,517 1,204 T. Rowe Price Group, Inc. ............................... 9,279 577 Washington Mutual, Inc. ................................. 63,553 2,687 Wells Fargo & Co. ....................................... 121,913 7,577 ------- 62,322 Diversified Telecommunication Services - 2.9% Alltel Corp. ............................................ 22,455 1,320 AT&T Corp. .............................................. 57,885 1,103 BellSouth Corp. ......................................... 131,626 3,658 CenturyTel, Inc. ........................................ 9,805 348 Citizens Communications Co. ............................. 22,715 313 Qwest Communications International, Inc. * .............. 132,184 587 SBC Communications, Inc. ................................ 239,595 6,174 Sprint Corp. ............................................ 105,720 2,627 Verizon Communications .................................. 200,380 8,118 ------- 24,248 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Electric Utilities - 2.4% AES Corp. * .............................................. 47,092 $ 644 Allegheny Energy, Inc. * ................................. 9,981 197 Ameren Corp. ............................................. 14,100 707 American Electric Power Co. .............................. 28,829 990 Calpine Corp. * .......................................... 38,834 153 CenterPoint Energy, Inc. ................................. 22,357 253 Cinergy Corp. ............................................ 13,131 547 CMS Energy Corp. * ....................................... 12,192 127 Consolidated Edison, Inc. ................................ 17,608 770 Constellation Energy Group, Inc. ......................... 12,738 557 Dominion Resources, Inc. ................................. 24,031 1,628 DTE Energy Co. ........................................... 12,640 545 Edison International ..................................... 23,738 760 Entergy Corp. ............................................ 16,538 1,118 Exelon Corp. ............................................. 48,032 2,117 Firstenergy Corp. ........................................ 23,981 947 FPL Group, Inc. .......................................... 13,456 1,006 PG & E Corp. * ........................................... 29,163 970 Pinnacle West Capital Corp. .............................. 6,623 294 PPL Corp. ................................................ 13,712 731 Progress Energy, Inc. .................................... 17,972 813 Public Services Enterprise Group, Inc. ................... 17,302 896 Southern Co. ............................................. 53,720 1,801 Teco Energy, Inc. ........................................ 13,497 207 TXU Corp. ................................................ 17,586 1,135 Xcel Energy, Inc. ........................................ 29,149 530 ------- 20,443 Electric/Gas - 0.2% Duke Energy Co. .......................................... 68,311 1,730 Electrical Equipment - 0.4% American Power Conversion ................................ 13,984 299 Cooper Industries, Ltd. - Cl. A .......................... 6,936 471 Emerson Electric Co. ..................................... 30,623 2,147 Power One, Inc. * ........................................ 6,714 60 Rockwell International Corp. ............................. 13,466 667 ------- 3,644 Electronic Equipment & Instruments - 0.5% Agilent Technologies, Inc. * ............................. 35,338 852 Broadcom Corp. - Cl. A * ................................. 23,403 755 Jabil Circuit, Inc. * .................................... 14,678 375 Molex, Inc. .............................................. 13,834 415 PerkinElmer, Inc. ........................................ 8,578 193 Sanmina Corp. * .......................................... 37,965 322 Solectron Corp. * ........................................ 69,970 373 Symbol Technologies, Inc. ................................ 17,429 302 Tektronix, Inc. .......................................... 6,636 201 Thermo Electron Corp. * .................................. 11,864 358 Waters Corp. * ........................................... 8,600 402 ------- 4,548 Energy Equipment & Services - 0.8% Baker Hughes, Inc. ....................................... 24,288 $ 1,036 BJ Services Co. .......................................... 11,800 549 Nabors Industries, Ltd. * ................................ 10,814 555 Noble Corp. * ............................................ 9,795 487 Rowan Cos., Inc. * ....................................... 7,437 193 Schlumberger, Ltd. ....................................... 43,034 2,881 Transocean Sedco Forex, Inc. * ........................... 23,398 992 ------- 6,693 Finance - 0.2% Dow Jones & Co., Inc. .................................... 5,726 247 Marsh & McLennan Cos., Inc. .............................. 37,902 1,247 ------- 1,494 Food & Drug Retailing - 1.0% Albertson's, Inc. ........................................ 26,766 639 CVS Corp. ................................................ 29,072 1,310 Safeway, Inc. * .......................................... 32,535 642 SuperValu, Inc. .......................................... 9,893 342 Sysco Corp. .............................................. 46,578 1,778 The Kroger Co. * ......................................... 53,779 943 Walgreen Co. ............................................. 74,580 2,862 ------- 8,516 Food Products - 1.3% Archer Daniels Midland Co. ............................... 47,344 1,056 Campbell Soup Co. ........................................ 29,894 894 ConAgra, Inc. ............................................ 38,481 1,133 General Mills, Inc. ...................................... 25,529 1,269 H.J. Heinz Co. ........................................... 25,407 991 Hershey Foods Corp. ...................................... 17,898 994 Kellogg Co. .............................................. 30,090 1,344 McCormick & Co., Inc. .................................... 10,000 386 Sara Lee Corp. ........................................... 57,761 1,394 WM Wrigley Jr. Co. ....................................... 16,329 1,130 ------- 10,591 Gas Utilities - 0.4% El Paso Corp. ............................................ 46,628 485 KeySpan Corp. ............................................ 11,700 461 Kinder Morgan, Inc. ...................................... 8,966 656 Nicor, Inc. .............................................. 2,666 98 Peoples Energy Corp. ..................................... 2,751 121 Sempra Energy ............................................ 16,904 620 Williams Cos., Inc. ...................................... 38,048 620 ------- 3,061 Health Care Equipment & Supplies - 2.1% Applera Corporation - Applied Biosystems Group ........... 14,707 308 Bausch & Lomb, Inc. ...................................... 3,678 237 Baxter International, Inc. ............................... 44,762 1,546 Becton, Dickinson & Co. .................................. 18,275 1,038 Biomet, Inc. ............................................. 18,515 803 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Health Care Equipment & Supplies - Continued Boston Scientific Corp. * ............................... 61,268 $ 2,178 C.R. Bard, Inc. ......................................... 7,648 489 Fisher Scientific International, Inc. * ................. 8,400 524 Guidant Corp. ........................................... 22,946 1,654 Hospira, Inc. * ......................................... 11,334 380 IMS Health, Inc. ........................................ 16,987 394 Medtronic, Inc. ......................................... 87,058 4,324 Millipore Corp. * ....................................... 3,568 178 St. Jude Medical, Inc. * ................................ 25,700 1,078 Stryker Corp. ........................................... 29,170 1,408 Zimmer Holdings, Inc. * ................................. 17,815 1,427 ------- 17,966 Health Care Providers & Services - 1.7% Aetna US Healthcare, Inc. ............................... 10,307 1,286 Amerisource Bergen Corp. ................................ 8,155 478 Cardinal Health, Inc. ................................... 31,379 1,825 Caremark Rx, Inc. * ..................................... 31,850 1,256 CIGNA Corp. ............................................. 10,018 817 Express Scripts, Inc. - Cl. A * ......................... 5,600 428 HCA-The Healthcare Corp. ................................ 30,632 1,224 Health Management Assoc., Inc. - Cl. A .................. 17,756 403 Humana, Inc. * .......................................... 11,647 346 Laboratory Corporation of America Holdings * ............ 10,100 503 Manor Care, Inc. ........................................ 6,265 222 McKesson HBOC, Inc. ..................................... 21,347 672 Quest Diagnostics, Inc. ................................. 7,400 707 Tenet Healthcare Corp. * ................................ 33,958 373 UnitedHealth Group, Inc. ................................ 46,822 4,122 ------- 14,662 Hotels Restaurants & Leisure - 1.6% Carnival Corp. .......................................... 46,050 2,654 Darden Restaurants, Inc. ................................ 10,658 296 Harrah's Entertainment, Inc. ............................ 8,170 546 Hilton Hotels Corp. ..................................... 28,036 638 International Game Technology ........................... 25,132 864 Marriott International, Inc. - Cl. A .................... 16,655 1,049 McDonald's Corp. ........................................ 91,481 2,933 Starbucks Corp. * ....................................... 28,953 1,805 Starwood Hotels & Resorts Worldwide, Inc. ............... 15,189 887 Wendy's International, Inc. ............................. 8,265 324 Yum Brands, Inc. ........................................ 21,128 997 ------- 12,993 Household Durables - 0.5% Black & Decker Corp. .................................... 5,800 512 Centex Corp. ............................................ 8,972 535 Fortune Brands, Inc. .................................... 10,522 812 KB Home ................................................. 3,364 351 Leggett & Platt, Inc. ................................... 13,985 398 Maytag Corp. ............................................ 6,111 129 Newell Rubbermaid, Inc. ................................. 20,004 $ 484 Pulte Homes, Inc. ....................................... 9,272 591 Snap-On, Inc. ........................................... 4,184 144 Stanley Works ........................................... 5,924 290 Whirlpool Corp. ......................................... 4,697 325 ------- 4,571 Household Products - 1.8% Clorox Co. .............................................. 11,044 651 Colgate-Palmolive Co. ................................... 38,616 1,975 Kimberly-Clark Corp. .................................... 34,674 2,282 Procter & Gamble Co. .................................... 184,168 10,144 ------- 15,052 Industrial Conglomerates - 4.9% 3M Co. .................................................. 55,846 4,583 General Electric Co. .................................... 763,400 27,864 Honeywell International, Inc. ........................... 62,539 2,215 Reynolds American, Inc. ................................. 10,800 849 Textron, Inc. ........................................... 10,105 746 Tyco International, Ltd. ................................ 144,747 5,173 ------- 41,430 Insurance - 4.2% Ace, Ltd. ............................................... 20,700 885 AFLAC, Inc. ............................................. 36,965 1,473 Allstate Corp. .......................................... 48,854 2,527 Ambac Financial Group, Inc. ............................. 7,854 645 American International Group, Inc. ...................... 188,726 12,394 Aon Corp. ............................................... 22,981 548 Chubb Corp. ............................................. 13,955 1,073 Cincinnati Financial Corp. .............................. 12,250 542 Jefferson-Pilot Corp. ................................... 9,896 514 Lincoln National Corp. .................................. 12,773 596 Loews Corp. ............................................. 13,487 948 MBIA, Inc. .............................................. 10,416 659 Metlife, Inc. ........................................... 54,590 2,211 MGIC Investment Corp. ................................... 7,156 493 Progressive Corp. ....................................... 14,305 1,214 Prudential Financial, Inc. .............................. 37,800 2,078 Safeco Corp. ............................................ 9,186 480 St. Paul Cos., Inc. ..................................... 48,694 1,805 Torchmark, Inc. ......................................... 7,982 456 UnumProvident Corp. ..................................... 21,571 387 Wellpoint, Inc. * ....................................... 21,684 2,494 XL Capital, Ltd. - Cl. A ................................ 10,094 784 ------- 35,206 Internet & Catalog Retail - 0.7% eBay, Inc. * ......................................... 47,600 5,535 Internet Software & Services - 0.4% Yahoo, Inc. * ........................................ 99,044 3,732 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued IT Consulting & Services - 0.4% Affiliated Computer Services, Inc. - Cl. A * ............ 9,300 $ 560 Computer Sciences Corp. * ............................... 13,745 775 Electronic Data Systems Corp. * ......................... 37,281 861 SunGard Data Systems, Inc. * ............................ 21,000 595 Unisys Corp. * .......................................... 24,361 248 ------- 3,039 Leisure Equipment & Products - 0.2% Brunswick Corp. ......................................... 6,927 343 Eastman Kodak Co. ....................................... 20,822 671 Hasbro, Inc. ............................................ 12,876 250 Mattel, Inc. ............................................ 30,127 587 ------- 1,851 Machinery - 1.5% Caterpillar, Inc. ....................................... 24,999 2,438 Cummings Engine Co., Inc. ............................... 3,260 273 Danaher Corp. ........................................... 22,414 1,287 Deere & Co. ............................................. 18,108 1,347 Dover Corp. ............................................. 14,796 620 Eaton Corp. ............................................. 11,032 798 Illinois Tool Works, Inc. ............................... 20,942 1,941 Ingersoll-Rand Co. - Cl. A .............................. 12,649 1,016 ITT Industries, Inc. .................................... 6,728 568 Navistar International Corp., Inc. - Cl. B * ............ 5,086 224 Paccar, Inc. ............................................ 12,599 1,014 Pall Corp. .............................................. 9,079 263 Parker-Hannifin Corp. ................................... 8,720 660 ------- 12,449 Media - 3.8% Clear Channel Communications, Inc. ...................... 40,254 1,348 Comcast Corp. - Cl. A * ................................. 160,967 5,357 Gannett Co., Inc. ....................................... 17,985 1,469 Interpublic Group Cos., Inc. * .......................... 30,746 412 Knight-Ridder, Inc. ..................................... 5,606 375 McGraw-Hill Cos., Inc. .................................. 13,784 1,262 Meredith Corp. .......................................... 3,672 199 New York Times Co. - Cl. A .............................. 10,732 438 News Corp. - Cl. A * .................................... 185,200 3,456 Omnicom Group, Inc. ..................................... 13,669 1,153 The Walt Disney Co. ..................................... 146,240 4,065 Time Warner, Inc. * ..................................... 329,694 6,409 Tribune Co. ............................................. 23,199 978 Univision Communications, Inc. - Cl. A * ................ 23,503 688 Viacom, Inc. - Cl. B .................................... 122,169 4,446 ------- 32,055 Metals & Mining - 0.6% Alcoa, Inc. ............................................. 63,349 1,990 Allegheny Technologies, Inc. ............................ 7,467 162 Freeport-McMoran Copper & Gold, Inc. - Cl. B ............ 12,909 493 Newmont Mining Corp. .................................... 32,285 $ 1,434 Nucor Corp. ............................................. 11,526 603 Phelps Dodge Corp. ...................................... 6,810 674 ------- 5,356 Multi-Utilities - 0.1% Dynegy, Inc. - Cl. A * .................................. 29,874 138 NiSource, Inc. .......................................... 19,166 437 ------- 575 Multiline Retail - 3.2% Big Lots, Inc. * ........................................ 6,765 82 Costco Wholesale Corp. .................................. 33,554 1,624 Dillard's, Inc. - Cl. A ................................. 6,124 165 Dollar General Corp ..................................... 23,927 497 Family Dollar Stores, Inc. .............................. 12,250 383 Federated Department Stores, Inc. ....................... 11,487 664 J.C. Penney Co., Inc. ................................... 20,983 869 Kohl's Corp. * .......................................... 24,884 1,223 May Department Stores Co. ............................... 21,185 623 Nordstrom, Inc. ......................................... 10,195 476 Sears, Roebuck & Co. .................................... 15,478 790 Target Corp. ............................................ 63,908 3,319 Wal-Mart Stores, Inc. ................................... 305,498 16,136 ------- 26,851 Office Electronics - 0.1% Xerox Corp. * ........................................... 69,210 1,177 Oil & Gas - 5.9% Amerada Hess Corp. ...................................... 6,656 548 Anadarko Petroleum Corp. ................................ 18,237 1,182 Apache Corp. ............................................ 23,690 1,198 Ashland, Inc. ........................................... 5,201 304 Burlington Resources, Inc. .............................. 28,736 1,250 ChevronTexaco Corp. ..................................... 152,378 8,001 Conoco Phillips ......................................... 49,548 4,302 Devon Energy Corp. ...................................... 35,176 1,369 EOG Resources, Inc. ..................................... 8,569 611 Exxon Mobil Corp. ....................................... 465,745 23,874 Halliburton Co. ......................................... 32,124 1,261 Kerr-McGee Corp. ........................................ 11,015 637 Marathon Oil Corp. ...................................... 25,149 946 Occidental Petroleum Corp. .............................. 28,547 1,666 Sunoco, Inc. ............................................ 5,522 451 Unocal Corp. ............................................ 19,254 833 Valero Energy Corp. ..................................... 18,600 844 XTO Energy, Inc. ........................................ 18,800 665 ------- 49,942 Paper & Forest Products - 0.5% Georgia-Pacific Corp. ................................... 18,755 703 International Paper Co. ................................. 35,369 1,486 Louisiana-Pacific Corp. ................................. 7,452 199 MeadWestvaco Corp. ...................................... 14,733 499 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Paper & Forest Products - Continued Plum Creek Timber Co., Inc. ............................. 13,300 $ 511 Weyerhaeuser Co. ........................................ 17,435 1,172 ------- 4,570 Personal Products - 0.6% Alberto-Culver Co. - Cl. B .............................. 6,273 305 Avon Products, Inc. ..................................... 34,390 1,331 Gillette Co. ............................................ 70,934 3,176 ------- 4,812 Pharmaceuticals - 6.8% Abbott Laboratories ..................................... 112,542 5,250 Allergan, Inc. .......................................... 9,591 778 Bristol-Myers Squibb Co. ................................ 141,626 3,628 Eli Lilly & Co. ......................................... 81,435 4,621 Forest Laboratories, Inc. * ............................. 26,912 1,207 Johnson & Johnson ....................................... 215,161 13,645 King Pharmaceuticals, Inc. * ............................ 16,622 206 Medco Health Solutions, Inc. * .......................... 19,805 824 Merck & Co., Inc. ....................................... 159,635 5,131 Mylan Laboratories, Inc. ................................ 19,600 347 Pfizer, Inc. ............................................ 542,985 14,601 Schering-Plough Corp. ................................... 107,228 2,239 Watson Pharmaceuticals, Inc. * .......................... 7,954 261 Wyeth ................................................... 95,912 4,085 ------- 56,823 Real Estate Investment Trust - 0.5% Apartment Investment & Management Co. ................... 6,900 266 Archstone Communities Trust ............................. 14,100 540 Equity Office Properties Trust .......................... 29,290 853 Equity Residential Properties Trust ..................... 20,386 738 Prologis Trust .......................................... 13,200 572 Simon Property Group, Inc. .............................. 16,100 1,041 ------- 4,010 Road & Rail - 0.5% Burlington Northern Santa Fe Corp. ...................... 27,070 1,281 CSX Corp. ............................................... 15,610 626 Norfolk Southern Corp. .................................. 28,659 1,037 Union Pacific Corp. ..................................... 18,861 1,268 ------- 4,212 Semiconductor Equipment & Products - 2.9% Advanced Micro Devices, Inc. * .......................... 25,800 568 Altera Corp. * .......................................... 27,062 560 Analog Devices, Inc. .................................... 27,523 1,016 Applied Materials, Inc. * ............................... 123,654 2,114 Applied Micro Circuits Corp. * .......................... 19,737 83 Freescale Semiconductor, Inc. - Cl. B * ................. 28,890 530 Intel Corp. ............................................. 455,540 10,655 KLA-Tencor Corp. * ...................................... 14,270 665 Linear Technology Corp. ................................. 22,346 866 LSI Logic Corp. * ....................................... 24,026 132 Maxim Integrated Products, Inc. ......................... 23,677 $ 1,004 Micron Technology, Inc. * ............................... 44,567 550 National Semiconductor Corp. * .......................... 26,104 469 Novellus Systems, Inc. .................................. 10,207 285 PMC-Sierra, Inc. * ...................................... 12,439 140 QLogic Corp. * .......................................... 6,734 247 Teradyne, Inc. * ........................................ 14,154 242 Texas Instruments, Inc. ................................. 126,025 3,103 Xilinx, Inc. ............................................ 25,284 750 ------- 23,979 Software - 4.2% Adobe Systems, Inc. ..................................... 17,448 1,095 Autodesk, Inc. .......................................... 15,712 596 BMC Software, Inc. * .................................... 16,054 299 Citrix Systems, Inc. * .................................. 12,269 301 Computer Associates International, Inc. ................. 42,663 1,325 Compuware Corp. * ....................................... 27,435 177 Electronic Arts, Inc. ................................... 22,100 1,363 Intuit, Inc. * .......................................... 13,903 612 Mercury Interactive Corp. * ............................. 6,804 310 Microsoft Corp. ......................................... 787,269 21,028 Novell, Inc. * .......................................... 28,124 190 Oracle Corp. * .......................................... 372,464 5,110 Parametric Technology Corp. * ........................... 20,384 120 Siebel Systems, Inc. * .................................. 36,759 386 Symantec Corp. * ........................................ 45,800 1,180 Veritas Software Corp. * ................................ 31,463 898 ------- 34,990 Specialty Retail - 2.3% AutoNation, Inc. * ...................................... 19,400 373 AutoZone, Inc. * ........................................ 6,063 554 Bed Bath & Beyond, Inc. * ............................... 21,920 873 Best Buy Co., Inc. ...................................... 23,707 1,409 Circuit City Stores, Inc. ............................... 14,503 227 Gap, Inc. ............................................... 61,525 1,299 Home Depot, Inc. ........................................ 158,444 6,772 Limited, Inc. ........................................... 25,295 582 Lowe's Cos., Inc. ....................................... 55,119 3,174 Office Depot, Inc. * .................................... 22,848 397 OfficeMax, Inc. ......................................... 6,062 190 RadioShack Corp. ........................................ 11,670 384 Sherwin-Williams Co. .................................... 10,328 461 Staples, Inc. ........................................... 36,261 1,222 Tiffany & Co. ........................................... 10,612 339 TJX Cos., Inc. .......................................... 35,616 895 Toys "R" Us, Inc. * ..................................... 15,587 319 ------- 19,470 Textiles & Apparel - 0.5% Coach, Inc. * ........................................... 13,700 773 Jones Apparel Group, Inc. ............................... 9,100 333 Liz Claiborne, Inc. ..................................... 7,852 331 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Textiles & Apparel - Continued Nike, Inc. - Cl. B ..................................... 19,194 $ 1,741 Reebok International, Ltd. ............................. 4,285 189 V.F. Corp. ............................................. 8,063 446 -------- 3,813 Tobacco - 1.2% Altria Group, Inc. ..................................... 148,399 9,067 UST, Inc. .............................................. 12,037 579 -------- 9,646 Trading Companies & Distributors - 0.1% Genuine Parts Co. ...................................... 12,700 560 W.W. Grainger, Inc. .................................... 6,638 442 -------- 1,002 U.S. Government Agencies - 1.0% Federal Home Loan Mortgage Corp. ....................... 50,007 3,686 Federal National Mortgage Assoc. ....................... 69,755 4,967 -------- 8,653 Unclassified - 0.0% EEX Corp. .............................................. -- Wireless Telecommunications Services - 0.3% Nextel Communications, Inc. - Cl. A * .................. 81,113 2,433 -------- TOTAL COMMON STOCK- (Cost $797,537) 97.0% 816,289 Par Value ------- (000's) SHORT-TERM INVESTMENTS - 2.9% Investment in joint trading account - 2.7% 2.29% due 01/03/05 ..................................... $22,994 22,994 U.S. Treasury - Bills - 0.2% 2.19% due 03/10/05 ..................................... 1,625 1,618 -------- TOTAL SHORT-TERM INVESTMENTS- (Cost $24,612) 24,612 24,612 ------- -------- TOTAL INVESTMENTS- (Cost $822,149) 99.9% 840,901 Cash and Receivables, less payables- 0.1% 848 ------- -------- NET ASSETS- 100.0% $841,749 ======= ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 Bank of New York. 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 year ended December 31, 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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 2004, open financial futures contracts for the Fund were as follows: Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ S&P 500 Index Futures 85 Long March 05 $563 ==== 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, of which $2,698 which expires in 2010. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 $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. For the year ended December 31, 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 in expenses of $30. John Hancock has entered into a Sub-Advisory Agreement with State Street Global Advisers Funds Management, Inc., which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $192,982 $101,187 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Depreciation - ---------- ------------ ------------ -------------- $853,388 $ 84,486 $(96,973) $(12,487) NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $2,698 $(11,924) 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 - ---- ------------------ ---------------------- ----------------- 2004 $13,389 $-- $ -- 2003 16,964 -- 340 Included in the Fund's 2004 and 2003 distributions from ordinary income are $135 and $2,856, respectively, in excess of investment company taxable income, which in accordance with applicable US tax law, were distributed, to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Equity Index Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Equity Index Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: April 30, 1997 - -------------------------------------------------------------------------------- Financial Industries Fund John Hancock Advisers, LLC J. Schmidt/L. Welch - -------------------------------------------------------------------------------- .. 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. Fund Commentary Performance: For the year 2004, the Financial Industries Fund returned +8.65%, underperforming the +10.89% return of the S&P Financial Index. Environment: The performance of the equity markets was mixed for the year. For the first three quarters, performance was flat as investors focused their attention on escalating oil prices, the fall of the U.S. dollar, geopolitical events, Federal Reserve interest rate increases and uncertainty about the Presidential election. These concerns left investors stymied regarding the health of the overall economy and the market. However, during the fourth quarter, many of these concerns were put to rest as President Bush was re-elected, oil prices moved sharply lower and investors perceived the Fed rate increases as necessary, given a slight increase in inflation and the fall of the U.S. dollar. In this environment, Financials slightly underperformed the market. For the year, we trailed our benchmark, as our stock selection within the insurance brokerage, asset management & custody bank and regional banks groups was negative. Also detracting from our performance was our group overweight of the insurance brokers. Aiding performance was our stock selection within the thrifts & mortgage finance, and the multi-line insurance groups. Outlook: Looking forward, we believe Financials remain attractive, given their stability of earnings, their ability to mitigate interest rate risk in a rising interest rate environment, and the continued prospects for consolidation. To benefit from the current market environment, we have overweighted asset management & custody banks, and diversified banks--overweighting the market sensitive groups. We believe these groups are better valued. We have underweighted life & health insurance companies and regional banks. [CHART] Line chart Historical Fund Return $10,000 Investment made 4/30/97 (Fund Inception Date) Financial S&P 500 Financials Industries VST S&P 500 TR Sector TR (c) 2004 -------------- ---------- ------------------ Apr-97 $10,000 $10,000 $10,000 May-97 10,600 10,614 10,467 Jun-97 11,240 11,087 11,048 Jul-97 12,460 11,968 12,368 Aug-97 11,930 11,302 11,445 Sep-97 12,990 11,921 12,369 Oct-97 12,620 11,523 12,112 Nov-97 12,840 12,057 12,591 Dec-97 13,505 12,264 13,222 Jan-98 13,334 12,400 12,845 Feb-98 14,409 13,295 14,053 Mar-98 14,972 13,975 14,854 Apr-98 15,043 14,116 15,100 May-98 14,701 13,873 14,736 Jun-98 15,173 14,437 15,354 Jul-98 14,741 14,283 15,356 Aug-98 11,988 12,218 11,815 Sep-98 12,631 13,001 12,053 Oct-98 13,535 14,058 13,515 Nov-98 14,269 14,910 14,436 Dec-98 14,663 15,769 14,733 Jan-99 14,257 16,429 15,045 Feb-99 14,044 15,918 15,246 Mar-99 14,368 16,555 15,830 Apr-99 15,403 17,196 16,903 May-99 15,190 16,790 15,964 Jun-99 15,332 17,722 16,625 Jul-99 14,561 17,169 15,592 Aug-99 13,932 17,084 14,876 Sep-99 13,232 16,616 14,103 Oct-99 14,947 17,667 16,456 Nov-99 14,531 18,026 15,649 Dec-99 14,842 19,088 15,339 Jan-00 14,267 18,129 14,854 Feb-00 12,913 17,786 13,246 Mar-00 15,592 19,526 15,703 Apr-00 14,945 18,938 15,209 May-00 15,797 18,550 16,229 Jun-00 15,694 19,007 15,245 Jul-00 16,823 18,710 16,821 Aug-00 18,291 19,872 18,436 Sep-00 18,825 18,823 18,874 Oct-00 18,886 18,743 18,791 Nov-00 17,706 17,265 17,684 Dec-00 18,873 17,350 19,282 Jan-01 18,183 17,965 19,228 Feb-01 17,195 16,327 17,965 Mar-01 16,300 15,293 17,424 Apr-01 17,051 16,481 18,072 May-01 17,401 16,592 18,801 Jun-01 17,072 16,188 18,794 Jul-01 16,434 16,029 18,490 Aug-01 15,384 15,025 17,363 Sep-01 14,623 13,812 16,338 Oct-01 14,232 14,075 16,035 Nov-01 15,240 15,155 17,180 Dec-01 15,568 15,288 17,556 Jan-02 15,129 15,065 17,281 Feb-02 14,840 14,774 17,030 Mar-02 15,728 15,330 18,162 Apr-02 15,044 14,401 17,677 May-02 14,915 14,295 17,648 Jun-02 14,081 13,276 16,810 Jul-02 13,205 12,241 15,477 Aug-02 13,493 12,322 15,794 Sep-02 11,986 10,983 13,947 Oct-02 12,905 11,949 15,209 Nov-02 13,226 12,653 15,834 Dec-02 12,538 11,909 14,985 Jan-03 12,127 11,597 14,735 Feb-03 11,695 11,423 14,275 Mar-03 11,533 11,533 14,219 Apr-03 12,884 12,484 15,961 May-03 13,650 13,142 16,805 Jun-03 13,686 13,310 16,847 Jul-03 14,237 13,544 17,620 Aug-03 14,193 13,808 17,442 Sep-03 14,185 13,662 17,559 Oct-03 15,173 14,435 18,768 Nov-03 15,146 14,562 18,716 Dec-03 15,802 15,326 19,636 Jan-04 16,219 15,608 20,261 Feb-04 16,573 15,825 20,798 Mar-04 16,359 15,586 20,593 Apr-04 15,686 15,341 19,642 May-04 15,927 15,551 20,004 Jun-04 16,056 15,853 20,103 Jul-04 15,606 15,328 19,691 Aug-04 15,950 15,390 20,353 Sep-04 15,971 15,556 20,179 Oct-04 16,003 15,794 20,282 Nov-04 16,483 16,434 20,881 Dec-04 17,170 16,992 21,774 Value on 12/31/04: - ------------------ $17,170 Financial Industries Fund $21,774 Standard & Poor's Financial Index(1) $16,992 S&P 500(R) Index(2) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Citigroup, Inc. 5.1% Bank of America Corp. 4.9% State Street Corp. 4.1% Berkshire Hathaway, Inc. 3.9% JP Morgan Chase & Co. 3.8% Wells Fargo & Co. 3.6% American Express Co. 3.5% Federal Home Loan Mortgage Corp. 3.5% Bank of New York Co., Inc. 3.4% Goldman Sachs Group, Inc. 3.3% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Financial S&P 500 Industries Financials S&P 500 Fund Sector/1/ Index/2/ ---------- ---------- -------- 1 Year 8.65% 10.89% 10.87% 3 Years 3.32% 7.44% 3.59% 5 Years 2.96% 7.26% -2.30% Since Inception (4/30/97) 7.29% 10.68% 7.16% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 94.9% Governments 4.5% Industrials 0.6% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Standard & Poor's Financial Index is an unmanaged index of financial sector stocks in the Standard & Poor's 500(R) Index. /2/ "Standard & Poor's 500(R) Index" 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. "Standard & Poor 500(R)" Index is an unmanaged stock index commonly used as a broad measure of stock market performance. Inception: April 30, 1997 - -------------------------------------------------------------------------------- Financial Industries Fund John Hancock Advisers, LLC J. Schmidt/L. Welch - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Financial Industries Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes: The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,069.30 Expense paid per $1,000* $ 4.88 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.42 Expense paid per $1,000* $ 4.76 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $ 52,138 Net unrealized appreciation if investments ......................... 7,597 Short-term investments at value .................................... 1,638 -------- Total investments ............................................ 61,373 Receivable for: Investments sold ................................................ 45 Dividends ....................................................... 55 Other receivables ............................................... 2 -------- Total assets ....................................................... 61,475 -------- LIABILITIES Payables for: Fund shares purchased ........................................... 119 Accrued operating expenses ...................................... 37 Other liabilities ............................................... 1 -------- Total liabilities .................................................. 157 -------- Net assets ......................................................... $ 61,318 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 3,973 -------- Net asset value per share .......................................... $ 15.44 ======== Composition of net assets: Capital paid-in ................................................. 63,798 Accumulated net realized loss on investments .................... (10,077) Net unrealized appreciation of investments ...................... 7,597 -------- Net assets ......................................................... $ 61,318 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted) INVESTMENT INCOME Interest .......................................................... $ 14 Dividends (net of foreign withholding tax of $1) .................. 1,221 ------ Total investment income .............................................. 1,235 ------ EXPENSES Investment advisory fee ........................................... 492 Auditors fees ..................................................... 7 Custodian fees .................................................... 23 Legal fees ........................................................ 10 Printing & mailing fees ........................................... 37 Trustees' fees .................................................... 2 Other fees ........................................................ 1 ------ Total Expenses ....................................................... 572 Less expenses reimbursed .......................................... (19) Less custodian expense reduction offset by commission recapture arrangement (Note C) ...................... (11) ------ Net expenses ......................................................... 542 ------ Net Investment Income ................................................ 693 ------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments .................................. 3,313 Change in unrealized appreciation investments ..................... 937 ------ Net realized and unrealized gain ..................................... 4,250 ------ Net increase in net assets resulting from operations ........................................................ $4,943 ====== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Financial Industries Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .................................................... $ 693 $ 791 Net realized gain (loss) ................................................. 3,313 (1,519) Change in net unrealized appreciation .................................... 937 14,169 -------- -------- Net increase in net assets resulting from operations .................. 4,943 13,441 Distributions to shareholders from: Net investment income .................................................... (693) (787) Capital paid-in .......................................................... (241) -------- -------- Decrease in net assets resulting from distributions ................... (693) (1,028) From fund share transactions: Proceeds from shares sold ................................................ 5,011 4,734 Distributions reinvested ................................................. 693 1,028 Payment for shares redeemed .............................................. (11,624) (12,562) -------- -------- Decrease in net assets from fund share transactions ................... (5,920) (6,800) -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ....................................... (1,670) 5,613 NET ASSETS Beginning of Period ...................................................... 62,988 57,375 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ......................................................... $ 61,318 $ 62,988 ======== ======== Analysis of fund share transactions: Sold ..................................................................... 341 318 Reinvested ............................................................... 48 59 Redeemed ................................................................. (800) (619) -------- -------- Decrease in fund shares outstanding ......................................... (411) (242) ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Financial Industries Fund ---------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------- 2004 2003(i) 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 ......................... 0.16 0.18 0.12 0.11 0.06 Net Realized and Unrealized Gain (Loss) on Investment(a) .............................. 1.07 2.82 (2.95) (3.33) 3.87 ------- ------- ------- ------- ------- Total From Investment Operations .............. 1.23 3.00 (2.83) (3.22) 3.93 Less Distributions: Distribution from Net Investment Income ....... (0.16) (0.18) (0.13) (0.09) (0.05) Distribution from Net Realized Gains on Investments ................................ (0.47) Distribution from Capital Paid-in ............. (0.05) ------- ------- ------- ------- ------- Total Distributions ........................... (0.16) (0.23) (0.13) (0.56) (0.05) Capital Contributions ......................... ------- ------- ------- ------- ------- Net Assets Value at End of Period ................ $ 15.44 $ 14.37 $ 11.60 $ 14.56 $ 18.34 ======= ======= ======= ======= ======= Total Investment Return(b) ....................... 8.65% 26.03%(c) (19.46)% (17.51)% 27.16% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ..................................... 0.90%(g)(h) 0.85%(d) 0.90% 0.89% 0.90% Ratio of Net Investment Income to Average Net Assets ................................. 1.13% 1.35%(d) 0.87% 0.71% 0.36% Portfolio Turnover Rate ....................... 33.27% 50.20%(c)(e) 2.00% 97.00%(e) 41.00% Net Assets End of Period (000s Omitted) .......... $61,318 $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. (g) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 0.93% for the year ended December 31, 2004. (h) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (i) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- FINANCIAL INDUSTRIES FUND Market Name of Issuer Shares Value -------------- ------ --------- (000's) COMMON STOCK Banks - 30.6% Bank of America Corp. .................................. 62,806 $ 2,951 Bank of New York Co., Inc. ............................. 60,500 2,022 Banknorth Group, Inc. .................................. 9,000 330 City National Corp. .................................... 7,500 530 Fifth Third Bancorp .................................... 40,842 1,931 First Horizon National Corp. ........................... 2,500 108 Golden West Financial Corp. ............................ 12,200 749 JP Morgan Chase & Co. .................................. 57,860 2,257 M & T Bank Corp. ....................................... 10,900 1,176 Mellon Financial Corp. ................................. 44,000 1,369 National City Corp. .................................... 8,900 334 North Fork Bancorporation, Inc. ........................ 7,500 216 PNC Bank Corp .......................................... 20,844 1,197 Synovus Financial Corp. ................................ 5,000 143 US Bancorp ............................................. 30,000 940 Wachovia Corp. ......................................... 31,182 1,640 Wintrust Financial Corp. ............................... 2,000 114 Zions Bancorp .......................................... 11,500 782 ------- 18,789 Commercial Services & Supplies - 0.6% Fiserv, Inc. * ......................................... 8,800 354 Credit Card - 2.2% MBNA Corp. ............................................. 48,975 1,381 Diversified Financials - 34.0% American Express Co. ................................... 37,000 2,086 Ameritrade Holding Corp. * ............................. 10,000 142 Assured Guaranty, Ltd. ................................. 22,330 439 Bear Stearns Cos., Inc. ................................ 7,400 757 CIT Group, Inc. ........................................ 11,000 504 Citigroup, Inc. ........................................ 63,000 3,035 Countrywide Financial Corp. ............................ 24,500 907 Doral Financial Corp. .................................. 9,000 443 Franklin Resources, Inc. ............................... 3,000 209 Goldman Sachs Group, Inc. .............................. 19,000 1,977 Hartford Financial Services Group, Inc. ................ 11,000 763 Legg Mason, Inc. ....................................... 8,200 601 Lehman Brothers Holdings, Inc. ......................... 15,500 1,356 Merrill Lynch & Co., Inc. .............................. 30,800 1,841 Morgan Stanley, Dean Witter, Discover & Co. ............ 17,600 977 National Financial Partners Corp. ...................... 5,060 196 State Street Corp. ..................................... 50,000 2,456 Wells Fargo & Co. ...................................... 35,000 2,175 ------- 20,864 Finance - 0.7% Marsh & McLennan Cos., Inc. ............................ 12,750 419 Insurance - 24.4% Ace, Ltd. .............................................. 13,000 556 AFLAC, Inc. ............................................ 5,900 235 Allstate Corp. ......................................... 16,500 853 Ambac Financial Group, Inc. ............................ 8,650 $ 710 American International Group, Inc. ..................... 23,400 1,537 Arch Capital Group, Ltd. * ............................. 29,200 1,130 Axis Capital Holdings, Ltd. ............................ 20,085 549 Berkshire Hathaway, Inc. - Cl. B * ..................... 800 2,349 Conseco, Inc. * ........................................ 32,200 642 Direct General Corp. ................................... 8,500 273 Genworth Financial, Inc. - Cl. A ....................... 21,983 594 Metlife, Inc. .......................................... 11,000 446 PartnerRe, Ltd. ........................................ 21,000 1,301 Prudential Financial, Inc. ............................. 13,500 742 Radian Group, Inc. ..................................... 14,750 785 Renaissancere Holdings, Ltd. ........................... 14,000 729 Scottish Annuity & Life ................................ 22,000 570 Torchmark, Inc. ........................................ 12,900 737 Transatlantic Holdings, Inc. ........................... 3,900 241 ------- 14,979 Real Estate Investment Trust - 0.5% Host Marriott Corp. .................................... 16,000 277 U.S. Government Agencies - 4.4% Federal Home Loan Mortgage Corp. ....................... 28,000 2,063 Federal National Mortgage Assoc ........................ 8,550 609 ------- 2,672 ------- TOTAL COMMON STOCK- (Cost $52,138) 97.4% 59,735 Par Value ------- (000's) SHORT-TERM INVESTMENTS - 2.7% Investment in joint trading account 2.29% due 01/03/05 (Cost $1,638) ......................................... $1,638 1,638 ------ ------- TOTAL INVESTMENTS- (Cost $53,776) 100.1% 61,373 Payables, less cash and receivables- (0.1)% (55) ------ ------- NET ASSETS- 100.0% $61,318 ====== ======= * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Financial Industries Fund (the "Fund" or "VST Financial Industries") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $58 1.83% $-- 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $7,576 and $2,372 which expire in 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. 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 and JHVLICO will reimburse the Fund for such excess. Accordingly, for the year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $19 to the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 John Hancock Advisers, LLC, with respect to the Fund. John Hancock Advisers, LLC, is an affiliate of John Hancock, which under John Hancock's 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 in expenses of $11. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $20,152 $25,947 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $53,905 $9,268 $(1,800) $7,468 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $9,948 $7,468 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 - ---- ------------------ ---------------------- ----------------- 2004 $693 $-- $ -- 2003 787 -- 241 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 John Hancock 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. The former VA Financial Industries was the accounting survivor of this merger and historical performance for it's periods prior to April 28, 2003 have been used by the surviving fund. The acquisition was accounted for as a tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Depreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 4,640 $55,074 $(5,280) $200 $55,274
NOTE F--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Financial Industries Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Financial Industries Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: August 31, 1999 - -------------------------------------------------------------------------------- Fundamental Value Fund Wellington Management Company, LLP C. Duckworth - -------------------------------------------------------------------------------- .. 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. Fund Commentary Performance: For the year 2004, Fundamental Value Fund returned +15.59%, underperforming the +16.49% return of the Russell 1000 Value Index. Environment: U.S. markets encountered some volatility in mid-2004 due to uncertainty about the pace of Federal Reserve interest rate increases, higher energy prices and concern about the war in Iraq and the threat of domestic terrorism. A year-end equity market rally marked the conclusion of 2004, as the Presidential election was decided, oil prices retreated from record highs and global inflationary pressures remained under control. Large-cap value stocks generated a higher return than large-cap growth stocks. All sectors in the Russell 1000 Value Index advanced during the year, with Energy the strongest. The portfolio's security selection was positive, driven by outperformance among Utilities and Financials. Financials is the largest sector, comprising over one-third of the portfolio and the Index. Security selection was weakest within Information Technology. Outlook: The American Job Creation Act allows corporations to repatriate accumulated un-remitted earnings from foreign subsidiaries at a much reduced tax rate. This windfall should be the catalyst that reverses the multi-year trend of accumulating corporate cash balances. Repatriated funds are likely to measure in the hundreds of billions of dollars, and companies are likely to use this cash for share repurchases, merger & acquisition activity and increasing their dividend payments. [CHART] Line chart Historical Fund Return $10,000 Investment made 8/31/99 (Fund Inception date) Fundamental Value Russell 1000(R) Value Index ----------------- --------------------------- Aug-99 $10,000 $10,000 Sep-99 9,786 9,651 Oct-99 10,351 10,206 Nov-99 10,294 10,126 Dec-99 10,471 10,175 Jan-00 10,030 9,843 Feb-00 9,613 9,112 Mar-00 10,828 10,224 Apr-00 10,443 10,105 May-00 10,606 10,211 Jun-00 10,216 9,744 Jul-00 10,451 9,866 Aug-00 11,178 10,415 Sep-00 11,404 10,511 Oct-00 11,709 10,769 Nov-00 11,228 10,369 Dec-00 11,876 10,889 Jan-01 11,882 10,931 Feb-01 11,469 10,627 Mar-01 11,161 10,251 Apr-01 11,707 10,754 May-01 11,918 10,995 Jun-01 11,612 10,751 Jul-01 11,578 10,729 Aug-01 11,156 10,299 Sep-01 10,310 9,574 Oct-01 10,346 9,492 Nov-01 10,817 10,043 Dec-01 11,045 10,280 Jan-02 10,816 10,201 Feb-02 10,738 10,217 Mar-02 11,193 10,700 Apr-02 10,596 10,333 May-02 10,619 10,385 Jun-02 10,028 9,789 Jul-02 9,157 8,879 Aug-02 9,208 8,946 Sep-02 8,285 7,951 Oct-02 8,954 8,540 Nov-02 9,497 9,078 Dec-02 9,123 8,684 Jan-03 8,863 8,474 Feb-03 8,632 8,248 Mar-03 8,624 8,262 Apr-03 9,361 8,989 May-03 9,983 9,569 Jun-03 10,137 9,689 Jul-03 10,188 9,833 Aug-03 10,398 9,986 Sep-03 10,257 9,889 Oct-03 10,901 10,494 Nov-03 11,035 10,636 Dec-03 11,741 11,292 Jan-04 11,861 11,491 Feb-04 12,128 11,737 Mar-04 12,014 11,634 Apr-04 11,676 11,350 May-04 11,764 11,465 Jun-04 11,967 11,736 Jul-04 11,709 11,571 Aug-04 11,769 11,736 Sep-04 12,053 11,918 Oct-04 12,414 12,116 Nov-04 13,104 12,728 Dec-04 13,572 13,154 Value on 12/31/04: - ------------------ $13,572 Fundamental Value Fund $13,154 Russell 1000(R) Value Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Assets ------ Citigroup, Inc. 5.1% Bank of America Corp. 4.7% Tyco International, Ltd. 2.7% General Electric Co. 2.5% Altria Group, Inc. 2.5% Exelon Corp. 2.0% UnionBanCal Corp. 2.0% Valero Energy Corp. 2.0% Exxon Mobil Corp. 2.0% Time Warner, Inc. 1.8% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Fundamental Russell 1000(R) Value Fund Value Index ----------- --------------- 1 Year 15.59% 16.49% 3 Years 7.11% 8.57% 5 Years 5.32% 5.27% Since Inception (8/31/99) 5.89% 5.28% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 32.1% Energy 12.2% Industrials 11.9% Consumer Discretionary 11.1% Utilities 6.5% Telecommunication Services 5.5% Information Technology 5.3% Materials 5.1% Consumer Staples 4.9% Health Care 3.8% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. Inception: August 31, 1999 - -------------------------------------------------------------------------------- Fundamental Value Fund Wellington Management Company, LLP C. Duckworth - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Fundamental Value Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,134.10 Expense paid per $1,000* $ 4.54 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.88 Expense paid per $1,000* $ 4.30 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted) ASSETS Long term investments at cost (including $7,932 of securities loaned (Note B)) ................................................ $175,536 Net unrealized appreciation of investments ......................... 34,640 Short-term investments at value .................................... 11,373 -------- Total investments ............................................ 221,549 Receivable for: Dividends ....................................................... 330 Other assets .................................................... 4 -------- Total assets ....................................................... 221,883 -------- LIABILITIES Payables for: Investments purchased ........................................... 190 Fund shares purchased ........................................... 89 Collateral for securities on loan ............................... 8,140 Foreign dividend tax withholding ................................ 2 Accrued operating expenses ...................................... 16 Futures contracts variation margin .............................. 2 Other liabilities ............................................... 4 -------- Total liabilities .................................................. 8,443 -------- Net assets ......................................................... $213,440 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 17,016 -------- Net asset value per share .......................................... $ 12.54 ======== Composition of net assets: Capital paid-in ................................................. $191,866 Accumulated net realized loss on investments and futures transactions ................................................. (13,104) Net unrealized appreciation of: Investments .................................................. 34,640 Futures ...................................................... 38 -------- Net assets ......................................................... $213,440 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 74 Dividends (net of foreign withholding tax $32) ................... 3,603 Securities lending ............................................... 12 ------- Total investment income ............................................. 3,689 ------- EXPENSES Investment advisory fee .......................................... 1,160 Auditors fees .................................................... 19 Custodian fees ................................................... 83 Legal fees ....................................................... 23 Printing & mailing fees .......................................... 98 Trustees' fees ................................................... 4 Other fees ....................................................... 5 ------- Total expenses ...................................................... 1,392 Less expenses reimbursed ......................................... (94) Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (43) ------- Net expenses ........................................................ 1,255 ------- Net investment income ............................................... 2,434 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments ................................................... 14,389 Financial futures contracts ................................... 213 Change in unrealized appreciation (depreciation) on: Investments ................................................... 9,070 Futures ....................................................... (19) ------- Net realized and unrealized gain .................................... 23,653 ------- Net increase in net assets resulting from operations ....................................................... $26,087 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Fundamental Value Fund (000's Omitted) Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ......................... $ 2,434 $ 1,751 Net realized gain (loss) ...................... 14,602 (3,702) Change in net unrealized appreciation ......... 9,051 32,920 -------- -------- Net increase in net assets resulting from operations .............................. 26,087 30,969 Distributions to shareholders from: Net investment income ......................... (2,434) (1,709) Capital paid-in ............................... (156) -------- -------- Decrease in net assets resulting from distributions ........................... (2,434) (1,865) From fund share transactions: Proceeds from shares sold ..................... 24,399 32,368 Shares issued in reorganization ............... 56,823 Distributions reinvested ...................... 2,434 1,865 Payment for shares redeemed ................... (32,724) (45,584) -------- -------- Increase (decrease) in net assets from fund share transactions ................. 50,932 (11,351) -------- -------- NET INCREASE IN NET ASSETS ....................... 74,585 17,753 NET ASSETS Beginning of Period ........................... 138,855 121,102 -------- -------- End of Period (including undistributed net investment income $0 and $0, respectively) .............................. $213,440 $138,855 ======== ======== Analysis of fund share transactions: Sold .......................................... 2,162 3,382 Issued in reorganization ...................... 4,933 Reinvested .................................... 212 197 Redeemed ...................................... (2,891) (4,906) -------- -------- Net decrease in fund shares outstanding .......... 4,416 (1,327) ======== ======== (a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Fundamental Value Fund ------------------------------------------------------------------- Year Ended December 31, ------------------------------------------------------------------- 2004 2003(g) 2002(g) 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 ................................. 0.18 0.14 0.12 0.10 0.09 Net Realized and Unrealized Gain (Loss) on Investment(a) ...................................... 1.52 2.33 (1.96) (0.91) 1.30 -------- -------- -------- -------- ------- Total From Investment Operations ...................... 1.70 2.47 (1.84) (0.81) 1.39 Less Distributions: Distribution from Net Investment Income ............... (0.18) (0.14) (0.12) (0.10) (0.10) Distribution from Net Realized Gains on Investments ... (0.08) Distribution from Excess of Net Investment Income/Gains ....................................... (0.06) Distribution from Capital Paid-In ..................... (0.01) (d) -------- -------- -------- -------- ------- Total Distributions ................................... (0.18) (0.15) (0.12) (0.10) (0.24) -------- -------- -------- -------- ------- Net Assets Value at End of Period ........................ $ 12.54 $ 11.02 $ 8.70 $ 10.66 $ 11.57 ======== ======== ======== ======== ======= Total Investment Return(b) ............................... 15.59% 28.70% (17.40)% (6.99)% 13.41% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................................. 0.86%(e)(f) 0.89%(e)(f) 0.85% 0.99%(e) 1.05%(e) Ratio of Net Investment Income to Average Net Assets ............................................. 1.61% 1.44% 1.26% 0.91% 0.97% Portfolio Turnover Rate ............................... 67.76%(c) 69.21% 82.22% 85.20%(c) 86.97% Net Assets End of Period (000s Omitted) .................. $213,440 $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) Excludes merger activity. (d) Amount is less than $0.01. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .92%, .90%, 1.20%, and 1.36% for the years ended December 31, 2004, 2003, 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) Certain amounts in 2003 and 2002 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.1% General Dynamics Corp. ................................. 17,900 $ 1,872 Lockheed Martin Corp. .................................. 6,300 350 Precision Castparts Corp. .............................. 5,700 375 United Technologies Corp. .............................. 17,300 1,788 ------- 4,385 Airlines - 0.3% Continental Airlines, Inc. - Cl. B # * ................. 43,900 594 Auto Components - 1.7% Johnson Controls, Inc. ................................. 13,800 875 Lear Corp. ............................................. 38,300 2,337 TRW Automotive Holdings Corp. * ........................ 24,700 511 ------- 3,723 Banks - 13.0% Bank of America Corp. .................................. 212,172 9,970 City National Corp. .................................... 10,800 763 Comerica, Inc. ......................................... 23,200 1,416 Golden West Financial Corp. ............................ 58,000 3,562 Hibernia Corp. - Cl. A ................................. 111,100 3,279 Northern Trust Corp. ................................... 29,800 1,448 UBS AG # ............................................... 29,800 2,498 UnionBanCal Corp. ...................................... 64,800 4,178 Zions Bancorp .......................................... 9,900 673 ------- 27,787 Beverages - 0.7% Constellation Brands, Inc. - Cl. A * ................... 31,800 1,479 Chemicals - 2.8% Dow Chemical Co. ....................................... 36,800 1,822 E.I. du Pont de Nemours & Co. .......................... 48,200 2,364 Rohm & Haas Co. ........................................ 41,100 1,818 ------- 6,004 Commercial Services & Supplies - 1.1% Cendant Corp. .......................................... 32,300 755 First Data Corp. ....................................... 28,400 1,208 The Bisys Group, Inc. * ................................ 29,600 487 ------- 2,450 Communications Equipment - 0.7% Avaya, Inc. * .......................................... 31,200 537 Cisco Systems, Inc. * .................................. 21,700 419 Motorola, Inc. ......................................... 24,500 421 Scientific-Atlanta, Inc. ............................... 4,300 142 ------- 1,519 Computers & Peripherals - 1.8% Hewlett-Packard Co. .................................... 52,300 1,097 International Business Machines Corp. .................. 27,200 2,681 ------- 3,778 Diversified Financials - 10.8% Capital One Financial Corp. ............................ 13,300 1,120 Citigroup, Inc. ........................................ 223,266 $10,757 Countrywide Credit Industries, Inc. .................... 41,498 1,536 Eaton Vance Corp. ...................................... 1,000 52 Franklin Resources, Inc. ............................... 22,800 1,588 Goldman Sachs Group, Inc. .............................. 26,200 2,726 Merrill Lynch & Co., Inc. .............................. 62,700 3,748 State Street Corp. ..................................... 32,400 1,591 ------- 23,118 Diversified Telecommunication Services - 4.7% AT&T Corp. ............................................. 61,600 1,174 Citizens Communications Co. ............................ 161,600 2,228 Deutsche Telekom AG - ADR # * .......................... 105,500 2,393 Qwest Communications International, Inc.* .............. 74,300 330 Sprint Corp. ........................................... 22,600 562 Verizon Communications ................................. 81,400 3,297 ------- 9,984 Electric Utilities - 5.5% Entergy Corp. .......................................... 27,900 1,886 Exelon Corp. ........................................... 95,024 4,187 PG & E Corp. * ......................................... 64,900 2,160 TXU Corp. # ............................................ 55,000 3,551 ------- 11,784 Electric/Gas - 0.4% MDU Resources Group, Inc. .............................. 35,900 958 Electronic Equipment & Instruments - 0.3% Tektronix, Inc. ........................................ 21,200 640 Gas Utilities - 0.5% UGI Corp. # ............................................ 23,800 974 Health Care Providers & Services - 0.7% McKesson HBOC, Inc. .................................... 45,600 1,435 Hotels Restaurants & Leisure - 1.1% McDonald's Corp. ....................................... 75,100 2,408 Household Durables - 0.5% Lennar Corp. ........................................... 17,200 975 Industrial Conglomerates - 5.1% General Electric Co. ................................... 144,300 5,267 Tyco International, Ltd. ............................... 160,300 5,729 ------- 10,996 Insurance - 5.1% Ambac Financial Group, Inc. ............................ 5,600 460 American International Group, Inc. ..................... 20,765 1,364 MBIA, Inc. ............................................. 59,550 3,768 Prudential Financial, Inc. ............................. 35,200 1,935 St. Paul Cos., Inc. .................................... 52,700 1,954 UnumProvident Corp. .................................... 8,100 145 Wellpoint, Inc. * ...................................... 10,100 1,161 ------- 10,787 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Internet Software & Services - 0.3% VeriSign, Inc. * ...................................... 18,100 $ 607 Machinery - 1.9% Deere & Co. ........................................... 10,500 781 Graco, Inc. ........................................... 50,800 1,898 Ingersoll-Rand Co. - Cl. A ............................ 17,600 1,413 -------- 4,092 Media - 5.3% Comcast Corp. - Cl. A *................................ 9,463 315 Comcast Corp. - Cl. A SPL *............................ 55,800 1,832 E.W. Scripps Co. - Cl. A # ............................ 17,800 859 Fox Entertainment Group, Inc. - Cl. A *................ 26,800 838 Gannett Co., Inc. ..................................... 11,700 956 Liberty Media Corp. - Ser. A .......................... 179,200 1,968 McGraw-Hill Cos., Inc. ................................ 8,400 769 Time Warner, Inc. *.................................... 197,100 3,832 -------- 11,369 Metals & Mining - 0.8% Alcoa, Inc. ........................................... 52,100 1,637 Multiline Retail - 0.7% Costco Wholesale Corp. ................................ 29,400 1,423 Office Electronics - 0.3% Xerox Corp. # * ....................................... 41,800 711 Oil & Gas - 12.0% Conoco Phillips ....................................... 42,085 3,654 Exxon Mobil Corp. ..................................... 80,300 4,116 Halliburton Co. ....................................... 67,100 2,633 Noble Energy, Inc. # .................................. 6,100 376 Occidental Petroleum Corp. ............................ 55,000 3,210 Petro-Canada .......................................... 69,600 3,551 Premcor, Inc. ......................................... 41,400 1,746 Pride International, Inc. * ........................... 52,700 1,083 Valero Energy Corp. ................................... 92,000 4,177 Western Gas Resources, Inc. ........................... 35,500 1,038 -------- 25,584 Paper & Forest Products - 1.4% Bowater, Inc. ......................................... 43,400 1,909 Weyerhaeuser Co. ...................................... 16,800 1,129 -------- 3,038 Personal Products - 1.7% Alberto-Culver Co. - Cl. B ............................ 17,500 850 Gillette Co. .......................................... 62,600 2,803 -------- 3,653 Pharmaceuticals - 3.1% Abbott Laboratories ................................... 38,500 1,796 King Pharmaceuticals, Inc. * .......................... 57,600 714 Medco Health Solutions, Inc. * ........................ 17,300 720 Schering-Plough Corp. ................................. 122,300 2,554 Watson Pharmaceuticals, Inc. * ........................ 24,700 $ 810 -------- 6,594 Real Estate Investment Trust - 2.7% General Growth Properties ............................. 84,140 3,043 Kimco Realty Corp. .................................... 47,650 2,763 -------- 5,806 Road & Rail - 1.2% Canadian National Railway Co. ......................... 23,750 1,454 Norfolk Southern Corp. ................................ 28,400 1,028 -------- 2,482 Semiconductor Equipment & Products - 0.6% Fairchild Semiconductor Corp. - Cl. A * ............... 73,300 1,192 Software - 1.3% Electronic Arts, Inc. * ............................... 8,600 531 Microsoft Corp. ....................................... 83,200 2,222 -------- 2,753 Specialty Retail - 1.6% Abercrombie & Fitch Co. ............................... 13,800 648 Foot Locker, Inc. ..................................... 17,100 460 Michaels Stores, Inc. ................................. 74,200 2,224 -------- 3,332 Tobacco - 2.4% Altria Group, Inc. .................................... 85,400 5,218 U.S. Government Agencies - 1.6% Federal Home Loan Mortgage Corp. ...................... 45,500 3,353 Wireless Telecommunications Services - 0.7% Nextel Communications, Inc. - Cl. A * ................. 51,800 1,554 -------- TOTAL COMMON STOCK- (Cost $175,536) 98.5% 210,176 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 3.8% State Street Navigator Securities Lending Portfolio .......................................... $ 8,140 8,140 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- FUNDAMENTAL VALUE FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) SHORT-TERM INVESTMENTS - 1.5% Investment in joint trading account 2.29% due 01/03/05 .................................... $ 3,068 $ 3,068 U.S. Treasury - Bills 2.075% due 02/03/05 ................................... 70 70 2.138% due 02/10/05 ................................... 25 25 2.171% due 02/24/05 ................................... 35 35 2.212% due 03/03/05 ................................... 35 35 -------- TOTAL SHORT-TERM INVESTMENTS- (Cost $3,233) 3,233 3,233 ------- -------- TOTAL INVESTMENTS- (Cost $186,909) 103.8% 221,549 Payables, less cash and receivables- (3.8)% (8,109) ------- -------- NET ASSETS- 100.0% $213,440 ======= ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Fundamental Value Fund (the "Fund" or "VST Fundamental Value") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $216 2.53% $-- 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 December 31, 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 - -------------------------- ------------------- $7,932 $8,140 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 2004, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ S&P Mini 500 Index Futures 41 Long March 05 $38 ===
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, 2004, the Fund had no open forward foreign currency contracts. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $727, $5,281 and $5,961 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $32. Realized gains and losses from security transactions are determined on the basis of identified cost. 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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $94 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 in expenses of $43. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, LLP, which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $147,189 $100,532 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $188,006 $34,557 $(1,014) $33,543 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $11,969 $33,543 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - ---- ------------------ ---------------------- ----------------- 2004 $2,434 $-- $ -- 2003 1,709 -- 156 Included in the Fund's 2004 distributions from ordinary income is $109 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed to shareholders as ordinary income distributions. NOTE E--COMBINATION On October 15, 2004, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund - --------------------- ----------------------- VST Fundamental Value VST Fundamental Value B 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 a tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Appreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 4,933 $56,823 $4,338 $141,631 $198,453
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on October 15, 2004 on the following matter: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE F--OTHERS MATTERS (UNAUDITED)--Continued For Against Abstain --- ------- ------- To approve, as to the Fundamental Value Fund, a proposal 90% 5% 5% to combine with the Fundamental Value B Fund of John Hancock Variable Series Trust I. Shareholders in the Fundamental Value B Fund would receive Fundamental Fund shares having the same value as their prior Value Fundamental Value B Fund shares. Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Fundamental Value Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fundamental Value Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Global Bond Fund Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- .. The Fund employs a multiple manager approach with several portfolio managers managing a portion of the Fund. The managers select securities using proprietary fundamental research and economic analysis to identify attractive markets and currencies as well as undervalued sectors and securities. Fund Commentary Performance: For the year 2004, the Global Bond Fund returned +10.63%, outperforming the +10.36% return of the Citibank World Government Bond Index. Environment: The portfolio's underweight exposure to Japanese government bonds and an overweight to Eurozone countries were the top contributors to results for the year. Within corporates, the portfolio's issue selection within Financials and Telecommunication Services was positive. There were no significant negative contributors for the year. Outlook: We have a long-term negative outlook for the U.S. dollar as its current account deficit continues to grow. We think the euro is expensive and likely to remain so, and we believe the yen has room to appreciate. Over the longer term, we expect U.S. interest rates to move higher as the Federal Reserve continues to target a more neutral policy. Because the best news in low inflation is behind us, we expect to have a slightly short duration stance. In the Eurozone and Japan, however, central banks are not expected to tighten monetary policy in 2005 as corporate and labor market restructuring continues. [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/96 (Fund Inception Date) Global Global Bond Bond Benchmark ----------- -------------- Apr-96 10,000 10,000 May-96 9,983 10,002 Jun-96 10,068 10,123 Jul-96 10,103 10,163 Aug-96 10,112 10,184 Sep-96 10,297 10,371 Oct-96 10,490 10,587 Nov-96 10,674 10,775 Dec-96 10,671 10,704 Jan-97 10,723 10,763 Feb-97 10,755 10,801 Mar-97 10,634 10,697 Apr-97 10,761 10,847 May-97 10,871 10,938 Jun-97 11,021 11,082 Jul-97 11,262 11,351 Aug-97 11,194 11,281 Sep-97 11,396 11,456 Oct-97 11,459 11,599 Nov-97 11,518 11,661 Dec-97 11,638 11,787 Jan-98 11,775 11,939 Feb-98 11,795 11,958 Mar-98 11,844 12,015 Apr-98 11,891 12,078 May-98 12,012 12,206 Jun-98 12,101 12,296 Jul-98 12,133 12,344 Aug-98 12,316 12,556 Sep-98 12,624 12,852 Oct-98 12,539 12,796 Nov-98 12,640 12,886 Dec-98 12,703 12,910 Jan-99 12,812 13,019 Feb-99 12,564 12,826 Mar-99 12,668 12,917 Apr-99 12,705 12,990 May-99 12,578 12,912 Jun-99 12,447 12,766 Jul-99 12,562 12,739 Aug-99 12,512 12,753 Sep-99 12,436 12,818 Oct-99 12,430 12,844 Nov-99 12,455 12,887 Dec-99 12,429 12,889 Jan-00 12,395 12,899 Feb-00 12,497 13,029 Mar-00 12,674 13,245 Apr-00 12,671 13,279 May-00 12,739 13,357 Jun-00 12,828 13,473 Jul-00 12,903 13,575 Aug-00 12,937 13,638 Sep-00 13,005 13,717 Oct-00 13,113 13,832 Nov-00 13,320 14,107 Dec-00 13,920 14,613 Jan-01 13,913 14,594 Feb-01 13,915 14,588 Mar-01 13,483 14,168 Apr-01 13,457 14,117 May-01 13,357 14,074 Jun-01 13,269 13,945 Jul-01 13,613 14,296 Aug-01 14,148 14,834 Sep-01 14,168 14,942 Oct-01 14,245 15,060 Nov-01 14,109 14,849 Dec-01 13,718 14,468 Jan-02 13,455 14,200 Feb-02 13,526 14,274 Mar-02 13,490 14,234 Apr-02 13,931 14,743 May-02 14,369 15,161 Jun-02 14,941 15,893 Jul-02 14,998 16,049 Aug-02 15,282 16,329 Sep-02 15,421 16,507 Oct-02 15,410 16,440 Nov-02 15,469 16,461 Dec-02 16,304 17,289 Jan-03 16,566 17,526 Feb-03 16,831 17,771 Mar-03 16,847 17,826 Apr-03 17,090 18,040 May-03 17,909 18,823 Jun-03 17,631 18,518 Jul-03 17,041 17,968 Aug-03 16,958 17,871 Sep-03 17,960 18,885 Oct-03 17,791 18,790 Nov-03 18,112 19,108 Dec-03 18,897 19,870 Jan-04 18,938 19,924 Feb-04 18,978 19,954 Mar-04 19,205 20,241 Apr-04 18,447 19,375 May-04 18,540 19,526 Jun-04 18,558 19,569 Jul-04 18,442 19,469 Aug-04 18,950 19,930 Sep-04 19,160 20,211 Oct-04 19,809 20,809 Nov-04 20,580 21,559 Dec-04 20,907 21,929 - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Federal Republic of Germany 15.5% Government of Japan 13.7% Government of France 12.7% U.S. Treasury 8.5% Kingdom of Spain 4.5% Kingdom of Sweden 4.1% Government of Netherlands 2.8% Republic of Finland 2.8% U.K. Treasury 2.1% KFW International Finance, Inc. 2.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Global Bond Global Bond Fund Fund/1/ Benchmark/2/ ----------- ---------------- 1 Year 10.63% 10.36% 3 Years 15.08% 14.87% 5 Years 10.96% 11.22% Since Inception (5/1/96) 8.87% 9.48% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 12.59% AAA 53.68% AA 2.53% A 19.21% Weighted Average Yield 3.09% BBB 11.99% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ Statistics are based on bond assets only, excluding cash. /2/ The Global Bond Fund benchmark represents 75% Lehman Brothers Aggregate Bond Index 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. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Global Bond Fund Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Global Bond Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,126.50 Expense paid per $1,000* $ 5.90 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.59 Expense paid per $1,000* $ 5.60 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $8,938 of securities loaned (Note B)) ................................................ 94,592 Net unrealized appreciation of investments ......................... 18,683 Short-term investments at value .................................... 12,367 -------- Total investments ............................................ 125,642 Receivable for: Interest ........................................................ 2,686 Foreign interest tax expenses ................................... 1 Unrealized appreciation in forward currency contracts ........... 705 -------- Total assets ....................................................... 129,034 -------- LIABILITIES Payables for: Fund shares purchased ........................................... 6 Foreign interest tax expenses ................................... 1 Accrued operating expenses ...................................... 87 Collateral for securities on loan ............................... 9,100 Unrealized depreciation in forward currency contracts ........... 1,069 -------- Total liabilities .................................................. 10,263 -------- Net assets ......................................................... $118,771 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ................................... 9,647 -------- Net asset value per share .......................................... $ 12.31 ======== Composition of net assets: Capital paid-in ................................................. $100,107 Accumulated net realized loss on investments and foreign currency transactions ........................................ (205) Undistributed net investment income ............................. 365 Net unrealized appreciation (depreciation) of: Investments .................................................. 18,683 Translation of assets and liabilities in foreign currencies .. (179) -------- Net assets ......................................................... $118,771 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 3,797 Securities lending ............................................... 6 ------- Total investment income ............................................. 3,803 ------- EXPENSES Investment advisory fee .......................................... 922 Auditors fees .................................................... 13 Custodian fees ................................................... 151 Legal fees ....................................................... 18 Printing & mailing fees .......................................... 97 Trustees' fees ................................................... 3 Other fees ....................................................... 3 ------- Total expenses ...................................................... 1,207 Less expenses reimbursed ......................................... (66) ------- Net expenses ........................................................ 1,141 ------- Net investment income ............................................... 2,662 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments ................................................... 875 Foreign currency transactions ................................. 3,036 Change in unrealized appreciation on: Investments ................................................... 4,365 Translation of assets and liabilities in foreign currencies ... 227 ------- Net realized and unrealized gain .................................... 8,503 ------- Net decrease in net assets resulting from operations ....................................................... $11,165 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Global Bond Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 2,662 $ 2,744 Net realized gain ......................................... 3,911 4,561 Change in net unrealized appreciation ..................... 4,592 6,812 -------- -------- Net increase in net assets resulting from operations ... 11,165 14,117 Distributions to shareholders from: Net investment income ..................................... (6,538) (6,998) Capital paid-in ........................................... (1,577) (222) -------- -------- Decrease in net assets resulting from distributions .... (8,115) (7,220) From fund share transactions: Proceeds from shares sold ................................. 31,700 73,381 Distributions reinvested .................................. 8,115 7,220 Payment for shares redeemed ............................... (31,389) (58,674) -------- -------- Increase in net assets from fund share transactions .... 8,426 21,927 -------- -------- NET INCREASE IN NET ASSETS ................................... 11,476 28,824 NET ASSETS Beginning of Period ....................................... 107,295 78,471 -------- -------- End of Period (including undistributed net investment income of $365 and $346, respectively) ...... $118,771 $107,295 ======== ======== Analysis of fund share transactions: Sold ...................................................... 2,646 6,269 Reinvested ................................................ 666 598 Redeemed .................................................. (2,630) (4,995) -------- -------- Net increase in fund shares outstanding ...................... 682 1,872 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Global Bond Fund ------------------------------------------------------------- Year Ended December 31, ------------------------------------------------------------- 2004 2003(f) 2002(f) 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 ........................... 0.37 0.40 0.40 0.38 0.48 Net Realized and Unrealized Gain (Loss) on Investment(a) ................................ 0.87 1.36 1.43 (0.53) 0.67 -------- -------- ------- ------- ------- Total From Investment Operations ................ 1.24 1.76 1.83 (0.15) 1.15 Less Distributions: Distribution from Net Investment Income ......... (0.73) (0.82) (0.46) (0.45) (0.63) Distribution from Capital Paid-In ............... (0.17) (0.03) (0.05) -------- -------- ------- ------- ------- Total Distributions ............................. (0.90) (0.85) (0.51) (0.45) (0.63) -------- -------- ------- ------- ------- Net Assets Value at End of Period .................. $ 12.31 $ 11.97 $ 11.06 $ 9.74 $ 10.34 ======== ======== ======= ======= ======= Total Investment Return(b) ......................... 10.63% 15.91% 18.85% (1.45)% 12.00% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ....................................... 1.05%(d) 0.95%(d) 0.95%(d) 0.95%(d) 0.81%(d) Ratio of Net Investment Income to Average Net Assets ....................................... 2.46% 2.85% 3.53% 3.73%(e) 4.71% Portfolio Turnover Rate ......................... 40.04% 51.09% 64.15% 41.75% 259.60% Net Assets End of Period (000s Omitted) ............ $118,771 $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 1.12%, .98%, 1.01%, .95%, and .91%, for the years ended December 31, 2004, 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) Certain amounts in 2003 and 2002 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - AAA ............AUD $ 250 $ 200 Canada - 0.9% Government of Canada (FG) 5.5% due 06/01/10 - AAA .............CAD 650 584 Government of Canada - Bonds (FG) 7.0% due 12/01/06 - AAA ................ 125 112 Government of Canada (FG) 7.25% due 06/01/07 - AAA ............... 250 227 Province of British Columbia - Debs. (FG) 6.35% due 06/18/31 - AA ................ 125 121 ------- 1,044 Denmark - 2.8% NY Kredit (FB) .........................DKK 5.0% due 10/01/35 - NA ................. 6,585 1,202 RealKredit Danmark - Notes (JP) 5.0% due 10/01/35 - NA ................. 11,679 2,130 ------- 3,332 Finland - 2.6% Republic of Finland - Bonds (FB) 5.75% due 02/23/11 - AAA ............EUR 2,030 3,131 France - 12.1% Government of France (FG) 5.0% due 10/25/11 - AAA .............EUR 3,200 4,765 Government of France - Bonds (FG) 5.25% due 04/25/08 - AAA ............... 6,580 9,589 ------- 14,354 Germany - 15.6% Bayer Hypo Vereins - Bonds (JP) 6.0% due 02/14/14 - BBB+ ............EUR 400 608 Federal Republic of Germany (FG) 4.5% due 07/04/09 - AAA ................ 3,130 4,503 5.25% due 01/04/11 - AAA ............... 4,625 6,947 6.25% due 01/04/30 - AAA ............... 3,250 5,730 Federal Republic of Germany - Bonds (FG) 5.25% due 01/04/08 - AAA ............... 125 182 6.5% due 10/14/05 - AAA ................ 125 175 Kredit Fuer Wiederaufbau (JP) 5.0% due 07/04/11 - AAA ................ 250 372 ------- 18,517 Greece - 0.4% Hellenic Republic - Bonds (FG) 8.8% due 06/19/07 - A ...............EUR 293 454 Ireland - 0.4% Wal-Mart Stores (JD) * GBP 5.25% due 09/28/35 - NA ................ 250 489 Japan - 13.0% Government of Japan (FG) 0.5% due 06/20/13 - AA- .............JPY $545,000 $ 4,995 1.8% due 03/22/10 - AA- ................ 300,000 3,096 Government of Japan - Bonds (FG) 0.9% due 12/22/08 - AA- ................ 425,000 4,217 1.1% due 03/21/11 - AA- ................ 320,000 3,169 ------- 15,477 Luxembourg - 1.9% KFW International Finance, Inc. (FB) 1.75% due 03/23/10 - AAA ............EUR 215,000 2,212 Netherlands - 2.7% Government of Netherlands (FG) 5.5% due 01/15/28 - AAA .............EUR 1,990 3,199 New Zealand - 0.3% Government of New Zealand - Bonds (FG) 8.0% due 11/15/06 - AAA .............NZD 500 371 Spain - 3.3% Kingdom of Spain (FG) 6.15% due 01/31/13 - NA .............EUR 2,420 3,880 Supra National - 13.8% Arena Brands Co. (JG) 6.1% due 11/15/62 - NA ..............EUR 500 776 Bank of America (JP) 3.625% due 03/03/08 - NA ............EUR 250 345 4.75% due 05/06/19 - NA * .............. 400 567 Bank of Ireland (JP) 6.45% due 02/10/10 - NA .............EUR 1,000 1,540 Bayerische Landesbank Girozen (JP) 1.4% due 04/22/13 - AAA .............JPY 60,000 587 BNP Paribas (JP) 5.25% due 01/23/14 - AA- ............EUR 125 183 Daimler Chrysler International Finance Co. (FB) 6.125% due 03/21/06 - BBB ...........EUR 850 1,195 Deutsche Telekom International Finance (FB) 7.5% due 05/29/07 - BBB+ ............EUR 125 187 Deutsche Telekom International Finance BV (FB) 8.125% due 05/29/12 - BBB+ ..........EUR 350 601 E On International Finance (FB) 5.75% due 05/29/09 - AA- ...........EUR 590 881 Edison Spa (J3) 5.125% due 12/10/10 - BBB+ ..........EUR 580 844 Essent NV (EU) 4.5% due 06/25/13 - NA ..............EUR 770 1,077 Federal National Mortgage Assoc. - Bonds (FD) 2.125% due 10/09/07 - AAA ...........JPY 100,000 1,023 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- GLOBAL BOND FUND Par Market Name of Issuer Value Value -------------- -------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Supra National - Continued Ford Credit Canada, Ltd. (AL) 4.875% due 05/17/07 - BBB- ............EUR $ 430 $ 595 France Telecom (J1) 8.25% due 03/14/08 - BBB+ .............EUR 250 379 9.0% due 03/14/11 - BBB+ ................. 405 882 GIE Psa Tresorerie - Bonds (BV) 5.875% due 09/27/11 - A- ..............EUR 250 380 HSBC Capital Funding (FB) 8.03% due 12/29/49 - A- ...............EUR 350 597 International-American Development Bank - Bonds (JP) 1.9% due 07/08/09 - AAA ...............JPY 100,000 1,034 Kingdom of Spain - Notes (FG) 3.1% due 09/20/06 - AAA ...............JPY 120,000 1,228 PLD International Finance LLC (FB) * 4.375% due 04/13/11 - NA ..............EUR 350 486 RWE Finance BV (FB) 6.125% due 10/26/12 - A+ ..............EUR 125 196 Sogerim SA (J1) 7.25% due 04/20/11 - BBB+ .............EUR 125 199 Veolia Environment (J6) 4.875% due 05/28/13 - NA ..............EUR 440 633 ------- 16,415 Sweden - 4.6% Kingdom of Sweden (FG) 5.0% due 01/28/09 - AAA ...............SEK 14,200 2,278 5.25% due 03/15/11 - AAA ................. 14,350 2,352 Spintab - Bonds (JP) 6.0% due 04/20/09 - NA ................... 5,000 825 ------- 5,455 United Kingdom - 8.3% Anglian Water plc (BO) 5.375% due 07/02/09 - A- ..............EUR 400 586 Anglian Water Services Finance plc (FB) 4.625% due 10/07/13 - A- ..............EUR 250 354 British Telecom Plc (J1) 7.125% due 02/15/11 - A- ..............EUR 780 1,249 Cadbury Schweppes (JH) * 4.25% due 06/30/09 - NA ...............EUR 675 942 Imperial Tobacco Finance plc (FB) 6.375% due 09/27/06 - BBB .............EUR 410 588 Koninklijke KPN NV - Notes (JY) 4.75% due 11/05/08 - A- ...............EUR 430 612 National Grid Group Finance (FB) 5.25% due 08/23/06 - A- ...............EUR 410 577 6.125% due 08/23/11 - A- ................. 250 384 Royal Bank of Scotland (JP) 4.875% due 03/26/09 - AA- .............EUR 125 180 Sumitomo Mitsui Banking (JP) * 4.375% due 10/27/14 - NA ..............EUR 250 349 U.K. Treasury (FG) 4.25% due 06/07/32 - AAA ..............GBP 320 595 U.K. Treasury (FG) 7.25% due 12/07/07 - AAA ..............GBP $ 660 $ 1,360 U.K. Treasury - Bonds (FG) 6.0% due 12/07/28 - AAA ...............GBP 50 117 8.5% due 12/07/05 - AAA ...............GBP 150 298 UK Treasury Stock (FG) 5.0% due 09/07/14 - AAA ...............GBP 870 1,727 ------- 9,918 United States - 12.5% Bank Americorp - Sr. Notes (JP) 4.875% due 09/15/12 - A+ ..............USD 400 409 Clear Channel Communications, Inc. (JA) 7.65% due 09/15/10 - BBB- ................ 125 142 Dominion Resources, Inc. - Sr. Notes Ser. B (EU) 4.125% due 02/15/08 - BBB+ ............... 250 252 Federal National Mortgage Assoc. - Notes # (FD) 6.0% due 05/15/08 - AAA .................. 900 968 General Motors Acceptance Corp. - Notes (AL) 6.875% due 09/15/11 - BBB- ............... 1,025 1,050 Kellogg Co. - Notes Ser. B (JH) 6.6% due 04/01/11 - BBB+ ................. 500 560 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004 A1 Cl. 2A1 (OC) 4.67% due 02/25/34 - AAA ................. 289 289 Metlife, Inc. - Debs. (JR) 3.911% due 05/15/05 - A .................. 190 191 News America, Inc. - Sr. Notes (JA) 6.75% due 01/09/38 - BBB- ................ 125 141 NiSource Finance Corp. - Sr. Notes (FB) 6.15% due 03/01/13 - BBB ................. 80 87 Pulte Homes, Inc. - Sr. Notes (BJ) 6.25% due 02/15/13 - BBB- ................ 100 106 8.125% due 03/01/11 - BBB- ............... 25 30 Schering Plough Corp. - Sr. Notes (JO) 5.3% due 12/01/13 - A- ................... 125 131 SLM Corp. (JQ) 5.0% due 04/15/15 - A .................... 375 374 Sprint Capital Corp. (J1) 6.375% due 05/01/09 - BBB- ............... 50 54 6.875% due 11/15/28 - BBB- ............... 50 55 U.S. Treasury - Notes (TN) 1.125% due 06/30/05 - # AAA .............. 1,125 1,117 3.25% due 08/15/07 - # AAA ............... 1,650 1,653 5.0% due 08/15/11 - # AAA ............... 850 905 5.75% due 08/15/10 - # AAA ............... 250 275 6.5% due 02/15/10 - # AAA ................ 500 566 6.875% due 05/15/06 - # AAA .............. 1,750 1,843 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - # AAA ......................USD $ 250 $ 262 6.375% due 08/15/27 - # AAA ........................ 1,250 1,501 8.875% due 08/15/17 - # AAA ........................ 1,050 1,488 Washington Mutual, Inc. (JQ) 5.625% due 01/15/07 - A- ........................... 125 130 Wells Fargo & Co. - Notes (JQ) 3.5% due 04/04/08 - AA- ............................ 250 248 -------- 14,827 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $94,592) 95.4% 113,275 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 7.7% State Street Navigator Securities Lending Portfolio .......................................... 9,100 9,100 SHORT-TERM INVESTMENTS - 2.7% Investment in joint trading account 2.29% due 01/03/05 (Cost $3,267) ...................................... 3,267 3,267 ------ -------- TOTAL INVESTMENTS- (Cost $106,959) 105.8% 125,642 Payables, less cash and receivables- (5.8)% (6,871) ------ -------- NET ASSETS- 100.0% $118,771 ====== ======== # At December 31, 2004 all or portion of this security was out on loan. * 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. ** Bond ratings are unaudited 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 $ 66,471 58.7% Finance ........................ FB 12,678 11.2% Banks .......................... JP 9,129 8.1% U.S. Treasury Notes ............ TN 6,359 5.6% U.S. Treasury Bonds ............ TB 3,251 2.9% Diversified Telecommunication Services .................... JI 2,818 2.5% U.S. Government Agencies ....... FD 1,991 1.8% Auto Loan ...................... AL 1,645 1.4% Food Products .................. JH 1,502 1.3% Electric/Gas ................... EU 1,329 1.2% Electric Utilities ............. J3 844 0.7% Beverages ...................... JG 776 0.7% Diversified Financials ......... JQ 752 0.7% Water Utilities ................ J6 633 0.6% Electronic Equipment & Instruments ................. JY 612 0.5% Commercial Services & Supplies .................... BO 586 0.5% Multiline Retail ............... JD 489 0.4% Automobiles .................... BV 380 0.3% Whole Loan CMOs ................ OC 289 0.3% Media .......................... JA 283 0.2% Insurance ...................... JR 191 0.2% Construction & Engineering ..... BJ 136 0.1% Pharmaceuticals ................ JO 131 0.1% -------- ----- $113,275 100.0% ======== ===== Key to Currency Abbreviations Australian Dollar .............. AUD Canadian Dollar ................ CAD Danish Krone ................... DKK European Currency .............. EUR British Pound .................. GBP Japanese Yen ................... JPY New Zealand Dollar ............. NZD Swedish Krone .................. SEK United States Dollar ........... USD NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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 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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The Fund had borrowings under the line of credit during the period ended December 31, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense - --------------------------- ---------------- ---------------- $220 1.79% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At December 31, 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 - -------------------------- ------------------- $8,938 $9,100 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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 December 31, 2004, the Fund had open forward currency contracts, which contractually obligate the Fund to deliver or receive currencies at a specified date, as follows: Unrealized Principal Amount Appreciation/ Currency Purchased Covered by Contract Expiration Month (Depreciation) - ------------------ ------------------- ---------------- -------------- Euro 644 January 05 $ 5 Pound Sterling 1,083 January 05 65 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Unrealized Principal Amount Appreciation/ Covered by Contract Expiration Month (Depreciation) ------------------- ---------------- -------------- Currency Purchased- Continued - ------------------- Japanese Yen 3,267 January 05 $ -- Japanese Yen 7,448 January 05 525 Japanese Yen 2,227 February 05 66 Japanese Yen 955 February 05 22 Japanese Yen 762 February 05 22 ------- $ 705 ======= Currency Sold - ------------- Euro 1,994 January 05 $ (104) Euro 3,067 January 05 (115) Euro 7,447 January 05 (811) Japanese Yen 1,175 January 05 (15) Japanese Yen 644 January 05 (9) Japanese Yen 1,108 February 05 (15) ------- $(1,069) ======= 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $157 and $1 which expire in 2008 and 2010, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. 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 December 31, 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 $66 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, which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $42,727 $42,579 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $107,006 $18,722 $(86) $18,636 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 based on the Fund's income and capital gains computed on a tax basis, which NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $158 $18,457 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 - ---- ------------------ ---------------------- ----------------- 2004 $6,538 $-- $1,577 2003 6,998 -- 222 Included in the Fund's 2004 and 2003 distributions from ordinary income are $870 and $1,714, respectively, in excess of investment company taxable income, which in accordance with applicable US tax law, were distributed to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matter:
For Against Abstain --- -------- ------- To approve, as to the Global Bond Fund, an amendment to the 84% 7% 9% current investment management agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses.
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS (UNAUDITED)--Continued Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Global Bond Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Global Bond Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: March 29, 1986 - -------------------------------------------------------------------------------- Growth & Income Fund Independence Investment LLC J. Forelli/T. Spicer T. Rowe Price Associates, Inc. Robert W. Sharps - -------------------------------------------------------------------------------- .. The 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. .. Independence Investment LLC selects stocks using a combination of fundamental equity research and quantitative portfolio construction tools. Stocks are purchased that combine low pricing and improving fundamentals with favorable valuations and earnings growth prospects. .. T. Rowe Price Associates, Inc. selects stocks using a bottom-up, fundamental equity approach, focusing on companies with above-average earnings growth and cash flow relative to peers and sustainable earnings momentum. Fund Commentary Overall Performance: For the year 2004, the Growth & Income Fund returned +10.96%, underperforming the +11.39% return of the Russell 1000 Index. Independence Investment LLC Environment: The core sleeve of the Growth and Income Fund underperformed earlier in the year but performed well in the fourth quarter. For 2004, stock selection in healthcare and industrials was strong while stock selection in consumer discretionary and financials detracted from performance. Sector weightings in technology did not help but an underweight in consumer staples added to performance. Outlook: Overall, our forecast for U.S. stock performance in 2005 is favorable. We expect continued recovery in corporate spending, an improved employment picture, and a healthy consumer driving stocks higher. We are attuned to potential risks including weakness in the US dollar, accelerating inflation, and an increase in bond yields. T. Rowe Price Associates, Inc. Environment: For the year, the growth sleeve outpaced the Russell 1000 Growth Index. Large growth underperformed small-cap and value stocks for most of the year, especially in the third quarter, when semiconductor firms warned of poor earnings. However, the broad market advanced in the fourth quarter, and some large growth industries (notably technology) closed the gap on large value. Our long-term focus on high-quality companies with sustainable growth prospects contributed to good stock selection and positive sector positioning. Among the keys to our performance were overweights in the Telecommunications and Energy fields and an underweight position in the Health Care sector. Health Care stocks struggled after safety concerns for several blockbuster drugs made headlines. Yet the portfolio profited in this area by deemphasizing pharmaceuticals in favor of health care service providers. The Information Technology sector as a whole declined for the year, largely because of a drop in semiconductor shares after negative earnings news in the fall. However, our holdings in semiconductors, as well as in Internet and software stocks, generally fared better than the Index. Outlook: We believe the overall environment for large-cap growth stocks is positive heading into 2005. Valuations in this market segment have not kept up with a strong expansion in earnings, providing us with numerous solid growth opportunities at reasonable prices. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Growth & Income Fund Independence Investment LLC J. Forelli/T. Spicer T. Rowe Price Associates, Inc. Robert W. Sharps - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 investment made 12/31/93 (10-year period) Growth & Income VST VST Growth & Income Benchmark ------------------- ----------------------------- 10,000 10,000 Jan-95 10,206 10,260 Feb-95 10,609 10,658 Mar-95 10,844 10,974 Apr-95 11,160 11,293 May-95 11,531 11,739 Jun-95 11,793 12,015 Jul-95 12,169 12,415 Aug-95 12,249 12,448 Sep-95 12,780 12,970 Oct-95 12,697 12,925 Nov-95 13,232 13,493 Dec-95 13,421 13,743 Jan-96 13,778 14,216 Feb-96 13,956 14,352 Mar-96 14,135 14,490 Apr-96 14,294 14,703 May-96 14,625 15,082 Jun-96 14,705 15,144 Jul-96 14,010 14,470 Aug-96 14,344 14,777 Sep-96 15,010 15,607 Oct-96 15,377 16,035 Nov-96 16,400 17,252 Dec-96 16,118 16,914 Jan-97 16,948 17,964 Feb-97 17,041 18,110 Mar-97 16,377 17,357 Apr-97 17,171 18,393 May-97 18,102 19,522 Jun-97 18,816 20,393 Jul-97 20,497 22,012 Aug-97 19,459 20,788 Sep-97 20,591 21,927 Oct-97 19,816 21,195 Nov-97 20,562 22,176 Dec-97 20,928 22,558 Jan-98 21,154 22,808 Feb-98 22,881 24,452 Mar-98 24,161 25,704 Apr-98 24,227 25,964 May-98 23,963 25,517 Jun-98 24,980 26,553 Jul-98 24,688 26,272 Aug-98 20,898 22,473 Sep-98 21,970 23,914 Oct-98 23,929 25,858 Nov-98 25,361 27,425 Dec-98 27,258 29,004 Jan-99 28,173 30,217 Feb-99 27,298 29,277 Mar-99 28,106 30,448 Apr-99 29,290 31,626 May-99 28,436 30,880 Jun-99 30,397 32,594 Jul-99 29,357 31,577 Aug-99 29,009 31,419 Sep-99 28,209 30,558 Oct-99 29,859 32,493 Nov-99 30,205 33,152 Dec-99 31,681 35,105 Jan-00 29,751 33,343 Feb-00 29,003 32,712 Mar-00 32,250 35,912 Apr-00 31,461 34,831 May-00 31,046 34,117 Jun-00 31,543 34,956 Jul-00 31,159 34,411 Aug-00 33,087 36,548 Sep-00 31,087 34,618 Oct-00 31,163 34,472 Nov-00 27,643 31,756 Dec-00 27,530 31,912 Jan-01 28,381 33,044 Feb-01 25,403 30,031 Mar-01 23,319 28,130 Apr-01 25,560 30,316 May-01 25,607 30,519 Jun-01 25,016 29,777 Jul-01 24,414 29,485 Aug-01 22,725 27,639 Sep-01 20,765 25,406 Oct-01 21,427 25,891 Nov-01 23,088 27,877 Dec-01 23,279 28,123 Jan-02 22,956 27,712 Feb-02 22,421 27,177 Mar-02 23,422 28,199 Apr-02 22,304 26,490 May-02 22,119 26,257 Jun-02 20,629 24,319 Jul-02 18,979 22,520 Aug-02 19,106 22,637 Sep-02 17,092 20,206 Oct-02 18,342 21,885 Nov-02 19,195 23,165 Dec-02 18,115 21,854 Jan-03 17,650 21,325 Feb-03 17,429 20,994 Mar-03 17,531 21,213 Apr-03 18,736 22,925 May-03 19,577 24,231 Jun-03 19,684 24,551 Jul-03 20,063 25,040 Aug-03 20,511 25,548 Sep-03 20,316 25,287 Oct-03 21,501 26,769 Nov-03 21,624 27,091 Dec-03 22,526 28,388 Jan-04 22,863 28,928 Feb-04 23,148 29,327 Mar-04 22,897 28,928 Apr-04 22,355 28,404 May-04 22,694 28,813 Jun-04 23,127 29,332 Jul-04 22,293 28,302 Aug-04 22,264 28,441 Sep-04 22,536 28,799 Oct-04 22,925 29,264 Nov-04 24,106 30,517 Dec-04 24,993 31,622 Value on 12/31/04: - ------------------ 24,993 Growth & Income VST 31,622 VST Growth & Income Benchmark - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- General Electric Co. 3.6% Citigroup, Inc. 3.2% Exxon Mobil Corp. 2.7% Microsoft Corp. 2.2% Bank of America Corp. 2.0% Johnson & Johnson 1.8% Altria Group, Inc. 1.6% Home Depot, Inc. 1.5% UnitedHealth Group, Inc. 1.5% The Walt Disney Co. 1.4% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Growth & Income Growth & Income Fund Fund Benchmark/1/ --------------- ----------------- 1 Year 10.96% 11.39% 3 Years 2.40 3.99 5 Years -4.63 -2.07 10 Years 9.59 12.20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 22.7% Information Technology 16.4% Consumer Discretionary 14.7% Industrials 12.8% Health Care 9.9% Energy 7.8% Consumer Staples 4.7% Utilities 3.3% Telecommunication Services 3.2% Materials 2.8% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Growth & Income Fund Benchmark represents the S&P 500 Index from April 1986 to April 2002 and then the Russell 1000 Index from May 2002 to present. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Growth & Income Fund Independence Investment LLC J. Forelli/T. Spicer T. Rowe Price Associates, Inc. Robert W. Sharps - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Growth & Income Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,080.70 Expense paid per $1,000* $ 3.97 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,021.32 Expense paid per $1,000* $ 3.85 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted) ASSETS Long term investments at cost (including $59,366 of securities loaned (Note B)) ................................... $1,883,986 Net unrealized appreciation of investments ....................... 304,235 Short-term investments at value .................................. 66,017 ---------- Total investments .......................................... 2,254,238 Receivable for: Dividends ..................................................... 3,404 ---------- Total assets ..................................................... 2,257,642 ---------- LIABILITIES Payables for: Fund shares purchased ......................................... 388 Collateral for securities on loan ............................. 60,534 Foreign dividend tax withholding .............................. 1 Accrued operating expenses .................................... 932 Other payables ................................................ 1 ---------- Total liabilities ................................................ 61,856 ---------- Net assets ....................................................... $2,195,786 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ............................................ 177,153 ---------- Net asset value per share ........................................ $ 12.39 ========== Composition of net assets: Capital paid-in ............................................... $2,536,096 Accumulated net realized loss on investments .................. (644,545) Net unrealized appreciation of investments .................... 304,235 ---------- Net assets ....................................................... $2,195,786 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 501 Dividends (net of foreign withholding tax of $42) ............... 37,626 Securities lending .............................................. 64 -------- Total investment income ............................................ 38,191 -------- EXPENSES Investment advisory fee ......................................... 14,215 Auditors fees ................................................... 285 Custodian fees .................................................. 556 Fidelity Bond fees .............................................. 5 Legal fees ...................................................... 348 Printing & mailing fees ......................................... 355 Trustees' fees .................................................. 64 Other fees ...................................................... 69 -------- Total expenses ..................................................... 15,897 Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................................................... (902) -------- Net expenses ....................................................... 14,995 -------- Net investment income .............................................. 23,196 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 160,195 Change in unrealized appreciation on investments .................................................. 35,946 -------- Net realized and unrealized gain ................................... 196,141 -------- Net increase in net assets resulting from operations ...................................................... $219,337 ======== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Growth & Income Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ........................................... $ 23,196 $ 18,856 Net realized gain (loss) ........................................ 160,195 (24,691) Change in net unrealized appreciation ........................... 35,946 429,847 ---------- ---------- Net increase in net assets resulting from operations ......... 219,337 424,012 Distributions to shareholders from: Net investment income ........................................... (23,196) (17,207) Capital paid-in ................................................. (11,765) ---------- ---------- Decrease in net assets resulting from distributions .......... (23,196) (28,972) From fund share transactions: Proceeds from shares sold ....................................... 111,823 104,683 Shares issued in reorganization ................................. 66,546 Distributions reinvested ........................................ 23,196 28,972 Payment for shares redeemed ..................................... (263,395) (229,423) ---------- ---------- Decrease in net assets from fund share transactions .......... (128,376) (29,222) ---------- ---------- NET INCREASE IN NET ASSETS ......................................... 67,765 365,818 NET ASSETS Beginning of Period ................................................ 2,128,021 1,762,203 ---------- ---------- End of Period (including undistributed net investment income of $0 and $0, respectively) .............................. $2,195,786 $2,128,021 ========== ========== Analysis of fund share transactions: Sold ............................................................ 9,789 10,526 Issued in reorganization ........................................ 7,117 Reinvested ...................................................... 1,982 2,786 Redeemed ........................................................ (23,048) (23,196) ---------- ---------- Net decrease in fund shares outstanding ............................ (11,277) (2,767) ========== ==========
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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 -------------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------------- 2004 2003(f)(g) 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 ....................... 0.13 0.10 0.08 0.06 0.17 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................ 1.10 2.12 (2.71) (2.25) (2.77) ---------- ---------- ---------- ---------- ---------- Total From Investment Operations ............ 1.23 2.22 (2.63) (2.19) (2.60) Less Distributions: Distribution from Net Investment Income ..... (0.13) (0.09) (0.08) (0.06) (0.17) Distribution from Net Realized Gains on Investments .............................. (2.69) Distribution from Excess of Net Investment Income/Gains ............................. (0.14) Distribution from Capital Paid-in ........... (0.06) (0.23) ---------- ---------- ---------- ---------- ---------- Total Distributions ......................... (0.13) (0.15) (0.08) (0.06) (3.23) ---------- ---------- ---------- ---------- ---------- Net Assets Value at End of Period .............. $ 12.39 $ 11.29 $ 9.22 $ 11.93 $ 14.18 ========== ========== ========== ========== ========== Total Investment Return(b) ..................... 10.96% 24.35% (22.18)% (15.44)% (13.10)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................... 0.76%(e) 0.73%(e) 0.75% 0.72% 0.40% Ratio of Net Investment Income to Average Net Assets ............................... 1.10% 1.00% 0.73% 0.49% 0.84% Portfolio Turnover Rate ..................... 71.15% 91.53%(d) 73.60% 104.47%(d) 112.94% Net Assets End of Period (000s Omitted) ........ $2,195,786 $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 Price Associates, Inc., during the period shown. (g) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK Aerospace & Defense - 1.0% Boeing Co. ........................................... 275,300 $ 14,252 United Defense Industries, Inc. * .................... 92,600 4,375 United Technologies Corp. ............................ 21,400 2,212 -------- 20,839 Air Freight & Couriers - 1.3% Fedex Corp. .......................................... 209,900 20,673 United Parcel Service, Inc. - Cl. B .................. 89,400 7,640 -------- 28,313 Airlines - 0.1% Southwest Airlines Co. ............................... 182,900 2,978 Auto Components - 0.5% Autoliv, Inc. ........................................ 58,200 2,811 Borg-Warner Automotive, Inc. ......................... 36,800 1,994 Magna International, Inc. - Cl. A .................... 77,000 6,356 -------- 11,161 Automobiles - 0.1% General Motors Corp. # ............................... 51,600 2,067 Banks - 4.4% Bank of America Corp. ................................ 922,100 43,329 Comerica, Inc. ....................................... 169,900 10,367 JP Morgan Chase & Co. ................................ 128,400 5,009 Suntrust Banks, Inc. ................................. 136,000 10,048 UnionBanCal Corp. .................................... 106,500 6,867 Wachovia Corp. ....................................... 379,900 19,983 -------- 95,603 Beverages - 1.0% Coca-Cola Co. ........................................ 241,200 10,041 Constellation Brands, Inc. - Cl. A * ................. 233,000 10,837 -------- 20,878 Biotechnology - 1.8% Amgen, Inc. * ........................................ 401,100 25,731 Biogen IDEC, Inc. * .................................. 95,000 6,328 Gilead Sciences, Inc. * .............................. 200,200 7,005 -------- 39,064 Building Products - 0.2% Masco Corp. .......................................... 129,100 4,716 Chemicals - 1.7% Dow Chemical Co. ..................................... 355,100 17,581 Monsanto Co. ......................................... 154,700 8,594 NALCO Holding Co. * .................................. 243,000 4,743 Praxair, Inc. ........................................ 73,000 3,223 Rohm & Haas Co. ...................................... 94,700 4,189 -------- 38,330 Commercial Services & Supplies - 1.2% Apollo Group, Inc. - Cl. A * ......................... 67,100 5,416 Automatic Data Processing, Inc. ...................... 228,500 10,134 Choicepoint, Inc. * .................................. 73,000 $ 3,357 DST Systems, Inc. * .................................. 85,000 4,430 Dun & Bradstreet Corp. * ............................. 53,300 3,179 -------- 26,516 Communications Equipment - 3.1% Cisco Systems, Inc. * ................................ 1,161,900 22,425 Comverse Technology, Inc. * .......................... 236,500 5,782 Corning, Inc. * ...................................... 478,000 5,626 Harris Corp. ......................................... 24,400 1,508 Juniper Networks, Inc. # * ........................... 219,600 5,971 Motorola, Inc. ....................................... 765,600 13,168 Nokia Oyj - ADR ...................................... 475,500 7,451 Qualcomm, Inc. ....................................... 168,000 7,123 -------- 69,054 Computers & Peripherals - 3.4% Apple Computer, Inc. * ............................... 189,400 12,197 Dell, Inc. * ......................................... 681,100 28,702 EMC Corp. * .......................................... 628,400 9,344 International Business Machines Corp. ................ 236,200 23,285 -------- 73,528 Construction & Engineering - 0.1% D.R. Horton, Inc. .................................... 30,300 1,221 Construction Materials - 0.2% United States Steel Corp. * .......................... 69,200 3,547 Credit Card - 0.7% MBNA Corp. ........................................... 549,600 15,493 Diversified Financials - 11.1% American Express Co. ................................. 109,300 6,161 Ameritrade Holding Corp. * ........................... 555,400 7,898 Bear Stearns Cos., Inc. .............................. 103,100 10,548 Capital One Financial Corp. .......................... 205,300 17,288 CIT Group, Inc. ...................................... 257,100 11,780 Citigroup, Inc. ...................................... 1,471,800 70,911 E*TRADE Group, Inc. * ................................ 194,800 2,912 Franklin Resources, Inc. ............................. 73,000 5,085 Goldman Sachs Group, Inc. ............................ 171,000 17,791 Hartford Financial Services Group, Inc. .............. 404,100 28,008 Merrill Lynch & Co., Inc. ............................ 132,400 7,914 Morgan Stanley, Dean Witter, Discover & Co. .......... 422,200 23,441 Providian Financial Corp. * .......................... 86,600 1,426 SLM Corp. ............................................ 135,700 7,245 State Street Corp. ................................... 256,600 12,604 Wells Fargo & Co. .................................... 190,900 11,865 -------- 242,877 Diversified Telecommunication Services - 2.3% BellSouth Corp. ...................................... 121,000 3,362 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued Diversified Telecommunication Services - Continued CenturyTel, Inc. ..................................... 131,400 $ 4,661 Citizens Communications Co. .......................... 344,900 4,756 SBC Communications, Inc. ............................. 62,200 1,603 Sprint Corp. ......................................... 314,900 7,825 Verizon Communications ............................... 715,200 28,973 -------- 51,180 Electric Utilities - 2.6% AES Corp. * .......................................... 723,900 9,896 Constellation Energy Group, Inc. ..................... 77,300 3,379 Edison International ................................. 511,900 16,396 Entergy Corp. ........................................ 72,300 4,887 TXU Corp. # .......................................... 332,700 21,479 -------- 56,037 Electrical Equipment - 1.1% Emerson Electric Co. ................................. 87,600 6,141 Rockwell International Corp. ......................... 369,300 18,299 -------- 24,440 Electronic Equipment & Instruments - 0.3% Ingram Micro, Inc. - Cl. A * ......................... 68,800 1,431 Vishay Intertechnology, Inc. * ....................... 367,400 5,518 -------- 6,949 Energy Equipment & Services - 1.2% Baker Hughes, Inc. ................................... 152,300 6,498 National-Oilwell, Inc. # * ........................... 230,000 8,117 Schlumberger, Ltd. ................................... 54,800 3,669 Transocean Sedco Forex, Inc. * ....................... 200,100 8,482 -------- 26,766 Food & Drug Retailing - 0.5% Sysco Corp. .......................................... 177,100 6,760 Walgreen Co. ......................................... 122,100 4,685 -------- 11,445 Gas Utilities - 0.8% Sempra Energy ........................................ 222,600 8,165 Williams Cos., Inc. .................................. 515,000 8,389 -------- 16,554 Health Care Equipment & Supplies - 0.6% Becton, Dickinson & Co. .............................. 143,900 8,173 Medtronic, Inc. ...................................... 106,400 5,285 -------- 13,458 Health Care Providers & Services - 3.1% Aetna US Healthcare, Inc. ............................ 98,400 12,275 Amerisource Bergen Corp. # ........................... 209,800 12,311 Humana, Inc. * ....................................... 358,700 10,650 UnitedHealth Group, Inc. ............................. 371,300 32,686 -------- 67,922 Hotels Restaurants & Leisure - 1.4% Carnival Corp. ....................................... 109,600 $ 6,316 International Game Technology ........................ 336,100 11,555 Las Vegas Sands Corp. * .............................. 4,530 218 Marriott International, Inc. - Cl. A ................. 110,300 6,947 Rogers Communications, Inc. - Cl. B # ................ 247,500 6,472 -------- 31,508 Household Durables - 1.7% Centex Corp. ......................................... 149,900 8,931 Fortune Brands, Inc. ................................. 154,400 11,916 Lennar Corp. ......................................... 22,400 1,270 Newell Rubbermaid, Inc. .............................. 291,400 7,049 Pulte Homes, Inc. .................................... 17,900 1,142 Stanley Works ........................................ 157,400 7,711 -------- 38,019 Household Products - 0.9% Kimberly-Clark Corp. ................................. 197,100 12,971 Procter & Gamble Co. ................................. 112,400 6,191 -------- 19,162 Industrial Conglomerates - 5.4% 3M Co. ............................................... 40,300 3,307 General Electric Co. ................................. 2,183,400 79,694 Honeywell International, Inc. ........................ 81,800 2,897 Reynolds American, Inc. # ............................ 108,000 8,489 Textron, Inc. ........................................ 219,500 16,199 Tyco International, Ltd. ............................. 206,700 7,387 -------- 117,973 Insurance - 6.5% AFLAC, Inc. .......................................... 65,300 2,602 Allstate Corp. ....................................... 310,500 16,059 American International Group, Inc. ................... 411,300 27,010 Chubb Corp. .......................................... 52,100 4,006 Everest Re Group, Ltd. ............................... 89,100 7,980 Lincoln National Corp. ............................... 180,200 8,412 Old Republic International Corp. ..................... 87,300 2,209 Protective Life Corp. ................................ 33,800 1,443 Prudential Financial, Inc. ........................... 470,600 25,864 Safeco Corp. # ....................................... 157,900 8,249 St. Paul Cos., Inc. .................................. 217,219 8,052 Wellpoint, Inc. * .................................... 266,300 30,624 -------- 142,510 Internet & Catalog Retail - 0.2% eBay, Inc. * ......................................... 44,200 5,140 Internet Software & Services - 1.0% Google, Inc. - Cl. A * ............................... 22,900 4,422 IAC / InterActive Corp. # * .......................... 232,400 6,419 McAfee, Inc. * ....................................... 188,000 5,439 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued Internet Software & Services - Continued Yahoo, Inc. * ........................................ 161,600 $ 6,089 -------- 22,369 IT Consulting & Services - 1.2% Accenture, Ltd. - Cl. A * ............................ 470,400 12,701 Affiliated Computer Services, Inc. - Cl. A # * ....... 85,600 5,152 Computer Sciences Corp. * ............................ 168,900 9,521 -------- 27,374 Leisure Equipment & Products - 0.6% Brunswick Corp. # .................................... 242,900 12,024 Machinery - 1.1% Cummings Engine Co., Inc. ............................ 59,800 5,011 Danaher Corp. ........................................ 208,200 11,953 Pall Corp. ........................................... 79,700 2,307 Parker-Hannifin Corp. ................................ 60,000 4,544 -------- 23,815 Media - 4.1% Comcast Corp. - Cl. A * .............................. 777,000 25,858 E.W. Scripps Co. - Cl. A # ........................... 96,600 4,664 EchoStar Communications Corp. - Cl. A ................ 115,400 3,836 Fox Entertainment Group, Inc. - Cl. A * .............. 183,400 5,733 Liberty Media Corp. - Ser. A ......................... 403,700 4,433 McGraw-Hill Cos., Inc. ............................... 72,800 6,664 The Walt Disney Co. .................................. 1,133,000 31,497 Time Warner, Inc. * .................................. 318,500 6,192 Viacom, Inc. - Cl. B ................................. 52,300 1,903 -------- 90,780 Metals & Mining - 0.7% Nucor Corp. .......................................... 187,000 9,788 Phelps Dodge Corp. ................................... 50,800 5,025 -------- 14,813 Multiline Retail - 2.2% Claire's Stores, Inc. ................................ 164,500 3,496 Federated Department Stores, Inc. .................... 264,500 15,285 Kohl's Corp. * ....................................... 70,400 3,462 Nordstrom, Inc. ...................................... 203,600 9,514 Target Corp. ......................................... 115,200 5,982 Wal-Mart Stores, Inc. ................................ 192,200 10,152 -------- 47,891 Office Electronics - 0.5% Xerox Corp. * ........................................ 673,600 11,458 Oil & Gas - 6.5% Ashland, Inc. * ...................................... 86,700 5,062 BP Amoco plc - ADR ................................... 78,400 4,579 Conoco Phillips ...................................... 351,000 30,477 Devon Energy Corp. ................................... 334,800 13,030 EOG Resources, Inc. .................................. 235,400 $ 16,798 Exxon Mobil Corp. .................................... 1,171,300 60,041 Murphy Oil Corp. ..................................... 169,200 13,612 -------- 143,599 Paper & Forest Products - 0.3% Louisiana-Pacific Corp. .............................. 214,200 5,728 Personal Products - 0.8% Avon Products, Inc. .................................. 60,100 2,326 Estee Lauder Cos., Inc. - Cl. A ...................... 319,700 14,633 -------- 16,959 Pharmaceuticals - 4.3% Abbott Laboratories .................................. 105,100 4,903 Bristol-Myers Squibb Co. ............................. 37,400 958 Elan Corp. plc - ADR # * ............................. 206,300 5,622 Johnson & Johnson .................................... 617,900 39,187 Merck & Co., Inc. .................................... 767,900 24,680 Pfizer, Inc. ......................................... 743,100 19,982 -------- 95,332 Road & Rail - 0.8% Burlington Northern Santa Fe Corp. ................... 149,400 7,068 Norfolk Southern Corp. ............................... 317,900 11,505 -------- 18,573 Semiconductor Equipment & Products - 2.7% Analog Devices, Inc. ................................. 174,500 6,442 Applied Materials, Inc. * ............................ 758,400 12,969 Applied Micro Circuits Corp. * ....................... 143,300 603 Freescale Semiconductor, Inc. - Cl. B * .............. 98,543 1,809 Intel Corp. .......................................... 744,800 17,421 Maxim Integrated Products, Inc. ...................... 101,100 4,286 Novellus Systems, Inc. ............................... 185,000 5,160 Texas Instruments, Inc. .............................. 134,400 3,309 Xilinx, Inc. ......................................... 254,800 7,555 -------- 59,554 Software - 4.0% Autodesk, Inc. ....................................... 177,000 6,717 Citrix Systems, Inc. * ............................... 175,000 4,293 Mercury Interactive Corp. * .......................... 59,400 2,706 Microsoft Corp. ...................................... 1,766,200 47,175 Oracle Corp. * ....................................... 881,000 12,087 Red Hat, Inc. # * .................................... 289,100 3,860 Symantec Corp. * ..................................... 460,100 11,852 -------- 88,690 Specialty Retail - 3.3% Abercrombie & Fitch Co. .............................. 88,800 4,169 Best Buy Co., Inc. ................................... 202,400 12,027 Circuit City Stores, Inc. ............................ 612,300 9,576 Home Depot, Inc. ..................................... 780,000 33,337 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- GROWTH & INCOME FUND Market Name of Issuer Shares Value -------------- --------- ----------- (000's) COMMON STOCK - Continued Specialty Retail - Continued Limited, Inc. ..................................... 259,488 $ 5,974 Pacific Sunwear of California, Inc. * ............. 164,200 3,655 Sherwin-Williams Co. .............................. 105,700 4,717 ---------- 73,455 Textiles & Apparel - 0.4% Nike, Inc. - Cl. B ................................ 105,300 9,550 Tobacco - 1.6% Altria Group, Inc. ................................ 561,700 34,320 Trading Companies & Distributors - 0.5% W.W. Grainger, Inc. ............................... 147,800 9,846 U.S. Government Agencies - 1.7% Federal Home Loan Mortgage Corp. .................. 250,300 18,447 Federal National Mortgage Assoc. .................. 265,800 18,928 ---------- 37,375 Wireless Telecommunications Services - 0.9% Nextel Communications, Inc. - Cl. A * ............. 513,800 15,414 Nextel Partners, Inc. - Cl. A * ................... 207,500 4,054 ---------- 19,468 ---------- TOTAL COMMON STOCK- (Cost $1,883,986) 99.7% 2,188,221 Par Value --------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 2.8% State Street Navigator Securities Lending Portfolio .............................. $60,534 60,534 SHORT-TERM INVESTMENTS - 0.2% Investment in joint trading account 2.29% due 01/03/05 (Cost $5,483) .................................. 5,483 5,483 ------- ---------- TOTAL INVESTMENTS- (Cost $1,950,003) 102.7% 2,254,238 Payables, less cash and receivables- (2.7)% (58,452) ------- ---------- NET ASSETS- 100.0% $2,195,786 ======= ========== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. ADR- American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Growth & Income Fund (the "Fund" or "VST Growth & Income") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $715 2.34% $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 December 31, 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 - -------------------------- ------------------- $59,366 $60,534 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $3,395, $343,733, $230,879 and $54,590 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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $42. Realized gains and losses from security transactions are determined on the basis of identified cost. 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 year ended December 31, 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 in expenses of $902. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, an affiliate of John Hancock, which under John Hancock's supervision, is responsible for a portion of 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., which under John Hancock's supervision, is also responsible for a portion of 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - ---------- -------------------- $1,493,293 $1,616,037 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $1,961,951 $320,544 $(28,257) $292,287 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $632,597 $292,287 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 - ---- ------------------ ---------------------- ----------------- 2004 $23,196 $-- $ -- 2003 17,207 -- 11,765 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Included in the Fund's 2004 distributions from ordinary income is $1,226 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed 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: Acquiring Fund Target Fund - ------------------- ----------------------------------- VST Growth & Income John Hancock VA Relative Value VST Growth & Income John Hancock VA Sovereign Investors These combinations provided for the transfer of substantially all of the assets and liabilities of the target funds to the acquiring fund in exchange solely for the fund shares of the acquiring fund. The acquisitions were accounted for as tax-free exchanges as follows:
Target Fund Trust Shares Unrealized Acquiring Fund Acquiring Fund Issued by Target Fund Appreciation/ Net Assets Prior Aggregate Net Assets Target Fund Acquiring Fund Net Assets (Depreciation) to Combination After Combination - ----------------- -------------- ----------- -------------- ---------------- -------------------- VA Relative Value 3,079 $28,786 $ 845 $1,744,162 $1,772,947 VA Sovereign Investors 4,038 37,760 (415) 1,772,947 1,810,708
NOTE F--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Growth & Income Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Growth & Income Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 2001 - -------------------------------------------------------------------------------- Health Sciences Fund Wellington Management Company, LLP Management Team - -------------------------------------------------------------------------------- .. 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. Generally, holdings will be diversified across sub-sectors of health care, but at times will be concentrated in sub-sectors that provide the most compelling opportunities. Fund Commentary Performance: For the year 2004, the Health Sciences Trust returned +11.10%, outperforming the +6.31% return of the Goldman Sachs Health Care Index. Environment: Health care stocks underperformed the broader market in 2004, with notably weak performance among large-cap pharmaceutical stocks. The market has worried about the lack of visibility of product pipelines and low-probability, though high-risk, patent losses. Generics are challenging the industry, having moved on from easy patents to now challenging stronger-composition patents. High-profile patent cases have moved through the courts quite slowly, prolonging the market's uncertainty. The portfolio outperformed due to strong stock selection, primarily in pharmaceuticals, a sub-sector that accounted for roughly half of the Trust's assets. Outlook: The pharmaceutical industry maintains tremendous cash flow generating capability, driven by new product discovery. We continue to seek companies that are better positioned because of innovative products and can thus generate greater pricing power inside and outside the United States. The next couple of years will be difficult for health care service companies generally speaking, as utilization growth remains moderate and price increases decelerate. Low utilization growth will be driven by benefit design changes that push more of the cost onto the consumer and the escalating number of uninsured in the United States. Across all sub-sectors in the portfolio, we will continue to seek to accurately assess a company's position within its own lifecycle and to formulate profitable non-consensus investment ideas. Inception: May 1, 2001 - -------------------------------------------------------------------------------- Health Sciences Fund Wellington Management Company, LLP Management Team - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 4/30/01 (Fund Inception Date) Goldman Sachs Health Sciences Fund Health Care Index (1) S&P 500(R) Index (2) -------------------- --------------------- -------------------- Apr-01 $10,000 $10,000 $10,000 May-01 10,241 10,220 10,067 Jun-01 10,199 9,962 9,822 Jul-01 10,189 10,235 9,725 Aug-01 9,836 9,973 9,117 Sep-01 9,632 9,896 8,380 Oct-01 9,592 9,909 8,540 Nov-01 9,927 10,440 9,195 Dec-01 9,815 10,242 9,276 Jan-02 9,565 9,968 9,141 Feb-02 9,549 9,918 8,964 Mar-02 9,637 10,042 9,301 Apr-02 9,276 9,414 8,737 May-02 9,044 9,231 8,673 Jun-02 8,366 8,353 8,055 Jul-02 8,034 8,170 7,427 Aug-02 7,999 8,229 7,476 Sep-02 7,649 7,789 6,664 Oct-02 7,951 8,151 7,250 Nov-02 8,038 8,370 7,677 Dec-02 7,853 8,080 7,225 Jan-03 7,824 8,085 7,036 Feb-03 7,659 7,945 6,931 Mar-03 7,912 8,187 6,998 Apr-03 8,274 8,564 7,574 May-03 8,998 8,963 7,974 Jun-03 9,223 9,348 8,076 Jul-03 9,267 9,384 8,218 Aug-03 9,180 9,179 8,378 Sep-03 9,385 9,197 8,289 Oct-03 9,612 9,287 8,758 Nov-03 9,860 9,456 8,836 Dec-03 10,345 9,960 9,299 Jan-04 10,745 10,253 9,470 Feb-04 10,825 10,394 9,602 Mar-04 10,703 10,093 9,457 Apr-04 10,819 10,457 9,308 May-04 10,751 10,443 9,436 Jun-04 10,855 10,441 9,619 Jul-04 10,260 9,789 9,300 Aug-04 10,383 9,909 9,338 Sep-04 10,407 9,882 9,438 Oct-04 10,414 9,652 9,583 Nov-04 10,782 9,899 9,971 Dec-04 11,495 10,589 10,310 Value on 12/31/04: - ------------------ $11,495 Health Sciences Fund $10,589 Goldman Sachs Health Care Index (1) $10,310 S&P 500(R) Index (2) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Schering-Plough Corp. 6.5% AstraZeneca Group plc 5.5% Abbott Laboratories 5.1% Medtronic, Inc. 4.4% Genzyme Corp. 4.2% Elan Corp. plc 4.1% McKesson HBOC, Inc. 3.7% Novartis AG 3.4% Eli Lilly & Co. 3.3% PacifiCare Health Systems, Inc. 3.2% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Health Sciences GSSI Health S&P 500 Fund Care Index/1/ Index/2/ -------- ------------- -------- 1 Year 11.10% 6.31% 10.87% 3 Years 5.40% 1.12% 3.59% Since Inception (5/1/01) 3.86% 1.57% 0.84% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Health Care 98.1% Consumer Staples 1.0% Materials 0.9% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ 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. /2/ "Standard & Poor's 500(R) Index" 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. "Standard & Poor's 500(R)" Index is an unmanaged stock index commonly used as a broad measure of stock market performance. Inception: May 1, 2001 - -------------------------------------------------------------------------------- Health Sciences Fund Wellington Management Company, LLP Management Team - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Health Sciences Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,058.80 Expense paid per $1,000* $ 7.03 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,018.31 Expense paid per $1,000* $ 6.89 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $20,880 Net unrealized appreciation of investments .......................... 3,447 Short-term investments at value ..................................... 714 ------- Total investments ............................................. 25,041 Receivable for: Investments sold ................................................. 36 Fund shares sold ................................................. 46 Dividends ........................................................ 12 Foreign dividend tax withholding reclaim ......................... 6 ------- Total assets ........................................................ 25,141 ------- LIABILITIES Payables for: Investments purchased ............................................ 86 Accrued operating expenses ....................................... 34 ------- Total liabilities ................................................... 120 ------- Net assets .......................................................... $25,021 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 2,235 ------- Net asset value per share ........................................... $ 11.19 ======= Composition of net assets: Capital paid-in .................................................. $22,059 Accumulated net realized loss on investments and foreign currency transactions .................................................. (485) Net unrealized appreciation of: Investments ................................................... 3,447 ------- Net assets .......................................................... $25,021 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 12 Dividends (net of foreign withholding tax of $19) ................ 297 ------- Total investment income ............................................. 309 ------- EXPENSES Investment advisory fee .......................................... 331 Auditors fees .................................................... 5 Custodian fees ................................................... 48 Legal fees ....................................................... 6 Printing & mailing fees .......................................... 43 Trustees' fees ................................................... 1 Other fees ....................................................... 1 ------- Total expenses ...................................................... 435 Less expenses reimbursed ......................................... (22) Less custodian expense reduction offset by commission recapture arrangement (Note C) .......................................... (15) ------- Net expenses ........................................................ 398 ------- Net investment loss ................................................. (89) ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 4,395 Foreign currency transactions ................................. (12) Change in unrealized depreciation on investments ................. (1,782) ------- Net realized and unrealized gain .................................... 2,601 ------- Net increase in net assets resulting from operations ................ $ 2,512 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Health Sciences Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 (a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ...................................... $ (89) $ (33) Net realized gain ........................................ 4,383 83 Change in net unrealized appreciation (depreciation) ..... (1,782) 7,514 -------- ------- Net increase in net assets resulting from operations .. 2,512 7,564 Distributions to shareholders from: Net investment income .................................... (72) Capital paid-in .......................................... (719) -------- ------- Decrease in net assets resulting from distributions ... (791) From fund share transactions: Proceeds from shares sold ................................ 9,019 11,971 Distributions reinvested ................................. 791 Payment for shares redeemed .............................. (21,328) (7,387) -------- ------- Increase (decrease) in net assets from fund share transactions ....................................... (12,309) 5,375 -------- ------- NET INCREASE (DECREASE) IN NET ASSETS ....................... (9,797) 12,148 NET ASSETS Beginning of Period ...................................... 34,818 22,670 -------- ------- End of Period (including distributions in excess of net investment income of $0 and $(2), respectively) ....... $ 25,021 $34,818 ======== ======= Analysis of fund share transactions: Sold ..................................................... 863 1,372 Reinvested ............................................... 79 Redeemed ................................................. (2,084) (893) -------- ------- Net increase in fund shares outstanding ..................... (1,221) 558 ======== =======
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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:
Health Sciences Fund ---------------------------------------------------------- Period from Year Ended December 31, May 1, ------------------------------------- to December 31, 2004 2003(f)(i) 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 .................... (0.06) (h) 0.01 Net Realized and Unrealized Gain (Loss) on Investment(a) ...................... 1.18 2.48 (1.98) (0.18) ------- ------- ------- ------- Total From Investment Operations ......... 1.12 2.48 (1.97) (0.18) Less Distributions: Distribution from Net Investment Income .. (0.02) (0.02) Distribution from Net Realized Gains on Investments ........................... Distribution from Capital Paid-in ........ (0.21) (0.01) ------- ------- ------- ------- Total Distributions ...................... (0.23) (0.02) (0.01) ------- ------- ------- ------- Net Assets Value at End of Period ........... $ 11.19 $ 10.07 $ 7.82 $ 9.81 ======= ======= ======= ======= Total Investment Return(b) .................. 11.10% 31.74% (19.99)% (1.85)%(c) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............................ 1.25%(e)(i) 1.10%(e) 1.07%(e) 1.10%(d)(e) Ratio of Net Investment Income (Loss) to Average Net Assets ................. (0.27)% (0.12)% 0.10% (0.16)%(d) Portfolio Turnover Rate .................. 47.88% 115.75% 98.91% 37.76%(c) Net Assets End of Period (000s Omitted) ..... $25,021 $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 1.32%, 1.25%, 1.35%, and 1.19% for the years ended December 31, 2004, 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) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HEALTH SCIENCES FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Biotechnology - 17.4% Abgenix, Inc. * ......................................... 8,200 $ 85 Amylin Pharmaceuticals, Inc. * .......................... 12,000 280 Applera Corp. - Celera Genomics Group * ................. 23,400 322 Array Biopharma, Inc. * ................................. 7,800 74 Cephalon, Inc. * ........................................ 5,800 295 Ciphergen Biosystems, Inc. * ............................ 16,100 69 CV Therapeutics, Inc. * ................................. 12,000 276 Cytokinetics, Inc. * .................................... 3,400 35 Exelixis, Inc. * ........................................ 22,200 211 Genzyme Corp. * ......................................... 17,798 1,034 Gilead Sciences, Inc. * ................................. 11,300 395 Human Genome Sciences, Inc. * ........................... 22,700 273 ICOS Corp. * ............................................ 4,400 124 Millennium Pharmaceuticals, Inc. * ...................... 27,200 330 Onyx Pharmaceuticals, Inc. * ............................ 2,500 81 OSI Pharmaceuticals, Inc. * ............................. 2,100 157 Regeneron Pharmaceuticals * ............................. 10,100 93 Vertex Pharmaceuticals, Inc. * .......................... 6,100 65 Zymogenetics, Inc. * .................................... 6,400 147 ------- 4,346 Chemicals - 0.8% Bayer AG * .............................................. 6,300 213 Food & Drug Retailing - 1.0% Rite Aid Corp. * ........................................ 65,200 238 Health Care Equipment & Supplies - 13.3% Baxter International, Inc. .............................. 15,580 538 Beckman Coulter, Inc. ................................... 3,400 228 Becton, Dickinson & Co. ................................. 4,100 233 Bruker Biosciences Corp. * .............................. 25,000 101 CTI Molecular Imaging, Inc. * ........................... 14,100 200 Edwards Lifesciences Corp. * ............................ 5,900 244 Guidant Corp. ........................................... 1,613 116 Hospira, Inc. * ......................................... 7,473 250 Medtronic, Inc. ......................................... 21,400 1,063 Olympus Optical Co. * ................................... 11,000 234 Terumo Corp. * .......................................... 4,700 126 ------- 3,333 Health Care Providers & Services - 11.2% Aetna US Healthcare, Inc. ............................... 4,100 512 Gambro - Ser. A * ....................................... 2,690 38 McKesson HBOC, Inc. ..................................... 28,300 890 NDC Healthcorp .......................................... 31,500 586 PacifiCare Health Systems, Inc. * ....................... 13,700 774 ------- 2,800 Pharmaceuticals - 53.5% Abbott Laboratories ..................................... 26,334 1,229 AstraZeneca Group plc - ADR ............................. 36,634 1,333 Atherogenics, Inc. * .................................... 8,800 207 Eisai Co. Ltd. * ........................................ 17,300 568 Elan Corp. plc - ADR * .................................. 36,400 992 Eli Lilly & Co. ......................................... 14,227 $ 807 Forest Laboratories, Inc. * ............................. 12,000 538 Fujisawa Pharmeceutical Co., Ltd. * ..................... 22,000 601 King Pharmaceuticals, Inc. * ............................ 32,500 403 Medco Health Solutions, Inc. * .......................... 12,000 499 Medicinesco * ........................................... 13,100 377 Novartis AG * ........................................... 16,575 833 NPS Pharmaceuticals, Inc. * ............................. 5,900 108 Sankyo Co., Ltd. * ...................................... 13,900 313 Sanofi Aventis - ADR .................................... 18,758 751 Schering-Plough Corp. ................................... 76,300 1,593 Schwarz Pharma AG * ..................................... 4,700 212 Shionogi & Co., Ltd. * .................................. 38,000 524 Takeda Chemical Industries * ............................ 4,400 221 UCB SA * ................................................ 4,862 246 Watson Pharmaceuticals, Inc. * .......................... 11,000 361 Wyeth ................................................... 15,995 681 ------- 13,397 ------- TOTAL COMMON STOCK- (Cost $20,880) 97.2% 24,327 Par Value ------- (000's) SHORT-TERM INVESTMENTS - 2.8% Investment in joint trading account 2.29% due 01/03/05 (Cost $714) ............................................. $ 714 714 ------ ------- TOTAL INVESTMENTS- (Cost $21,594) 100.0% 25,041 Payables, less cash and receivables- (0.0)% (21) ------ ------- NET ASSETS- 100.0% $25,020 ====== ======= * Non-income producing security. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $5 1.81% $-- Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, of $360 which expire in 2011. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $19. 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 December 31, 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 $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 $22 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, LLP, which under John Hancock's 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 in expenses of $15. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $15,595 $27,839 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $21,718 $4,037 $(714) $3,323 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $360 $3,323 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 - ---- ------------------ ---------------------- ----------------- 2004 $-- $-- $ -- 2003 72 -- 719 NOTE E--OTHER MATTERS (UNAUDITED) 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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS--Continued John Hancock Variable Series Trust I solicited a vote at a special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matter: For Against Abstain --- ------- ------- To approve, as to the Health Sciences Fund, an amendment 81% 9% 10% 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. Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Health Sciences Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Health Sciences Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1998 - -------------------------------------------------------------------------------- High Yield Bond Fund Wellington Management Company, LLP Earl E. McEvoy - -------------------------------------------------------------------------------- .. 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, focusing on the upper tier of the high yields market. Fund Commentary Performance: For the year 2004, the High Yield Fund returned +8.15%, underperforming the +9.90% return of the Lehman Brothers Upper Tier High Yield Splice (50/50 BB-B) Index. Environment: High yield default rates dropped significantly during the year, approaching levels not seen since the high-growth period of the mid-1990s. High yield companies are enjoying the benefits of a strong economy and have taken advantage of low interest rates to refinance existing debt and improve their balance sheets. We have de-emphasized industries with unresolved structural problems, such as airlines. This selectivity regarding airlines contributed to underperformance relative to the benchmark. Underweighting Utilities was also a source of underperformance. Utilities represent more than 15% of the benchmark and we struggle with the rationalization of dedicating that amount of the portfolio's assets to one industry. In any case, we continue to emphasize regulated utilities within this area, and to deemphasize the merchant energy operators, a strategy that leads to an underweight relative to the benchmark in Utilities. Outlook: We expect measured interest rate increases to continue for the foreseeable future and high yield bonds should continue to fare relatively well in this environment. We remain constructive in our outlook for the high yield market despite the fact that spreads and yields are at their tightest levels in several years. However, spreads do have the potential to remain low for an extended period of time. Inception: May 1, 1998 - -------------------------------------------------------------------------------- High Yield Bond Fund Wellington Management Company, LLP Earl E. McEvoy - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/98 (Fund Inception Date) High Yield Bond High Yield Bond Fund Benchmark/1/ -------------------- --------------- 4/30/1998 410,000 $10,000 5/31/1998 9,987 10,035 6/30/1998 10,028 10,071 7/31/1998 10,075 10,129 8/31/1998 9,309 9,569 9/30/1998 9,280 9,612 10/31/1998 9,120 9,415 11/30/1998 9,802 9,806 12/31/1998 9,702 9,817 1/31/1999 9,875 9,962 2/28/1999 9,884 9,903 3/31/1999 10,061 9,998 4/30/1999 10,214 10,192 5/31/1999 9,992 10,054 6/30/1999 9,989 10,033 7/31/1999 9,993 10,073 8/31/1999 9,924 9,961 9/30/1999 9,874 9,889 10/31/1999 9,806 9,824 11/30/1999 10,089 9,940 12/31/1999 10,200 10,051 1/31/2000 10,132 10,008 2/29/2000 10,123 10,027 3/31/2000 9,876 9,817 4/30/2000 9,945 9,832 5/31/2000 9,777 9,731 6/30/2000 10,006 9,930 7/31/2000 10,121 10,005 8/31/2000 10,203 10,073 9/30/2000 9,974 9,985 10/31/2000 9,578 9,666 11/30/2000 9,016 9,283 12/31/2000 9,097 9,462 1/31/2001 9,829 10,171 2/28/2001 10,014 10,306 3/31/2001 9,866 10,063 4/30/2001 9,755 9,938 5/31/2001 9,951 10,117 6/30/2001 9,582 9,834 7/31/2001 9,725 9,978 8/31/2001 9,796 10,096 9/30/2001 8,865 9,418 10/31/2001 9,026 9,650 11/30/2001 9,357 10,003 12/31/2001 9,291 9,962 1/31/2002 9,363 10,031 2/28/2002 9,265 9,891 3/31/2002 9,532 10,129 4/30/2002 9,707 10,291 5/31/2002 9,631 10,238 6/30/2002 8,874 9,483 7/31/2002 8,388 9,069 8/31/2002 8,491 9,327 9/30/2002 8,214 9,205 10/31/2002 8,225 9,125 11/30/2002 8,825 9,690 12/31/2002 8,872 9,826 1/31/2003 9,006 10,075 2/28/2003 9,109 10,175 3/31/2003 9,244 10,422 4/30/2003 9,588 10,917 5/31/2003 9,576 10,990 6/30/2003 9,762 11,260 7/31/2003 9,600 11,127 8/31/2003 9,657 11,226 9/30/2003 9,875 11,510 10/31/2003 10,031 11,715 11/30/2003 10,128 11,881 12/31/2003 10,336 12,110 1/31/2004 10,437 12,299 2/28/2004 10,444 12,318 3/31/2004 10,525 12,442 4/30/2004 10,453 12,321 5/31/2004 10,255 12,107 6/30/2004 10,387 12,255 7/31/2004 10,517 12,441 8/31/2004 10,700 12,697 9/30/2004 10,832 12,874 10/31/2004 11,026 13,080 11/30/2004 11,077 13,162 12/31/2004 11,179 13,309 Value on 12/31/04: - ------------------ $11,179 High Yield Bond Fund $13,309 Lehman Brothers High Yield B/BB Bond Index/1/ - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- CSC Holdings, Inc. 1.8% Nextel Communications, Inc. 1.7% AES Corp. 1.7% Georgia Pacific Corp. 1.7% HCA, Inc. 1.5% Host Marriott LP 1.5% Qwest Corp. 1.3% Williams Cos, Inc. 1.3% Insight Midwest LP Capital, Inc. 1.1% AT&T Corp. 1.1% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* High Yield High Yield Bond Fund Bond Fund Benchmark/1/ ---------- ------------ 1 Year 8.15% 9.90% 3 Years 6.36% 10.14% 5 Years 1.85% 5.77% Since Inception (5/1/98) 1.68% 4.38% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 0.08% BBB 1.33% BB 38.51% B 54.27% Below B 5.31% Not rated 0.50% Weighted Average Yield 6.69% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The High Yield Bond Fund Index represents the Lehman Brothers High Yield Bond Fund Index: from May 1998 to December 2002 and then 50% Lehman Brothers B Index and 50% Lehman Brothers BB Index from January 2003 to present. Inception: May 1, 1998 - -------------------------------------------------------------------------------- High Yield Bond Fund Wellington Management Company, LLP Earl E. McEvoy - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a High Yield Bond Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,076.20 Expense paid per $1,000* $ 4.70 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.61 Expense paid per $1,000* $ 4.57 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted) ASSETS Long term investments at cost ...................................... $ 90,585 Net unrealized appreciation of investments ......................... 4,131 Short-term investments at value .................................... 80 -------- Total investments ............................................ 94,796 Receivable for: Interest ........................................................ 1,894 -------- Total assets ....................................................... 96,690 -------- LIABILITIES Payables for: Fund shares purchased ........................................... 36 Accrued operating expenses ...................................... 15 -------- Total liabilities .................................................. 51 -------- Net assets ......................................................... $ 96,639 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 14,876 -------- Net asset value per share .......................................... $ 6.50 ======== Composition of net assets: Capital paid-in ................................................. $107,209 Accumulated net realized loss on investments .................... (14,734) Undistributed net investment income ............................. 33 Net unrealized appreciation of investments ...................... 4,131 -------- Net assets ......................................................... $ 96,639 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 7,171 EXPENSES Investment advisory fee ......................................... 767 Auditors fees ................................................... 12 Custodian fees .................................................. 99 Legal fees ...................................................... 16 Printing & mailing fees ......................................... 15 Trustees' fees .................................................. 3 Other fees ...................................................... 3 ------- Total expenses ..................................................... 915 Less expenses reimbursed ........................................ (52) ------- Net expenses ....................................................... 863 ------- Net investment income .............................................. 6,308 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................ 2,368 Change in unrealized depreciation on investments ................ (1,184) ------- Net realized and unrealized loss ................................... 1,184 ------- Net increase in net assets resulting from operations ...................................................... $ 7,492 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- High Yield Bond Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ........................................................ $ 6,308 $ 5,394 Net realized gain (loss) ..................................................... 2,368 (724) Change in net unrealized appreciation (depreciation) ......................... (1,184) 7,272 -------- -------- Net increase in net assets resulting from operations ...................... 7,492 11,942 Distributions to shareholders from: Net investment income ........................................................ (6,337) (5,469) Capital paid-in .............................................................. (184) -------- -------- Decrease in net assets resulting from distributions ....................... (6,337) (5,653) From fund share transactions: Proceeds from shares sold .................................................... 25,660 109,079 Distributions reinvested ..................................................... 6,337 5,653 Payment for shares redeemed .................................................. (33,529) (84,786) -------- -------- Increase (decrease) in net assets from fund share transactions ............ (1,532) 29,946 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ........................................... (377) 36,235 NET ASSETS Beginning of Period .......................................................... 97,016 60,781 -------- -------- End of Period (including undistributed net investment income of $33 and $0, respectively) ............................................................. $ 96,639 $ 97,016 ======== ======== Analysis of fund share transactions: Sold ......................................................................... 4,018 17,586 Reinvested ................................................................... 993 909 Redeemed ..................................................................... (5,250) (13,667) -------- -------- Net increase (decrease) in fund shares outstanding .............................. (239) 4,828 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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 ----------------------------------------------------------- Year Ended December 31, 2004 2003(e) 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 ........................................... 0.42 0.42 0.57 0.73 0.73 Net Realized and Unrealized Gain (Loss) on Investment(a) ........ 0.08 0.53 (0.87) (0.55) (1.65) ------- ------- ------- ------- ------- Total From Investment Operations ................................ 0.50 0.95 (0.30) 0.18 (0.92) Less Distributions: Distribution from Net Investment Income ......................... (0.42) (0.43) (0.62) (0.68) (0.74) Distribution from Net Realized Gains on Investments ............. Distribution from Capital Paid-In ............................... (0.01) ------- ------- ------- ------- ------- Total Distributions ............................................. (0.42) (0.44) (0.62) (0.68) (0.74) ------- ------- ------- ------- ------- Net Assets Value at End of Period .................................. $ 6.50 $ 6.42 $ 5.91 $ 6.83 $ 7.33 ======= ======= ======= ======= ======= Total Investment Return(b) ......................................... 8.15% 16.51% (4.51)% 2.13% (10.81)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................ 0.90%(c) 0.90%(c) 0.90%(c) 0.80%(c) 0.75% Ratio of Net Investment Income to Average Net Assets ............ 6.59% 6.81% 9.84% 10.39%(d) 8.88% Portfolio Turnover Rate ......................................... 52.00% 47.82% 89.30% 32.50% 21.94% Net Assets End of Period (000s Omitted) ............................ $96,639 $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 .96%, .95%, .96%, .90%, and .87%, for the years ended December 31, 2004, 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) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND ** Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.7% Alliant Techsystems, Inc. - Sr. Sub. Notes 8.5% due 05/15/11 - B ................................ $ 95 $ 104 Argo-Tech Corp - Sr. Notes 9.25% due 06/01/11 - B ............................... 110 121 Sequa Corp. 9.0% due 08/01/09 - BB- .............................. 275 311 Sequa Corp. - Sr. Notes 8.875% due 04/01/08 - BB- ............................ 105 115 Transdigm, Inc. - Sr. Sub. Notes 8.375% due 07/15/11 - B- ............................. 10 11 ------ 662 Airlines - 0.8% American Airlines, Inc. 7.024% due 04/15/11 - BBB+ ........................... 130 134 Continental Airlines - Ser. 1997-4 Cl. 4A 6.9% due 01/02/18 - A- ............................... 95 95 Continental Airlines, Inc. - Ser. 1999-2 Cl. A2 7.056% due 09/15/09 - A .............................. 170 175 Delta Air Lines, Inc. - CTF Ser. 2001-1 Cl. A2 7.11% due 03/18/13 - A ............................... 265 261 Northwest Airlines - Ser. 2001 Cl. 1A2 6.841% due 10/01/12 - AA+ ............................ 80 80 ------ 745 Auto Components - 2.8% Arvinmeritor, Inc. - Notes 8.75% due 03/01/12 - BB+ ............................. 420 483 Cummins, Inc. - Sr. Notes 9.5% due 12/01/10 - BB+ .............................. 45 51 Dura Operating Corp. - Sr. Notes Ser. B 8.625% due 04/15/12 - B .............................. 260 271 Eagle Picher, Inc. - Sr. Notes 9.75% due 09/01/13 - B- .............................. 40 40 R.J. Towercorp - Gtd. Sr. Notes 12.0% due 06/01/13 - CCC+ ............................ 235 182 Tenneco Automotive, Inc. - Sr. Sec. Notes Ser. B 10.25% due 07/15/13 - B- ............................. 205 242 Tenneco Automotive, Inc. - Sr. Sub. Notes 144A (a) 8.625% due 11/15/14 - B- ............................. 120 125 TRW, Inc. - Sr. Notes 9.375% due 02/15/13 - BB- ............................ 376 436 Visteon Corp. 8.25% due 08/01/10 - BB+ ............................. 250 264 Visteon Corp. - Notes 7.0% due 03/10/14 - BB+ .............................. 660 637 ------ 2,731 Automobiles - 0.6% Navistar International Corp., Inc. - Sr. Notes 7.5% due 06/15/11 - BB- .............................. 70 75 United Rentals North America, Inc. - Sr. Notes 6.5% due 02/15/12 - BB- .............................. $485 $ 473 ------ 548 Banks - 0.7% Chevy Chase Bank - Sub. Debs. 6.875% due 12/01/13 - BB- ............................ 175 180 Western Financial Bank - Sub. Debs. 9.625% due 05/15/12 - BB- ............................ 415 473 ------ 653 Beverages - 0.5% Constellation Brands, Inc. - Sr. Sub. Notes 8.125% due 01/15/12 - B+ ............................. 430 470 Building Products - 1.4% American Standard Cos., Inc. 7.625% due 02/15/10 - BBB- ........................... 305 350 Building Materials Corp. America - Sr. Notes 144A (a) 7.75% due 08/01/14 - B+ .............................. 235 239 Goodman Global Holdings, Inc. - Sr. Sub. Notes 144A (a) 7.875% due 12/15/12 - B- ............................. 245 243 Koppers, Inc. Pennsylvania - Sr. Sec. Notes 9.875% due 10/15/13 - B .............................. 200 228 Texas Industries, Inc. - Sr. Notes 10.0% due 06/01/11 - BB- ............................. 195 228 Valmont Industries, Inc. - Sr. Sub. Notes 6.875% due 05/01/14 - B+ ............................. 40 41 ------ 1,329 Chemicals - 4.9% Acetex Corp. - Sr. Notes 10.875% due 08/01/09 - B+ ............................ 75 82 Airgas, Inc. - Sr. Sub. Notes 9.125% due 10/01/11 - BB- ............................ 335 376 Equistar Chemical - Sr. Notes 10.125% due 09/01/08 - B+ ............................ 58 67 Equistar Chemicals LP - Sr. Notes 10.625% due 05/01/11 - B+ ............................ 155 180 Huntsman LLC - Sr. Sec. Notes 11.625% due 10/15/10 - B ............................. 125 147 IMC Global, Inc. - Sr. Notes 10.875% due 08/01/13 - BB ............................ 470 587 Lubrizol Corp. - Sr. Notes 5.5% due 10/01/14 - BB+ .............................. 80 80 Lyondell Chemical Co. 9.875% due 05/01/07 - B+ ............................. 42 44 Lyondell Chemical Co. - Notes Ser. A 9.625% due 05/01/07 - B+ ............................. 800 880 Methanex Corp. - Sr. Notes 8.75% due 08/15/12 - BBB- ............................ 260 304 Millenium America, Inc. - Sr. Notes 9.25% due 06/15/08 - B+ .............................. 275 314 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Chemicals - Continued NALCO Co. - Sr. Notes 7.75% due 11/15/11 - B- .............................. $445 $ 479 Nova Chemicals Corp. - Notes 7.0% due 05/15/06 - BB+ .............................. 210 219 Nova Chemicals Corp. - Sr. Notes 6.5% due 01/15/12 - BB+ .............................. 80 85 Omnova Solutions, Inc. - Sr. Sec. Notes 11.25% due 06/01/10 - B+ ............................. 245 276 Resolution Performance Products - Sr. Notes 9.5% due 04/15/10 - CCC+ ............................. 310 336 Rockwood Specialties Group - Sr. Sub. Notes 144A (a) 7.5% due 11/15/14 - B- ............................... 50 52 Union Carbide Chemicals & Plastics 7.875% due 04/01/23 - BBB- ........................... 55 57 Union Carbide Corp. - Debs. 6.79% due 06/01/25 - BBB- ............................ 180 182 ------ 4,747 Commercial Services & Supplies - 3.8% Advanstar Communications, Inc. - Sr. Sec. Notes 10.75% due 08/15/10 - B- ............................. 120 135 Affinia Group, Inc. - Sr. Sub. Notes 144A (a) 9.0% due 11/30/14 - B ................................ 70 73 Allied Waste North America, Inc. - Sr. Notes 8.5% due 12/01/08 - BB- .............................. 225 239 8.875% due 04/01/08 - BB- ............................ 355 378 Crystal US Holdings - Sr. Disc. Notes Ser. A 144A (A) 1.0% due 10/01/14 - B- ............................... 385 266 Harvest Operations Corp. - Gtd. Sr. Notes 144A (a) 7.875% due 10/15/11 - B- ............................. 75 76 Iron Mountain, Inc. - Sr. Sub. Notes 8.625% due 04/01/13 - B .............................. 130 138 Iron Mountain, Inc. Delaware - Sr. Sub. Notes 8.25% due 07/01/11 - B ............................... 115 118 Iron Mountain, Inc. Pennsylvania - Sr. Sub. Notes 7.75% due 01/15/15 - B ............................... 145 146 Mail Welli Corp. - Sr. Notes 9.625% due 03/15/12 - B+ ............................. 440 486 National Waterworks, Inc. - Sr. Sub. Notes - Ser. B 10.5% due 12/01/12 - B- .............................. 385 431 Poindexter JB, Inc. - Sr. Notes 144A (a) 8.75% due 03/15/14 - B- .............................. 235 252 SPX Corp. - Sr. Notes 6.25% due 06/15/11 - BB+ ............................. 150 158 7.5% due 01/01/13 - BB+ .............................. 245 267 Trinity Industries, Inc. - Sr. Notes 6.5% due 03/15/14 - BB- .............................. 45 45 Vertis, Inc. - Sr. Notes 9.75% due 04/01/09 - B- .............................. $105 $ 114 10.875% due 06/15/09 - B- ............................ 90 98 WDAC Subsidiary Corp. - Sr. Notes 144A (a) 8.375% due 12/01/14 - CCC+ ........................... 250 247 ------ 3,667 Construction & Engineering - 2.3% Beazer Homes USA, Inc. - Sr. Notes 8.625% due 05/15/11 - BB ............................. 390 424 Horton, Inc. - Sr. Sub. Notes 9.375% due 03/15/11 - BB- ............................ 170 188 KB Home - Sr. Sub. Notes 8.625% due 12/15/08 - BB- ............................ 200 226 Meritage Corp. - Sr. Notes 7.0% due 05/01/14 - BB- .............................. 180 187 9.75% due 06/01/11 - BB- ............................. 90 100 Ryland Group, Inc. - Sr. Sub. Notes 9.125% due 06/15/11 - BB+ ............................ 345 383 Standard Pacific Corp. - Sr. Notes 6.5% due 10/01/08 - BB ............................... 310 325 6.875% due 05/15/11 - BB ............................. 110 116 Toll Brothers, Inc. 8.25% due 02/01/11 - BB+ ............................. 220 238 Toll Corp. - Sr. Sub. Notes 8.25% due 12/01/11 - BB+ ............................. 65 72 ------ 2,259 Containers & Packaging - 2.4% AEP Industries, Inc. - Sr. Sub. Notes 9.875% due 11/15/07 - B- ............................. 45 46 Anchor Glass Container Corp. - Sr. Notes Ser. B 11.0% due 02/15/13 - B+ .............................. 355 380 Owens Brockway Glass Container - Sr. Notes 8.75% due 11/15/12 - BB- ............................. 490 555 Owens Brockway Glass Container - Sr. Sec. Notes 7.75% due 05/15/11 - BB- ............................. 415 448 Pliant Corp. - Sr. Sec. Notes 11.125% due 09/01/09 - CCC+ .......................... 190 208 Stone Container Corp. - Sr. Notes 9.25% due 02/01/08 - B ............................... 200 221 9.75% due 02/01/11 - B ............................... 435 476 ------ 2,334 Distributors - 0.8% ADESA, Inc. - Sr. Sub. Notes 7.625% due 06/15/12 - B+ ............................. 275 290 Owens & Minor 8.5% due 07/15/11 - BB- .............................. 445 491 ------ 781 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Financials - 0.5% E*Trade Financial Corp. - Sr. Notes 144A (a) 8.0% due 06/15/11 - B+ ............................... $ 235 $ 252 Johnson Diversey, Inc. -Sr. Sub. Notes Ser. B 9.625% due 05/15/12 - B .............................. 215 240 Riviera Holdings Corp. - Sr. Sec. Notes 11.0% due 06/15/10 - B ............................... 5 5 ------ 497 Diversified Telecommunication Services - 5.8% Alaska Communications Systems - Sr. Notes 9.875% due 08/15/11 - B- ............................. 325 349 American Cellular Corp. - Sr. Notes Ser. B 10.0% due 08/01/11 - B- .............................. 560 480 AT&T Corp. - Sr. Notes 7.8% due 11/15/11 - BB+ .............................. 915 1,053 Centennial Communications Corp. - Sr. Notes 8.125% due 02/01/14 - CCC ............................ 250 257 Fairpoint Communications, Inc. - Sr. Notes 11.875% due 03/01/10 - B ............................. 180 211 GCI, Inc. - Sr. Notes 7.25% due 02/15/14 - B+ .............................. 500 499 GCI, Inc. - Sr. Notes 144A (a) 7.25% due 02/15/14 - B+ .............................. 5 5 Intelsat, Ltd. - Sr. Notes 5.25% due 11/01/08 - BBB+ ............................ 175 171 7.625% due 04/15/12 - BBB+ ........................... 75 73 MasTec, Inc. - Sr. Sub. Notes 7.75% due 02/01/08 - NR .............................. 155 150 MCI, Inc. - Notes 6.688% due 05/01/09 - B+ ............................. 250 259 7.735% due 05/01/14 - B+ ............................. 240 259 Panamsat Corp. - Sr. Notes 144A (a) 9.0% due 08/15/14 - B+ ............................... 130 145 Qwest Communications International, Inc. - Sr. Notes 144A (a) 7.25% due 02/15/11 - B ............................... 385 398 Qwest Corp. - Notes 144A (a) 8.875% due 03/15/12 - BB- ............................ 1,035 1,195 United West Communications, Inc. - Debs. 6.875% due 09/15/33 - BB- ............................ 80 74 ------ 5,578 Electric Utilities - 2.9% AES Corp. - 144A (a) 8.75% due 05/15/13 - B+ .............................. 565 643 AES Corp. - Sr. Notes 9.5% due 06/01/09 - B- ............................... 20 23 AES Corp. Sr. Sec. Notes 144A (a) 9.0% due 05/15/15 - B+ ............................... 825 944 Centerpoint Energy Resources Corp. - Sr. Notes 7.875% due 04/01/13 - BBB ............................ 390 464 Teco Energy, Inc. - Notes 7.0% due 05/01/12 - BB ............................... 25 27 7.2% due 05/01/11 - BB ............................... $ 305 $ 335 Texas Genco LLC - Sr. Notes 144A (a) 6.875% due 12/15/14 - B .............................. 325 336 ------ 2,772 Electric/Gas - 6.5% AES Corp. 9.375% due 09/15/10 - B- ............................. 30 35 Aquila, Inc. - Sr. Notes 9.95% due 02/01/11 - B- .............................. 453 513 Avista Corp. - Sr. Notes 9.75% due 06/01/08 - BB+ ............................. 275 319 CMS Energy Corp - Sr. Notes 8.5% due 04/15/11 - B+ ............................... 320 364 DPL, Inc. - Sr. Notes 6.875% due 09/01/11 - B+ ............................. 225 246 Edison Mission Energy - Sr. Notes 9.875% due 04/15/11 - B .............................. 455 538 El Paso Natural Gas Co. - Sr. Notes 7.625% due 08/01/10 - B- ............................. 230 253 EL Paso Production Holding Co. - Sr. Notes 7.75% due 06/01/13 - B- .............................. 525 551 Midwest Generation LLC - Sr. Sec. Notes 8.75% due 05/01/34 - B- .............................. 105 119 Nevada Power Co. - Notes Ser. E 10.875% due 10/15/09 - BB ............................ 355 410 Nevada Power Co. - Notes Ser. G 9.0% due 08/15/13 - BB ............................... 345 404 Nevada Power Co. - Notes Ser. L 144A (a) 5.875% due 01/15/15 - BB ............................. 100 100 NRG Energy, Inc. - Sr. Sec. Notes 144A (a) 8.0% due 12/15/13 - B ................................ 150 163 Reliant Energy, Inc. - Sr. Sec. Notes 6.75% due 12/15/14 - B+ .............................. 330 330 Semco Energy, Inc. - Sr. Notes 7.125% due 05/15/08 - BB- ............................ 165 177 7.75% due 05/15/13 - BB- ............................. 60 65 Southern Natural Gas Co. - Sr. Notes 8.875% due 03/15/10 - B- ............................. 425 479 TNP Enterprises, Inc. - Sr. Sub. Notes 10.25% due 04/01/10 - BB- ............................ 275 293 TXU Corp. - Sr. Notes Ser. P 144A (a) 5.55% due 11/15/14 - BBB- ............................ 250 248 TXU Corp. - Sr. Notes Ser. Q 144A (a) 6.5% due 11/15/24 - BBB- ............................. 250 250 TXU Corp. - Sr. Notes Ser. R 144A (a) 6.55% due 11/15/34 - BBB- ............................ 250 248 Western Resources, Inc. - Sr. Notes 9.75% due 05/01/07 - BB- ............................. 155 174 ------ 6,279 Electrical Equipment - 0.6% General Cable Corp. - Sr. Notes 9.5% due 11/15/10 - B ................................ 210 239 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electrical Equipment - Continued ITT Corp. - Debs. 7.375% due 11/15/15 - BB+ ............................ $ 30 $ 33 Wesco Distribution, Inc. - Ser. B 9.125% due 06/01/08 - B .............................. 290 300 ------ 572 Electronic Equipment & Instruments - 1.6% Itron, Inc. - Sr. Sub. Notes 144A (a) 7.75% due 05/15/12 - B ............................... 35 36 Sanmina SCI Corp. - Sr. Sec. Notes 10.375% due 01/15/10 - BB- ........................... 560 647 Solectron Corp. - Sr. Notes 9.625% due 02/15/09 - B+ ............................. 670 736 Thomas & Betts Corp. 6.39% due 02/10/09 - BBB- ............................ 15 16 Thomas & Betts Corp. - Notes 7.25% due 06/01/13 - BBB- ............................ 65 71 ------ 1,506 Finance - 6.0% Alamosa, Inc. - Sr. Notes 8.5% due 01/31/12 - CCC .............................. 20 22 Arch Western Finance LLC - Gtd Sr. Notes 144A (a) 6.75% due 07/01/13 - BB .............................. 240 248 Arch Western Finance LLC - Gtd. Sr. Notes 6.75% due 07/01/13 - BB .............................. 230 237 BCP Caylux Holdings Lux SCA - Sr. Sub. Notes 144A (a) 9.625% due 06/15/14 - B- ............................. 650 730 Borden US Finance Corp. - Sr. Sec. Notes 144A (a) 9.0% due 07/15/14 - B- ............................... 265 293 Bowater Canada Finance Corp. - Notes 7.95% due 11/15/11 - BB .............................. 425 459 Crown European Holdings SA - Sr. Sec. Notes 9.5% due 03/01/11 - B+ ............................... 410 467 10.875% due 03/01/13 - B ............................. 140 166 ELAN Finance plc - Sr. Notes 144A (a) 7.75% due 11/15/11 - B ............................... 195 209 Hampshire Donnelly Finance Corp. - Sr. Sub. Notes 144A (a) 10.875% due 12/15/12 - B+ ............................ 125 148 Huntsman Advanced Materials LLC - Sr. Sec. Notes 144A (a) 11.0% due 07/15/10 - B ............................... 60 71 Insight Midwest LP Capital, Inc. - Sr. Notes 10.5% due 11/01/10 - B+ .............................. 965 1,058 MDP Acquisitions plc - Sr. Notes 9.625% due 10/01/12 - B .............................. 370 413 New Asat Finance, Ltd. - Sr. Notes 144A (a) 9.25% due 02/01/11 - B ............................... 325 289 Refco Financial Holdings LLC - Sr. Sub. Notes 144A (a) 9.0% due 08/01/12 - B ................................ $175 $ 191 RH Donnelly Finance Corp. - Sr. Sub. Notes 10.875% due 12/15/12 - B+ ............................ 120 143 Ucar Finance, Inc. - Sr. Notes 10.25% due 02/15/12 - B .............................. 170 196 UGS Corp. - 144A (a) 10.0% due 06/01/12 - B- .............................. 345 393 Universal City Florida Holding Co. - Sr. Notes 144A (a) 8.375% due 05/01/10 - B- ............................. 40 42 ------ 5,775 Food & Drug Retailing - 0.6% Rite Aid Corp. Sr. Notes 9.5% due 02/15/11 - B+ ............................... 440 482 Winn Dixie Stores, Inc. - Sr. Notes 8.875% due 04/01/08 - CCC+ ........................... 110 103 ------ 585 Food Products - 0.7% Dole Food, Inc. - Sr. Notes 7.25% due 06/15/10 - B+ .............................. 10 10 8.875% due 03/15/11 - B+ ............................. 600 655 United Agricultural Products, Inc. - Sr. Notes 144A (a) 8.25% due 12/15/11 - B ............................... 53 57 ------ 722 Gas Utilities - 1.3% NorthWestern Corp. - Sr. Sec. Notes 144A (a) 5.875% due 11/01/14 - BB ............................. 30 31 Williams Cos, Inc. - Notes 7.125% due 09/01/11 - B+ ............................. 305 333 8.125% due 03/15/12 - B+ ............................. 740 856 ------ 1,220 Health Care Equipment & Supplies - 1.6% Bio Rad Laboratories, Inc. - Sr. Sub. Notes 7.5% due 08/15/13 - BB- .............................. 55 60 Bio Rad Laboratories, Inc. - Sr. Sub. Notes 144A (a) 6.125% due 12/15/14 - BB- ............................ 60 60 CDRV Investors, Inc. - Sr. Disc. Notes 144A (a) 9.625% due 01/01/15 - B- ............................. 405 249 Fisher Scientific International, Inc. - Sr. Sub. Notes 8.125% due 05/01/12 - BB+ ............................ 578 644 Radiologix, Inc. - Sr. Notes 10.5% due 12/15/08 - B ............................... 325 358 VWR International - Sr. Notes 144A (a) 6.875% due 04/15/12 - B- ............................. 55 58 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Health Care Equipment & Supplies - Continued VWR International, Inc. - Sr. Sub. Notes 144A (a) 8.0% due 04/15/14 - B- ............................... $ 90 $ 96 ------ 1,525 Health Care Providers & Services - 3.8% Coventry Health Care, Inc. - Sr. Notes 8.125% due 02/15/12 - BBB- ........................... 225 246 HCA, Inc. - Notes 5.5% due 12/01/09 - BB+ .............................. 140 140 6.3% due 10/01/12 - BB+ .............................. 930 940 6.375% due 01/15/15 - BB+ ............................ 275 275 HCA, Inc. - Sr. Notes 5.75% due 03/15/14 - BB+ ............................. 55 53 Iasis Healthcare LLC - Sr. Sub. Notes 8.75% due 06/15/14 - B- .............................. 205 224 NDC Healthcorp - Sr. Sub. Notes 10.5% due 12/01/12 - B ............................... 420 454 Neighborcare, Inc. - Sr. Sub. Notes 6.875% due 11/15/13 - B+ ............................. 230 241 Omnicare, Inc. - Sr. Sub. Notes Ser. B 8.125% due 03/15/11 - BB+ ............................ 525 563 Triad Hospitals, Inc. - Sr. Notes 7.0% due 05/15/12 - B+ ............................... 540 568 ------ 3,704 Hotels Restaurants & Leisure - 8.7% AMC Entertainment, Inc. - Sr. Notes 144A (a) 8.625% due 08/15/12 - B- ............................. 250 276 AMC Entertainment, Inc. - Sr. Sub. Notes 8.0% due 03/01/14 - CCC+ ............................. 115 114 Argosy Gaming Co. - Sr. Sub. Notes 7.0% due 01/15/14 - B+ ............................... 155 172 AZTAR Corp. - Sr. Sub. Notes 9.0% due 08/15/11 - B+ ............................... 645 713 Boyd Gaming Corp. - Sr. Sub. Notes 7.75% due 12/15/12 - B+ .............................. 165 181 8.75% due 04/15/12 - B+ .............................. 80 89 Hilton Hotels Corp. - Sr. Notes 7.5% due 12/15/17 - BBB- ............................. 55 64 Host Marriott LP - Sr. Notes Ser. I 9.5% due 01/15/07 - B+ ............................... 1,170 1,281 Host Marriott LP - Sr. Notes Ser. J 7.125% due 11/01/13 - B+ ............................. 95 103 Isle Capri Casinos, Inc. - Sr. Sub. Notes 7.0% due 03/01/14 - B ................................ 240 247 Mandalay Resort Group - Sr. Sub. Notes 9.375% due 02/15/10 - BB- ............................ 380 442 Mandalay Resort Group - Sr. Sub. Notes Ser. B 10.25% due 08/01/07 - BB- ............................ 305 345 MGM Mirage, Inc. 8.5% due 09/15/10 - BB+ .............................. 130 149 MGM Mirage, Inc. - Sr. Sub. Notes 8.375% due 02/01/11 - BB- ............................ 700 789 Park Place Entertainment Corp. - Notes 8.5% due 11/15/06 - BB+ .............................. $ 25 $ 27 Caesars Entertainment - Sr. Notes 7.0% due 04/15/13 - BB+ .............................. 410 455 Caesars Entertainment - Sr. Sub. Notes 8.125% due 05/15/11 - BB- ............................ 10 12 8.875% due 09/15/08 - BB- ............................ 425 482 Penn National Gaming, Inc. - Sr. Sub. notes 8.875% due 03/15/10 - B .............................. 55 60 Scientific Games Corp. - Sr. Sub. Notes 144A (a) 6.25% due 12/15/12 - B+ .............................. 100 101 Seneca Gaming Corp. - Sr. Notes 7.25% due 05/01/12 - BB- ............................. 230 243 Speedway Motorsports, Inc. - Sr. Sub. Notes 6.75% due 06/01/13 - B+ .............................. 100 105 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes 7.875% due 05/01/12 - BB+ ............................ 620 707 Station Casinos, Inc. - Sr. Sub. Notes 6.5% due 02/01/14 - B+ ............................... 590 606 Virgin River Casino Corp. RBG LLC - Sr. Sec Notes 144A (a) 9.0% due 01/15/12 - B ................................ 220 229 Wynn Las Vegas LLC - Bonds 144A (a) 6.625% due 12/01/14 - B+ ............................. 425 421 ------ 8,413 Household Products - 0.1% Church & Dwight Co., Inc. - Sr. Sub. Notes 144A (a) 6.0% due 12/15/12 - B+ ............................... 60 61 Industrial - 0.4% Jostens IH Corp. - Sr. Sub. Notes 144A (a) 7.625% due 10/01/12 - B- ............................. 35 36 Polypore, Inc. - Sr. Sub. Notes 8.75% due 05/15/12 - CCC+ ............................ 300 312 ------ 348 Industrial Conglomerates - 0.6% Invesys plc - Sr. Notes 144A (a) 9.875% due 03/15/11 - B- ............................. 340 365 Tyco International Group SA - Notes 6.75% due 02/15/11 - BBB ............................. 170 191 ------ 556 Insurance - 0.3% Provident Companies, Inc. - Sr. Notes 7.0% due 07/15/18 - BB+ .............................. 65 63 Unumprovident Corp. - Notes 6.75% due 12/15/28 - BB+ ............................. 100 91 UnumProvident Corp. - Sr. Debs. 7.375% due 06/15/32 - BB+ ............................ 15 15 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Insurance - Continued UnumProvident Corp. - Sr. Notes 7.625% due 03/01/11 - BB+ ............................ $ 95 $ 100 ------ 269 Internet Software & Services - 0.1% Unisys Corp. - Sr. Notes 6.875% due 03/15/10 - BB+ ............................ 135 145 Leisure Equipment & Products - 0.5% AMF Bowling Worldwide, Inc. - Sr. Sub Notes 10.0% due 03/01/10 - CCC+ ............................ 225 241 Bombadier Recreational Products - Sr. Sub. Notes 8.375% due 12/15/13 - B- ............................. 230 246 ------ 487 Machinery - 1.3% Case New Holland, Inc. - Sr. Notes 144A (a) 9.25% due 08/01/11 - BB- ............................. 410 457 9.25% due 08/01/11 - BB- ............................. 440 491 Cummings Engine Co., Inc. - Notes 7.125% due 03/01/28 - BB+ ............................ 40 41 Douglas Dynamics LLC - Sr. Notes 144A (a) 7.75% due 01/15/12 - B- .............................. 60 61 NMHG Holding Co. - Sr. Notes 10.0% due 05/15/09 - B+ .............................. 165 182 ------ 1,232 Media - 10.0% American Media Operations, Inc. - Sr. Sub. Notes 8.875% due 01/15/11 - B- ............................. 285 302 Canwest Media, Inc. - Sr. Sub. Notes 10.625% due 05/15/11 - B- ............................ 280 314 CanWest Media, Inc. - Sr. Sub. Notes 144A (a) 8.0% due 09/15/12 - B- ............................... 155 166 Charter Commercial Holdings II - Sr. Notes 10.25% due 09/15/10 - CCC- ........................... 230 244 Charter Communication Operating LLC - Sr. Notes 144A (a) 8.0% due 04/30/12 - B- ............................... 430 448 Charter Communications Operating LLC - Sr. Notes 144A (a) 8.375% due 04/30/14 - B- ............................. 40 42 Citizens Communications Co. - Notes 9.25% due 05/15/11 - BB+ ............................. 650 765 Corus Entertainment, Inc. - Sr. Sub. Notes 8.75% due 03/01/12 - B+ .............................. 510 559 CSC Holdings, Inc. - Sr. Notes 7.625% due 04/01/11 - BB- ............................ 1,410 1,519 CSC Holdings, Inc. - Sr. Notes 144A (a) 6.75% due 04/15/12 - BB- ............................. 185 190 Dex Media East LLC - Sr. Notes 9.875% due 11/15/09 - B .............................. 170 193 Dex Media West LLC - Sr. Notes 8.5% due 08/15/10 - B ................................ $ 200 $ 223 Direct TV Holdings LLC - Sr. Notes 8.375% due 03/15/13 - BB- ............................ 175 196 EchoStar DBS Corp. - Notes 6.375% due 10/01/11 - BB- ............................ 685 702 Houghton Mifflin Co. - Sr. Notes 8.25% due 02/01/11 - B- .............................. 445 475 L 3 Communications Corp. - Sr. Sub. Notes 6.125% due 07/15/13 - BB- ............................ 270 279 Lamar Media Corp. - Sr. Sub. Notes 7.25% due 01/01/13 - B ............................... 110 119 Liberty Group Operating, Inc. - Sr. Sub. Notes 9.375% due 02/01/08 - CCC+ ........................... 235 239 Lodgenet Entertainment Corp. - Sr. Sub. Notes 9.5% due 06/15/13 - B- ............................... 85 94 Mediacom Broadband LLC - Sr. Notes 11.0% due 07/15/13 - B ............................... 465 500 Mediacom LLC - Sr. Notes 9.5% due 01/15/13 - B ................................ 200 202 Medianews Group, Inc. - Sr. Sub. Notes 144A (a) 6.875% due 10/01/13 - B+ ............................. 220 224 Quebecor Media, Inc. - Sr. Notes 11.125% due 07/15/11 - B ............................. 410 470 Rogers Cable, Inc. - Sr. Sec. 2nd Priority Notes 7.875% due 05/01/12 - BB+ ............................ 35 38 Rogers Cable, Inc. - Sr. Sec. Notes 144A (a) 6.75% due 03/15/15 - BB+ ............................. 70 71 Rogers Cable, Inc. Sr. Notes 6.25% due 06/15/13 - BB+ ............................. 450 452 Shaw Communications, Inc. 7.25% due 04/06/11 - BB+ ............................. 15 17 Shaw Communications, Inc. - Sr. Notes 8.25% due 04/11/10 - BB+ ............................. 260 296 Sinclair Broadcast Group, Inc. - Sr. Sub. Notes 8.0% due 03/15/12 - B ................................ 50 53 8.75% due 12/15/11 - B ............................... 165 180 Videotron Ltee - Sr. Notes 6.875% due 01/15/14 - B+ ............................. 140 145 ------ 9,717 Metals & Mining - 2.7% AK Steel Corp. 7.875% due 02/15/09 - B+ ............................. 245 252 Compass Minerals Group, Inc. - Sr. Sub. Notes 10.0% due 08/15/11 - B- .............................. 275 309 Consol Energy, Inc. - Notes 7.875% due 03/01/12 - BB ............................. 200 224 Fastentech, Inc. - Sr. Sub. Notes 144A (a) 11.5% due 05/01/11 - B- .............................. 135 155 Hawk Corp. - Ser. Notes 144A (a) 8.75% due 11/01/14 - B ............................... 135 139 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Metals & Mining - Continued Kennametal, Inc. - Sr. Notes 7.2% due 06/15/12 - BBB .............................. $ 75 $ 83 Massey Energy Co. - Sr. Notes 6.625% due 11/15/10 - BB ............................. 110 114 Massey Energy Corp. - Notes 6.95% due 03/01/07 - B+ .............................. 190 198 Peabody Energy Corp. - Sr. Notes 6.875% due 03/15/13 - BB- ............................ 360 390 Russel Metals, Inc. - Sr. Notes 6.375% due 03/01/14 - BB- ............................ 45 46 Steel Dynamics, Inc. - Sr. Notes 9.5% due 03/15/09 - B+ ............................... 45 50 9.5% due 03/15/09 - B+ ............................... 155 171 Timken Co. - Notes 5.75% due 02/15/10 - BBB- ............................ 205 211 United States Steel Corp. - Sr. Notes 10.75% due 08/01/08 - BB ............................. 244 289 ------ 2,631 Multiline Retail - 0.2% J.C. Penney Co., Inc. - Notes 7.375% due 08/15/08 - BB+ ............................ 195 214 Office Electronics - 1.0% Xerox Corp. 7.2% due 04/01/16 - B+ ............................... 190 204 Xerox Corp. - Sr. Notes 9.75% due 01/15/09 - B+ .............................. 645 761 ------ 965 Oil & Gas - 6.0% ANR Pipeline Co. - Sr. Notes 8.875% due 03/15/10 - B- ............................. 425 480 Chesapeake Energy Corp. 7.5% due 09/15/13 - BB- .............................. 60 65 Chesapeake Energy Corp. - Sr. Notes 7.75% due 01/15/15 - BB- ............................. 35 38 8.125% due 04/01/11 - BB- ............................ 545 590 Encore Acquisition Co. - Sr. Sub. notes 6.25% due 04/15/14 - B ............................... 50 50 8.375% due 06/15/12 - B .............................. 70 78 Evergreen Resources, Inc. - Sr. Sub. Notes 5.875% due 03/15/12 - BBB- ........................... 55 58 EXCO Resources, Inc. - Sr. Notes 7.25% due 01/15/11 - B ............................... 230 246 Forest Oil Corp. - Sr. Notes 8.0% due 06/15/08 - BB- .............................. 102 112 8.0% due 12/15/11 - BB- .............................. 335 384 Giant Industries, Inc. - Sr. Sub. Notes 8.0% due 05/15/14 - B- ............................... 35 37 11.0% due 05/15/12 - B- .............................. 174 201 Key Energy Services, Inc. - Sr. Notes 6.375% due 05/01/13 - B .............................. 50 51 Magnum Hunter Resources, Inc. - Sr. Notes 9.6% due 03/15/12 - B+ ............................... 325 369 Markwest Energy Partners LP - Sr. Notes 144A (a) 6.875% due 11/01/14 - B+ ............................. $ 35 $ 36 Newfield Exploration Co. - Sr. Sub. Notes 8.375% due 08/15/12 - BB- ............................ 215 242 Newfield Exploration Co. - Sr. Sub. Notes 144A (a) 6.625% due 09/01/14 - BB- ............................ 225 238 Parker Drilling Co. - Notes 9.625% due 10/01/13 - B- ............................. 210 236 Petroleum Geo Services ASA - Sr. Notes 10.0% due 11/05/10 - NA .............................. 420 480 Plains Exploration & Production Co. Sr. Notes 7.125% due 06/15/14 - BB- ............................ 105 115 Plains Exploration & Production Co. - Sr. Sub. Notes 8.75% due 07/01/12 - B+ .............................. 45 50 Premcor Refining Group, Inc. - Sr. Notes 6.75% due 02/01/11 - BB- ............................. 155 166 9.5% due 02/01/13 - BB- .............................. 345 403 Pride International, Inc. - Sr. Notes 7.375% due 07/15/14 - BB- ............................ 460 503 Tesoro Petroleum Corp. - Sr. Sec. Notes 8.0% due 04/15/08 - BBB- ............................. 125 136 Western Oil Sands, Inc. - Sr. Sec. Notes 8.375% due 05/01/12 - BB+ ............................ 205 238 Whiting Petroleum Corp. - Sr. Sub. Notes 7.25% due 05/01/12 - B- .............................. 185 194 XTO Energy, Inc. - Sr. Notes 6.25% due 04/15/13 - BBB- ............................ 20 22 ------ 5,818 Paper & Forest Products - 4.0% Abitibi-Consolidated, Inc. - Notes 8.55% due 08/01/10 - BB- ............................. 880 955 Ainsworth Lumber Co., Ltd. - Sr. Notes 144A (a) 7.25% due 10/01/12 - B+ .............................. 105 107 Boise Cascade Corp. - Sr. Sub. Notes 144A (a) 7.125% due 10/15/14 - B+ ............................. 115 122 Bowater, Inc. - Notes 6.5% due 06/15/13 - BB ............................... 35 35 Georgia Pacific Corp. - Sr. Notes 8.875% due 02/01/10 - BB+ ............................ 590 686 9.375% due 02/01/13 - BB+ ............................ 780 912 Jefferson Smurfit Corp. - Sr. Notes 8.25% due 10/01/12 - B ............................... 115 126 Longview Fibre Co. - Sr. Sub. Notes 10.0% due 01/15/09 - B+ .............................. 245 268 Neenah Paper, Inc. - Sr. Notes 144A (a) 7.375% due 11/15/14 - B+ ............................. 105 106 Norske Skog Canada, Ltd. - Sr. Notes 7.375% due 03/01/14 - BBB ............................ 425 442 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- HIGH YIELD BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Paper & Forest Products - Continued Tembec Industries, Inc. - Sr. Notes 8.5% due 02/01/11 - B ................................ $ 125 $ 126 ------- 3,885 Personal Products - 0.3% Playtex Products, Inc. - Sr. Sec. Notes 8.0% due 03/01/11 - B ................................ 240 262 Pharmaceuticals - 1.5% AmeriSource Bergen Corp. - Sr. Notes 7.25% due 11/15/12 - BB+ ............................. 535 600 8.125% due 09/01/08 - BB+ ............................ 140 156 Biovail Corp. - Sr. Sub. Notes 7.875% due 04/01/10 - BB- ............................ 515 533 Valeant Pharmaceuticals International - Sr. Notes 7.0% due 12/15/11 - BB- .............................. 140 146 ------- 1,435 Real Estate Investment Trust - 1.1% FelCor Lodging, Ltd. - Sr. Notes 8.5% due 06/01/11 - B- ............................... 400 451 iStar Financial, Inc. - Sr. Notes 8.75% due 08/15/08 - BBB- ............................ 82 93 La Quinta Properties, Inc. - Sr. Notes 7.0% due 08/15/12 - BB- .............................. 55 58 Thomburg Mortgage, Inc. - Sr. Notes 8.0% due 05/15/13 - BB- .............................. 310 328 Ventas Realty, Ltd. - Sr. Notes 144A (a) 6.625% due 10/15/14 - BB ............................. 155 158 ------- 1,088 Real Estate Operations - 0.2% CB Richard Ellis Services, Inc. - Sr. Notes 9.75% due 05/15/10 - B+ .............................. 208 237 Road & Rail - 0.4% Kansas City Southern Railway Co. 9.5% due 10/01/08 - B+ ............................... 340 386 Kansas City Southern Railway Co. - Sr. Notes 7.5% due 06/15/09 - B+ ............................... 25 26 ------- 412 Semiconductor Equipment & Products - 0.6% Amkor Technology, Inc. 9.25% due 02/15/08 - B ............................... 370 378 Amkor Technologies, Inc. - Sr. Notes 7.75% due 05/15/13 - B ............................... 100 94 Magnachip Semiconductor - Sr. Sub. Notes 144A (a) 8.0% due 12/15/14 - NA ............................... 145 151 ------- 623 Specialty Retail - 0.2% Carrols Corp. - Sr. Sub. Notes 144A (a) 9.0% due 01/15/13 - B- ............................... 25 26 Rite Aid Corp. - Sr. Sec. Notes 8.125% due 05/01/10 - B+ ............................. $ 180 $ 190 Suburban Propane Partners - Sr. Notes 6.875% due 12/15/13 - B .............................. 30 30 ------- 246 Tobacco - 0.3% Dimon, Inc. - Sr. Notes 9.625% due 10/15/11 - BB ............................. 160 175 Standard Commercial Corp. - Sr. Notes 8.0% due 04/15/12 - BB+ .............................. 75 77 ------- 252 Wireless Telecommunications Services - 3.9% American Tower Corp. - Sr. Notes 7.5% due 05/01/12 - CCC .............................. 240 253 Dobson Cellular, Inc. - Sr. Secd. Notes 144A (a) 8.375% due 11/01/11 - B- ............................. 245 255 Nextel Communications, Inc. - Sr. Notes 6.875% due 10/31/13 - BB ............................. 1,510 1,650 Rogers Wireless, Inc. - Sr. Sec. Notes 9.625% due 05/01/11 - BB ............................. 650 764 Rogers Wireless, Inc. - Sr. Sec. Notes 144A (a) 7.5% due 03/15/15 - BB ............................... 265 280 Rural Cellular Corp. - Sr. Sec. Notes 8.25% due 03/15/12 - B- .............................. 95 100 Triton PCS, Inc. - Sr. Notes 8.5% due 06/01/13 - CCC .............................. 255 245 Western Wireless Corp. - Sr. Notes 9.25% due 07/15/13 - CCC ............................. 195 212 ------- 3,759 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $90,585) 98.0% 94,716 SHORT-TERM INVESTMENTS - 0.1% Investment in joint trading account 2.29% due 01/03/05 (Cost $80) .............................................. 80 80 ------- ------- TOTAL INVESTMENTS- (Cost $90,665) 98.1% 94,796 Cash and Receivables, less payables- 1.9% 1,843 ------- ------- NET ASSETS- 100.0% $96,639 ======= ======= (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 December 31, 2004, securities aggregated $15,113 or 15.6% of net assets of the Portfolio. ** Bond ratings are unaudited. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense - --------------------------- ---------------- ---------------- $354 1.61% $-- Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $676, $8,178 and $5,903 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 December 31, 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. 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. For the year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $52 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, LLP, which under John Hancock's 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 JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $49,451 $48,447 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $90,641 $4,476 $(321) $4,155 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss or difference in accretion/amortization. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 $-- $14,757 $4,155 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 - ---- ------------------ ---------------------- ----------------- 2004 $6,337 $-- $ -- 2003 5,469 -- 184 NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the High Yield Bond Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the High Yield Bond Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 2, 1988 - -------------------------------------------------------------------------------- International Equity Index Fund SSgA Funds Management, Inc. J. Francis/J. Beach - -------------------------------------------------------------------------------- .. 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. .. On March 25, 2004, 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. Fund Commentary Performance: For the year ending December 31, 2004, the International Equity Index Fund returned +20.24%, outperforming the +19.74% return of the MSCI AC World ex U.S. Index. From the date of manager inception, March 31, 2004 to year end, the International Equity Index Fund returned +15.02%, outperforming the +14.21% return of the MSCI AC World ex U.S. Index./2/ Environment: Uncertainty was the overriding theme for investors during the first three quarters of 2004. Rising oil prices, terrorist threats, the uncertainty surrounding the November U.S. elections and the unstable situation in Iraq, Afghanistan and North Korea gave investors cause for concern. Despite this, global equities produced modest positive returns early in the year. Global equities rallied strongly in the fourth quarter as oil prices fell from their October high of $53 per barrel and investors gained clarity in some of these other areas. On a regional basis, Europe was the clear winner for the period since manager inception. Europe returned +19.7% versus +9.6% for the Americas and +5.61% for Asia/Pacific. From April to December, 44 of 48 equity markets had positive returns, with 38 markets posting positive double-digit returns. The Czech Republic, Hungary, Poland and Austria were the top performers. Large exposure to banks, oil and telecommunications as well as a significant rise in their currencies caused these countries to outperform all others. Russia, Finland, Peru and Taiwan were the only countries with negative returns. Nine out of 10 sectors produced positive double-digit returns. Utilities, Energy, Telecommunications and Financials led the way. Mid-year carnage among the semiconductor stocks caused Information Technology (-4.9%) to be the only negatively performing sector during this period. The U.S. dollar continued to fall versus all major currencies during the year, boosting the returns of U.S. dollar-based investors. European currencies outperformed their Asian counterparts. Outlook: Many trends that benefited EAFE markets in the fourth quarter of 2004 remain firmly in place: low short-term interest rates; friendly bond yields; stabilizing energy costs; and healthy earnings prospects for 2005. No abrupt policy changes seem imminent at the European Central Bank, the Bank of England, or the Bank of Japan. The biggest near-term risk as we enter 2005 is probably one of simple overconfidence. The German VDAX Index, which measures implied options volatility on the DAX equity benchmark, thus tending to reflect investor anxiety, finished 2004 near its lowest level in over eight years. In addition, the sharp plunge of the US dollar in the fourth quarter, even if consistent with long-term fundamental concerns, also seems vulnerable to consolidation. But in the absence of exogenous shocks or an unexpected financial dislocation that forces overextended investors to reduce positions, equity markets should be able to make additional progress in early 2005. Until cash and bonds offer more promising returns, solid earnings and decent dividends seem likely to keep stocks attractive. Inception: May 2, 1988 - -------------------------------------------------------------------------------- International Equity Index Fund SSgA Funds Management, Inc. J. Francis/J. Beach - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (10-Year Period) International Equity Index International Equity Fund Index Fund Benchmark(1) ------------- ----------------------- 12/30/1994 $10,000 10,000 1/31/1995 9,441 9,618 2/28/1995 9,603 9,593 3/31/1995 9,951 10,194 4/28/1995 10,251 10,581 5/31/1995 10,461 10,457 6/30/1995 10,360 10,276 7/31/1995 10,935 10,918 8/31/1995 10,625 10,505 9/29/1995 10,776 10,713 10/31/1995 10,588 10,428 11/30/1995 10,637 10,721 12/29/1995 10,802 11,155 1/31/1996 10,972 11,203 2/29/1996 11,096 11,243 3/29/1996 11,202 11,485 4/30/1996 11,617 11,821 5/31/1996 11,499 11,606 6/28/1996 11,525 11,675 7/31/1996 11,036 11,336 8/30/1996 11,123 11,363 9/30/1996 11,331 11,668 10/31/1996 11,261 11,551 11/29/1996 11,764 12,013 12/31/1996 11,794 11,862 1/31/1997 11,590 11,449 2/28/1997 11,634 11,639 3/31/1997 11,418 11,685 4/30/1997 11,499 11,749 5/30/1997 12,467 12,516 6/30/1997 13,113 13,209 7/31/1997 13,525 13,426 8/29/1997 12,052 12,426 9/30/1997 12,923 13,124 10/31/1997 11,172 12,119 11/28/1997 11,168 11,998 12/31/1997 11,202 12,106 1/31/1998 11,211 12,662 2/27/1998 12,071 13,478 3/31/1998 12,561 13,896 4/30/1998 12,896 14,008 5/29/1998 12,973 14,210 6/30/1998 13,130 14,346 7/31/1998 13,237 14,537 8/31/1998 11,554 12,626 9/30/1998 11,194 12,277 10/30/1998 12,406 13,647 11/30/1998 13,007 14,358 12/31/1998 13,535 14,940 1/29/1999 13,564 14,959 2/26/1999 13,105 14,492 3/31/1999 13,793 15,259 4/30/1999 14,320 15,876 5/28/1999 13,627 15,047 6/30/1999 14,329 15,807 7/30/1999 14,665 16,200 8/31/1999 14,800 16,314 9/30/1999 14,904 16,514 10/29/1999 15,403 17,064 11/30/1999 16,083 17,771 12/31/1999 17,713 19,553 1/31/2000 16,674 18,595 2/29/2000 17,242 19,240 3/31/2000 17,707 19,768 4/28/2000 16,568 18,493 5/31/2000 16,249 18,049 6/30/2000 16,819 18,823 7/31/2000 16,020 17,878 8/31/2000 16,175 18,068 9/29/2000 15,392 17,157 10/31/2000 14,884 16,594 11/30/2000 14,236 15,854 12/31/2000 14,627 16,244 1/31/2001 14,922 16,603 2/28/2001 13,886 15,474 3/30/2001 12,916 14,430 4/30/2001 13,801 15,362 5/31/2001 13,363 14,893 6/30/2001 12,905 14,365 7/31/2001 12,576 13,990 8/31/2001 12,279 13,643 9/28/2001 10,853 12,074 10/31/2001 11,118 12,401 11/30/2001 11,626 12,945 12/31/2001 11,659 12,992 1/31/2002 11,106 12,388 2/28/2002 11,250 12,518 3/29/2002 11,930 13,221 4/30/2002 12,024 13,388 5/31/2002 12,182 13,617 6/28/2002 11,705 13,068 7/31/2002 10,555 11,760 8/31/2002 10,545 11,771 9/28/2002 9,343 10,421 10/31/2002 9,700 10,878 11/30/2002 10,212 11,458 12/31/2002 9,889 11,093 1/31/2003 9,577 10,763 2/28/2003 9,393 10,553 3/29/2003 9,133 10,248 4/30/2003 10,000 11,242 5/31/2003 10,612 11,982 6/28/2003 11,002 12,425 7/31/2003 11,330 12,838 8/31/2003 11,735 13,286 9/28/2003 12,053 13,666 10/31/2003 12,788 14,583 11/30/2003 13,068 14,900 12/31/2003 14,040 16,037 1/31/2004 14,283 16,296 2/28/2004 14,627 16,710 3/29/2004 14,676 16,813 4/30/2004 14,212 16,290 5/31/2004 14,254 16,342 6/28/2004 14,560 16,697 7/31/2004 14,140 16,211 8/31/2004 14,291 16,341 9/28/2004 14,706 16,867 10/31/2004 15,232 17,454 11/30/2004 16,216 18,412 12/31/2004 16,881 19,203 Value on 12/31/04: - ------------------ $16,881 International Equity Index Fund $19,203 International Equity Index Fund Benchmark(1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- BP Amoco plc 2.0% HSBC Holdings plc 1.8% Vodafone AirTouch plc 1.7% GlaxoSmithKline plc 1.3% Total Fina SA 1.2% Novartis AG 1.2% Royal Dutch Petroleum Co. 1.1% Toyota Motor Corp. 1.1% Nestle SA 1.0% Royal Bank of Scotland Group 1.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* International International Equity Equity Index Fund Index Fund Benchmark/1/ ----------------- ----------------------- 1 Year 20.24% 19.74% 3 Years 13.14% 13.91% 5 Years -0.95% -0.36% 10 Years 5.38% 6.74% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DIVERSIFICATION BY REGION AND COUNTRY/3/ % of Assets ------ Europe (excluding U.K.) 38.1% United Kingdom (U.K.) 20.6% Japan 18.3% Pacific Basin (excluding Japan) 12.3% Other 5.5% Emerging Markets 3.7% United States 1.5% DIVERSIFICATION BY REGION/4/ % of Assets ------ Developed Markets 91.5% Emerging Markets 8.5% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The International Equity Fund Benchmark represents the MSCI EAFE Index from May 1988 to April 1998 and then MSCI EAFE GDP weighted Index from May 1998 to June 1999 and then 90% MSCI EAFE GDP Index/10% MSCI Emerging Markets Free Index from July 1999 to October 2003 and now the MSCI All Country World Free excluding U.S. Index from November 2003 to present. /2/ Returns are not annualized. /3/ Calculations based upon country in which security is traded (listed). /4/ Calculations based upon country in which securities is domiciled. Inception: May 2, 1988 - -------------------------------------------------------------------------------- International Equity Index Fund SSgA Funds Management, Inc. J. Francis/J. Beach - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As an International Equity Index Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns NAV Series Series I Series II - ------------------- ---------- --------- --------- Beginning account value 7/1/2004 $1,000.00 $1,000.00 $1,000.00 Ending account value 12/31/2004 $1,159.60 $1,158.30 $1,157.20 Expense paid per $1,000* $ 1.69 $ 3.86 $ 5.18 Hypothetical 5% Fund Returns NAV Series Series I Series II - ---------------------------- ---------- --------- --------- Beginning account value 7/1/2004 $1,000.00 $1,000.00 $1,000.00 Ending account value 12/31/2004 $1,023.57 $1,021.56 $1,020.33 Expense paid per $1,000* $ 1.58 $ 3.61 $ 4.85 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted) ASSETS Long term investments at cost (including $70,514 of securities loaned (Note B)) ..................................... $234,304 Net unrealized appreciation on investments ......................... 57,727 Short-term investments at value .................................... 83,526 -------- Total investments ............................................ 375,557 Foreign currency at value (cost $522) .............................. 525 Futures segregation (restricted) ................................... 402 Receivable for: Investments sold ................................................ 54 Dividends ....................................................... 376 Interest ........................................................ 5 Foreign dividend tax withholding reclaim ........................ 21 Futures contracts variation margin .............................. 405 Unrealized appreciation in forward currency contracts .................................................... 46 -------- Total assets ....................................................... 377,391 -------- LIABILITIES Payables for: Investments purchased ........................................... 52 Fund shares purchased ........................................... 328 Collateral for securities on loan ............................... 74,222 Foreign dividend tax withholding ................................ 39 Accrued operating expenses ...................................... 54 Accrued Distribution fees--Series I ............................. 26 Accrued Distribution fees--Series II ............................ 12 Other payables .................................................. 87 Other liabilities ............................................... 10 -------- Total liabilities .................................................. 74,830 -------- Net assets ......................................................... $302,561 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 18,592 -------- Net asset value per share .......................................... $ 16.27 ======== Composition of net assets: Capital paid-in ................................................. $262,642 Accumulated net realized loss on investments, futures and foreign currency transactions .................... (18,313) Undistributed net investment income ............................. 292 Net unrealized appreciation of: Investments .................................................. 57,727 Futures ...................................................... 206 Translation of assets and liabilities in foreign currencies ................................................ 7 -------- Net assets ...................................................... $302,561 ======== Other Information: Net Assets: NAV Series ...................................................... $199,531 Series I ........................................................ $ 77,347 Series II ....................................................... $ 25,683 Shares outstanding, $0.01 par value per share: NAV Series ...................................................... 12,282 Series I ........................................................ 4,736 Series II ....................................................... 1,574 Net asset value per share: NAV Series ...................................................... $ 16.25 Series I ........................................................ $ 16.33 Series II ....................................................... $ 16.31 STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 163 Dividends (net of foreign withholding tax of $598) ............... 4,794 Securities lending ............................................... 171 ------- Total investment income ............................................. 5,128 ------- EXPENSES Investment advisory fee .......................................... 345 Distribution fee for Series I (Note C) ........................... 148 Distribution fee for Series II (Note C) .......................... 73 Auditors fees .................................................... 21 Custodian fees ................................................... 225 Legal fees ....................................................... 26 Printing & mailing fees .......................................... 143 Trustees' fees ................................................... 5 Other fees ....................................................... 24 ------- Total expenses ...................................................... 1,010 Less expenses reimbursed ......................................... (123) Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (2) ------- Net expenses ........................................................ 885 ------- Net investment income ............................................... 4,243 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 4,946 Financial futures contracts ................................... 10 Foreign currency transactions ................................. 473 Realized Thai Tax ............................................. (33) Change in unrealized appreciation (depreciation) on: Investments ................................................... 39,327 Financial futures contracts ................................... 127 Translation of assets and liabilities in foreign currencies ................................................. (52) ------- Net realized and unrealized gain .................................... 44,798 ------- Net increase in net assets resulting from operations ................ $49,041 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- International Equity Index Fund (000's Omitted) Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ......................... $ 4,243 $ 2,614 Net realized gain (loss) ...................... 5,396 (6,337) Change in net unrealized appreciation ......... 39,402 51,040 -------- -------- Net increase in net assets resulting from operations .............................. 49,041 47,317 Distributions to shareholders from: Net investment income ......................... (4,243) (3,685) Capital paid-in ............................... (479) -------- -------- Decrease in net assets resulting from distributions ........................... (4,243) (4,164) From fund share transactions: Proceeds from shares sold ..................... 86,214 97,542 Shares issued in reorganization ............... 45,097 Distributions reinvested ...................... 4,243 4,164 Payment for shares redeemed ................... (36,827) (84,740) -------- -------- Increase in net assets from fund share transactions ............................ 98,727 16,966 -------- -------- NET INCREASE IN NET ASSETS ....................... 143,525 60,119 NET ASSETS Beginning of Period ........................... 159,036 98,917 -------- -------- End of Period (including undistributed net investment income of $292 and distributions in excess of net investment income of $(421), respectively) ............ $302,561 $159,036 ======== ======== Analysis of fund share transactions: Sold .......................................... 6,139 9,143 Issued in reorganization ...................... 3,212 Reinvested .................................... 298 358 Redeemed ...................................... (2,565) (7,833) -------- -------- Net increase in fund shares outstanding .......... 7,084 1,668 ======== ======== Other Information:
Year ended Period from May 3, to December 31, December 31, 2004 2004 ------------ -------------------------- Fund share transactions NAV Series Series I(b) Series II(b) - ----------------------- ------------ ----------- ------------ Dollars Sold ............................... $ 35,226 $46,472 $ 4,516 Shares issued in reorganization .... 24,566 20,531 Reinvested ......................... 3,802 354 87 Redeemed ........................... (27,401) (6,327) (3,099) -------- ------- ------- Net increase ....................... $ 11,627 $65,065 $22,035 ======== ======= ======= Shares Sold ............................... 2,436 3,392 311 Issued in reorganization ........... 1,749 1,463 Reinvested ......................... 267 25 6 Redeemed ........................... (1,929) (430) (206) -------- ------- ------- Net increase ....................... 774 4,736 1,574 ======== ======= ======= Distributions Net investment income .............. $ 3,802 $ 354 $ 87
(a) Certain amounts in 2003 have been reclassified to permit comparison. (b) Commencement of investment operations. 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:
International Equity Index--NAV Series ------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------ 2004(d) 2003(f) 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 ....................... 0.31 0.24 0.21 0.22 0.23 Net Realized and Unrealized Gain (Loss) on Investment(a) ......................... 2.44 3.91 (2.02) (3.32) (3.64) -------- -------- ------- -------- -------- Total From Investment Operations ............ 2.75 4.15 (1.81) (3.10) (3.41) Less Distributions: Distribution from Net Investment Income ..... (0.32) (0.34) (0.21) (0.17) (0.18) Distribution from Net Realized Gains on Investments .............................. (0.59) Distribution from Capital Paid-in ........... (0.04) (0.05) (0.07) -------- -------- ------- -------- -------- Total Distributions ......................... (0.32) (0.38) (0.21) (0.22) (0.84) -------- -------- ------- -------- -------- Net Assets Value at End of Period .............. $ 16.25 $ 13.82 $ 10.05 $ 12.07 $ 15.39 ======== ======== ======= ======== ======== Total Investment Return(b) ..................... 20.24% 41.99% (15.18)% (20.30)% (17.42)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................... 0.30%(c)(e) 0.27%(c) 0.28%(c) 0.27%(c) 0.28%(c) Ratio of Net Investment Income to Average Net Assets ................................... 2.13% 2.13% 1.85% 1.66% 1.40% Portfolio Turnover Rate ..................... 20.27% 37.90% 17.55% 8.31% 14.86% Net Assets End of Period (000s Omitted) ........ $199,531 $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 .38%, .42%, .46%, .40%, and .37%, for the years ended December 31, 2004, 2003, 2002, 2001, and 2000, respectively. (d) The fund entered into a new sub-advisory agreement with SSgA Funds Management Inc. 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) Certain amounts in 2003 have been reclassified to permit comparison. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
International International Equity Index-- Equity Index-- Series I Series II ---------------------- ---------------------- Period from Period from May 3, to December 31, May 3, to December 31, 2004(c) 2004(c) ---------------------- ---------------------- Net Assets Value at Beginning of Period ......................... $ 13.89 $ 13.89 Income from Investment Operations: Net Investment Income ........................................ 0.13 0.12 Net Realized and Unrealized Gain on Investment(a) ............ 2.41 2.40 ------- ------- Total From Investment Operations ............................. 2.54 2.52 Less Distributions: Distribution from Net Investment Income ...................... (0.10) (0.10) ------- ------- Total Distributions .......................................... (0.10) (0.10) ------- ------- Net Assets Value at End of Period ............................... $ 16.33 $ 16.31 ======= ======= Total Investment Return(b) ...................................... 18.45%(f) 18.29%(f) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............. 0.72%(d)(e) 0.91%(d)(e) Ratio of Net Investment Income (Loss) to Average Net Assets .. 1.40%(e) 1.04%(e) Portfolio Turnover Rate ...................................... 20.27%(f)(g) 20.27%(f)(g) Net Assets End of Period (000s Omitted) ......................... $77,347 $25,683
(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) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (e) Annualized. (f) Not annualized. (g) Excludes merger activity. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 $ 24 Australia - 4.2% Alumina, Ltd. (BF) ...................................... 32,757 152 Amcor, Ltd. (BE) ........................................ 24,153 139 AMP, Ltd. (JR) .......................................... 52,132 295 Ansell, Ltd. (JL) ....................................... 4,303 30 Aristocrat Leisure Limited # (BZ) ....................... 8,847 69 Australia & New Zealand Banking Group, Ltd.(JP) ......... 52,269 840 Australian Gas & Light Co., Ltd. (J4) ................... 12,501 134 Australian Stock Exchange, Ltd. # (JQ) .................. 2,627 42 BHP Steel (BF) .......................................... 20,679 133 Boral, Ltd. (BD) ........................................ 16,307 87 Brambles Industries, Ltd. # (BO) ........................ 26,443 143 Broken Hill Proprietary Co., Ltd. (BF) .................. 100,297 1,200 Centro Properties Group (JS) ............................ 21,333 96 CFS Gandel Retail Trust (FB) (a) ........................ 1,210 2 CFS Gandel Retail Trust (JS) ............................ 38,298 48 Coca Cola Amatil # (JG) ................................. 13,043 83 Cochlear, Ltd. # (JL) ................................... 1,405 28 Coles Myer, Ltd. # (JF) ................................. 31,020 239 Commonwealth Bank of Australia (JP) ..................... 35,001 877 Commonwealth Property Office (JS) ....................... 37,760 37 Computershare, Ltd. (BO) ................................ 11,036 49 CSL, Ltd. (JO) .......................................... 5,573 127 CSR, Ltd. (BD) .......................................... 24,041 50 DB RReef Trust * (FB) ................................... 68,134 70 Foster's Brewing Group, Ltd. (JG) ....................... 55,001 248 Futuris Corp., Ltd. (JH) ................................ 14,532 24 General Property Trust (JS) ............................. 55,050 161 Harvey Norman Holdings, Ltd. (JD) ....................... 13,516 33 Iluka Resources, Ltd. (BF) .............................. 5,843 29 ING Industrial Fund # (JS) .............................. 16,858 28 Insurance Australia Group (JR) .......................... 44,831 225 Investa Property Group (JS) ............................. 41,015 72 Jame Hardie Industries NV (BD) .......................... 13,110 69 John Fairfax Holdings Ltd. (JA) ......................... 25,244 90 Leighton Holdings, Ltd. # (BJ) .......................... 3,516 34 Lend Lease Corp. (JS) ................................... 10,169 105 Lion Nathan, Ltd. (JG) .................................. 8,421 56 Macquarie Goodman Industrial Trust # (JS) ............... 47,233 87 Macquarie Infrastructure Group # (BT) ................... 54,597 145 Macquariebank, Ltd. (JP) ................................ 6,185 224 Mayne Group, Ltd. (BP) .................................. 18,939 63 Mirvac Group # (JS) ..................................... 20,186 77 National Australia Bank, Ltd. # (JP) .................... 44,076 991 National Mutual Holdings, Ltd. (JR) ..................... 19,596 $ 63 Newcrest Mining, Ltd. (BF) .............................. 9,063 123 Onesteel. Ltd. (BF) ..................................... 14,517 29 Orica, Ltd. (BC) ........................................ 7,645 121 Origin Energy (BB) ...................................... 18,733 101 Pacific Brands Holding Pty., Ltd. (BY) .................. 12,750 32 Paperlinx (BG) .......................................... 11,377 42 Patrick Corp., Ltd. (BT) ................................ 15,436 79 Perpetual Trustees Australia. Ltd. # (JQ) ............... 1,100 54 Publishing & Broadcasting, Ltd. (JA) .................... 3,397 46 Qantas Airways, Ltd. (BQ) ............................... 25,739 74 QBE Insurance Group, Ltd. (JR) .......................... 19,234 230 Rinker Group (BD) ....................................... 26,502 220 Rio Tinto, Ltd. # (BF) .................................. 8,753 267 Santos, Ltd. (BB) ....................................... 16,197 107 Sonic Healthcare, Ltd. (JM) ............................. 6,968 66 Southcorp, Ltd. * (JG) .................................. 16,353 55 Stockland (JS) .......................................... 34,570 162 Stockland Trust Group * (JS) (a) ........................ 1,148 5 Suncorp-Metway, Ltd. (JP) ............................... 15,164 206 Tabcorp Holdings, Ltd. (BZ) ............................. 14,380 194 Telstra Corp., Ltd. # (J1) .............................. 58,383 224 Toll Holdings, Ltd. (BP) ................................ 6,751 67 Transurban Group # (BT) ................................. 14,684 77 Wesfarmers (BL) ......................................... 10,572 328 Westfield Group # (JS) .................................. 40,131 514 Westpac Banking Corp., Ltd. (JP) ........................ 50,968 775 WMC Resources, Ltd. (BF) ................................ 32,612 184 Woodside Petroleum, Ltd. (BB) ........................... 13,134 206 Woolworth's, Ltd. (JF) .................................. 29,149 341 ------- 12,723 Austria - 0.3% Bank Austria Credit (JP) ................................ 1,043 94 Bohler-Uddeholm AG (BF) ................................. 219 28 Erste Bank (JP) ......................................... 3,426 182 Flughafen Wien AG (BT) .................................. 298 22 Immofinanz Immobilien # * (JS) .......................... 6,786 65 Mayr-Melnhof Karton AG (BE) ............................. 119 20 Oesterreichische Elektrizitaetswirtschafts AG (J3) ...... 175 39 OMV AG # (BB) ........................................... 383 115 RHI AG # * (BD) ......................................... 528 16 Telecom Austria (J1) .................................... 7,804 147 VA Technologie AG # * (BM) .............................. 326 26 Voest Alpine AG # (BF) .................................. 730 56 Wienerberger Baustoffindustrie AG # (BI) ................ 1,789 85 ------- 895 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Belgium - 1.1% Agfa Gevaert NV (BX) .................................... 2,768 $ 93 Barco NV (JY) ........................................... 324 30 Bekaert NV (BK) ......................................... 397 32 Belgacom SA * (J1) ...................................... 4,429 191 Cofinimmo SA (JS) ....................................... 131 21 Colruyt NV (JF) ......................................... 506 82 D' Ieteren SA # (JB) .................................... 77 14 Delhaize SA (JF) ........................................ 1,975 150 DEXIA # (JP) ............................................ 17,809 408 Electrabel SA # (J3) .................................... 782 347 Euronav NV (BR) ......................................... 558 14 Fortis (JQ) ............................................. 33,272 917 GPE Bruxelles LAM (JQ) .................................. 1,976 160 Interbew (JG) ........................................... 4,915 190 KBC Bancassurance Holding NV # (JP) ..................... 3,103 237 Mobistar SA * (J1) ...................................... 770 72 NV Union Miniere SA (BF) ................................ 695 65 Omega Pharma SA (JL) .................................... 569 27 Solvay SA (BC) .......................................... 1,812 199 UCB SA # (JO) ........................................... 2,503 127 ------ 3,376 Brazil - 0.1% Aracruz Celulose SA - ADR * (BG) ........................ 897 34 Centrais Electricas Brasileiras SA - ADR # * (J3) ....... 3,676 27 Compahnia Vale Do Rio Doce(BF) .......................... 2,700 77 Petrol Brasilieros (BB) ................................. 1,700 68 Souza Cruz (JI) ......................................... 2,100 28 Tele Norte Leste (J1) ................................... 1,500 26 Usinas Siderurgicas de Minas Gerais S/A - ADR # (BF) .... 1,669 34 ------ 294 Canada - 5.3% Aber Diamond Corp. * (BF) ............................... 1,300 46 Abitibi Consolidated, Inc. # * (BG) ..................... 10,200 70 Agnico-Eagle Mines, Ltd. # * (BF) ....................... 2,200 30 Agrium, Inc. # * (BC) ................................... 3,800 64 Alcan Aluminum, Ltd. # * (BF) ........................... 10,100 494 Aliant, Inc. * (J1) ..................................... 1,100 25 Angiotech Pharmaceuticals, Inc. * (JO) .................. 2,100 39 ATI Technologies, Inc. * (JX) ........................... 6,600 128 Ballard Power Systems, Inc. # * (BK) .................... 2,000 14 Bank Nova Scotia Halifax # * (JP) ....................... 27,500 930 Bank of Montreal # * (JP) ............................... 13,700 658 Barrick Gold Corp. # * (BF) ............................. 13,700 330 BCE, Inc. # (J1) ........................................ 8,300 200 Biovail Corp. # * (JO) .................................. 3,500 58 Bombardier, Inc. - Cl. B # * (BH) ....................... 39,400 78 Brascan Corp. - Cl. A # * (BL) .......................... 6,300 226 Brookfield Properties Corp. * (JS) ...................... 2,500 93 CAE, Inc. # * (BH) ...................................... 6,300 26 Cameco Corp. # * (BF) ................................... 4,800 $ 167 Canadian Imperial Bank of Commerce # * (JP) ............. 10,000 600 Canadian National Railway Co. * (BS) .................... 7,800 474 Canadian Natural Resources, Ltd. # * (BB) ............... 6,900 294 Canadian Pacific Railway # * (BS) ....................... 4,400 150 Canadian Tire, Ltd. - Cl. A # * (JD) .................... 2,200 103 Celestica, Inc. * (JY) .................................. 5,100 72 CGI Group, Inc. - Cl. A * (JU) .......................... 7,400 49 CI Fund Management, Inc. * (JQ) ......................... 4,200 63 Cognos, Inc. * (JV) ..................................... 2,400 105 Cott Corp. * (JG) ....................................... 1,300 32 CP Ships, Ltd. Common # * (BR) .......................... 2,300 33 Dofasco, Inc. # * (BF) .................................. 2,000 75 Domtar, Inc. # * (BG) ................................... 5,000 60 Enbridge, Inc. # * (J4) ................................. 4,400 218 Encana Corp. # * (BB) ................................... 12,600 716 Fairfax Financial Holdings, Ltd. # * (JR) ............... 400 67 Fairmont Hotels Resorts, Inc. # (BZ) .................... 2,200 76 Falconbridge, Ltd. # * (BF) ............................. 2,100 54 Finning International, Inc. * (BM) ...................... 2,500 73 Four Seasons Hotels, Inc. * (BZ) ........................ 600 49 Glamis Gold, Ltd. * (BF) ................................ 3,700 63 Goldcorp, Inc. # * (BF) ................................. 4,900 74 Great West Lifeco, Inc. # * (JR) ........................ 7,300 162 Hudson's Bay Co. * (JD) ................................. 1,800 20 Husky Energy, Inc. # * (BB) ............................. 3,600 103 IGM Financial, Inc. # * (JQ) ............................ 3,100 94 Imperial Oil, Ltd. # (BB) ............................... 3,400 201 Inco, Ltd. # * (BF) ..................................... 5,000 183 Intrawest Corp. * (BZ) .................................. 1,200 27 Loblaw Co., Ltd. # * (JF) ............................... 3,000 180 Magna International, Inc. # * (BU) ...................... 2,600 213 Manulife Financial Corp. # * (JR) ....................... 22,100 1,018 Masonite International Corp.(BI) ........................ 1,400 48 MDS, Inc. * (JM) ........................................ 4,000 56 Meridian Gold, Inc. * (BF) .............................. 2,600 49 Methanex Corp. * (BC) ................................... 3,100 56 MI Developments, Inc. - Cl. A (JS) ...................... 1,200 36 Molson Cos., Ltd. # * (JG) .............................. 2,900 86 National Bank of Canada # * (JP) ........................ 4,700 194 Nexen, Inc. * (BB) ...................................... 3,600 146 Noranda, Inc. # * (BF) .................................. 4,800 84 Nortel Networks Corp. (JW) .............................. 115,100 398 NOVA Chemicals Corp. # * (BC) ........................... 2,400 113 ONEX Corp. * (JY) ....................................... 3,200 53 Open Text Corp. # * (JT) ................................ 1,000 20 Penn West Petroleum, Ltd. * (BB) ........................ 1,400 92 Petro Canada # * (BB) ................................... 7,200 366 Placer Dome, Inc. # * (BF) .............................. 11,900 223 Potash Corp. of Saskatchewan, Inc. # * (BC) ............. 2,900 240 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Canada - Continued Power Corp. Canada # * (JQ) ............................. 8,600 $ 222 Power Financial Corp. # * (JQ) .......................... 6,700 178 Precision Drilling Corp. * (BA) ......................... 1,600 100 QLT, Inc. # * (JN) ...................................... 2,700 43 Quebecor World, Ltd. # * (JA) ........................... 2,200 47 Rogers Comunications, Inc. - Cl. B # * (J1) ............. 4,700 123 Royal Bank of Canada # * (JP) ........................... 17,700 945 Shaw Communications, Inc. # * (JA) ...................... 5,500 100 Shell Canada, Ltd. * (BB) ............................... 1,900 126 Shoppers Drug Mart Corp. * (JF) ......................... 5,200 161 SNC-Lavalin Group, Inc. * (BJ) .......................... 1,300 63 Sun Life Financial, Inc. # * (JR) ...................... 16,200 541 Suncor Energy, Inc. # * (BB) ............................ 12,200 430 Talisman Energy, Inc. # * (BB) .......................... 10,400 280 Teck Cominco, Ltd. - Cl. B * (BF) ....................... 5,200 160 Telus Corp. * (J1) ...................................... 1,700 51 Telus Corp. * (J1) ...................................... 4,300 124 Thomson Corp. * (JA) .................................... 6,200 218 Transalta Corp. # * (J5) ................................ 5,400 81 TransCanada Corp. # * (J4) .............................. 13,100 325 TSX Group, Inc. * (FB) .................................. 900 40 Weston George, Ltd. # * (JF) ............................ 1,400 128 ------- 16,123 Chile - 0.0% Sociedad Quimica y Minera de Chile SA - ADR (BC) ........ 736 46 Czech Republic - 0.1% Ceske Energeticke Zavody AS (J3) ........................ 5,909 90 Komercni Banka AS (JP) .................................. 433 63 Philip Morris Credit AS (JI) ............................ 20 15 SPT Telecom AS (J1) ..................................... 4,591 76 UniPetrol * (BC) ........................................ 2,068 9 Zentiva NV * (JO) ....................................... 380 13 ------- 266 Denmark - 0.7% A P Moller-Maersk A/S - Cl. B (BR) ...................... 32 263 Bang & Olufsen AS - Ser. B (BW) ......................... 300 22 Carlsberg AS # (JG) ..................................... 900 45 Coloplast - Ser. B (JL) ................................. 800 44 Danisco AS (JH) ......................................... 1,500 91 Danske Bank (JP) ........................................ 12,500 382 DSV # (BS) .............................................. 575 39 FLS Industries AS - Cl. B # * (BJ) ...................... 600 11 GN Store Nord # (JW) .................................... 6,500 70 H. Lundbeck AS # (JO) ................................... 1,800 40 ISS AS (BO) ............................................. 1,300 72 Kobenhauns Lufthavne AS (BT) ............................ 145 31 NKT Holdings AS (BK) .................................... 400 12 Novo Nordisk AS (JO) .................................... 7,400 403 Novozymes AS - Ser. B (BC) .............................. 1,600 81 Ostasiatiske Kompagni # (JH) ............................ 600 31 Tele Danmark AS (J1) .................................... 5,300 $ 224 Topdanmark AS * (JR) .................................... 575 45 Vestas Wind Systems AS # * (BK) ......................... 4,833 60 William Demant Holdings AS # * (JL) ..................... 800 37 ------- 2,003 Finland - 1.2% Amer Group, Ltd. (BX) ................................... 2,100 36 ELISA Corp. - Ser. A * (J1) ............................. 3,960 64 Fortum Oyj (BB) ......................................... 9,600 177 KCI Konecranes Oyj (BM) ................................. 350 15 Kesko Oyj # (JF) ........................................ 1,600 39 Kone Oyj - Ser. B (BM) .................................. 1,038 80 Metso OYJ # (BM) ........................................ 2,700 43 Nokia Oyj(JW) ........................................... 132,350 2,082 Nokian Renkaat (BU) ..................................... 275 42 Orion - Ser. B # (JO) ................................... 2,000 32 Outokumpu Oyj (BF) ...................................... 2,400 43 Pohoja Group plc - Ser. D (JR) .......................... 1,519 17 Rautaruukki Oyj (BF) .................................... 2,300 27 Sampo Insurance Co. plc (JR) ............................ 9,500 131 Stora Enso Oyj (BG) ..................................... 17,800 272 Tietoenator Oyj # (JU) .................................. 2,380 75 UPM-Kymmene Corp. (BG) .................................. 14,900 330 Uponor Oyj (BI) ......................................... 1,600 30 Wartsila (BM) ........................................... 1,500 32 ------- 3,567 France - 7.6% Accor SA # (BZ) ......................................... 5,141 224 Air Liquide # (BC) ...................................... 2,981 549 Alcatel # * (JW) ........................................ 32,984 511 Alstom # * (BK) ......................................... 118,908 90 Areclor # (BF) .......................................... 12,917 297 Atos Origin SA # * (JU) ................................. 1,193 81 Autoroutes du Sud de la France # (BT) ................... 1,930 97 AXA # (JR) .............................................. 38,656 951 BNP Paribas # (JP) ...................................... 21,685 1,565 Bouygues SA # (J2) ...................................... 5,568 256 Business Objects # * (JV) ............................... 1,738 44 Caisse National Credit Agricole # (JP) .................. 17,905 538 Cap Gemini SA # * (JU) .................................. 3,361 107 Carrefour SA # (JF) ..................................... 15,627 741 Casino Guichard-Perrachon SA # (JF) ..................... 908 72 CIE De St. Gobain # (BI) ................................ 8,489 509 CNP Assurances # (JR) ................................... 889 63 Dassault Systemes SA # (JV) ............................. 1,491 75 EADS, Inc. # (BH) ....................................... 6,627 192 Essilor International # (JL) ............................ 2,637 206 Euronext NV # (JQ) ...................................... 2,676 81 France Telecom # (J1) ................................... 40,326 1,330 Gecina # (JS) ........................................... 680 67 Groupe Air France # (BQ) ................................ 3,199 61 Groupe Danone # (JH) .................................... 6,586 606 Hermes International # (BY) ............................. 243 48 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued France - Continued Imerys # (BI) ............................................ 824 $ 69 Klepierre # (JS) ......................................... 583 51 L'Oreal SA #(JK) ......................................... 8,212 621 Lafarge SA # (BD) ........................................ 4,667 449 Lagardere SCA # (JA) ..................................... 3,373 242 LVMH (Louis Vuitton Moet Hennessy) # (BY) ................ 6,618 505 Michelin # (BU) .......................................... 3,865 247 Pernod Ricard # (JG) ..................................... 1,426 218 Peugoet SA # (BV) ........................................ 4,575 289 Piault-Printemps-Redoute SA # (JD) ....................... 1,852 185 Publicis Groupe SA # (JA) ................................ 3,436 111 Renault # (BV) ........................................... 5,064 422 Sanofi-Synthelabo SA # (JO) .............................. 26,712 2,126 Schneider SA # (BK) ...................................... 6,057 420 Societe BIC SA # (BO) .................................... 857 43 Societe Generale - Cl. A # (JP) .......................... 9,089 916 Societe Television Francaise (JA) ........................ 3,292 107 Sodexho Alliance SA # (BZ) ............................... 2,478 75 STMicroelectronics # (J0) ................................ 15,812 307 SUEZ # (J5) .............................................. 21,704 576 Technip SA # (BA) ........................................ 537 99 Thales # (BH) ............................................ 2,004 96 Thomson Multimedia (BW) .................................. 6,506 171 Total Fina SA - Cl. B # (BB) ............................. 15,982 3,477 Unibail SA # (JS) ........................................ 1,157 181 Valeo SA # (BU) .......................................... 1,913 80 Veolia Environment # (J5) ................................ 7,432 268 Vinci SA # (BJ) .......................................... 1,962 262 Vivendi Universal SA # * (JA) ............................ 27,779 883 Zodiac SA # (BH) ......................................... 1,036 48 ------- 22,905 Germany - 5.5% Adidas-Salomon AG # (BY) ................................. 1,247 200 Allianz AG # (JR) ........................................ 8,423 1,113 Altana AG # (JO) ......................................... 1,948 123 BASF AG # (BC) ........................................... 14,288 1,025 Bayer AG # (BC) .......................................... 18,012 608 Bayerische Vereinsbank AG # (JP) ......................... 17,003 384 Beiersdorf AG # (JK) ..................................... 444 51 Celesio AG # (JM) ........................................ 900 73 Commerzbank AG * (JP) .................................... 12,232 251 Continental AG (BU) ...................................... 3,340 211 DaimlerChrysler AG # (BV) ................................ 23,561 1,125 Depfa Bank plc (JP) ...................................... 9,707 162 Deutsche Bank AG # (JP) .................................. 13,394 1,184 Deutsche Boerse AG # (JQ) ................................ 2,913 175 Deutsche Post AG (BP) .................................... 12,136 278 Deutsche Telekom AG # * (J1) ............................. 74,635 1,682 Douglas Holding AG (JE) .................................. 880 31 E.On AG # (J3) ........................................... 17,038 1,547 Epcos AG # * (JY) ........................................ 1,239 18 Fresenius Medical Care AG # (JM) ......................... 909 $ 73 Heidelberg Zement (BD) ................................... 1,683 101 Hypo Real Estate * (JQ) .................................. 3,587 148 Infineon Technologies AG * (J0) .......................... 17,401 188 Karstadt AG # (JD) ....................................... 1,880 19 Linde AG # (BM) .......................................... 2,225 139 Lufthansa AG # * (BQ) .................................... 6,332 90 MAN AG (BM) .............................................. 2,914 112 Marschollek Lauten # (JR) ................................ 1,569 31 Merck KGAA (JO) .......................................... 1,316 90 Metro AG # (JD) .......................................... 3,995 219 Muenchener Rueckversicherungs- Gesellschaft AG # (JR) .... 5,033 616 Puma AG (BY) ............................................. 439 120 Qiagen NV * (JL) ......................................... 3,815 42 RWE AG # (J5) ............................................ 10,758 593 Sagem SA # (JY) .......................................... 2,375 50 SAP AG # (JV) ............................................ 5,622 1,000 Schering AG (JO) ......................................... 4,489 334 Siemens AG # (BK) ........................................ 21,934 1,852 Suedzucker AG # (JH) ..................................... 1,350 28 Thyssen Krupp AG # (BF) .................................. 8,462 186 Tui AG # (BZ) ............................................ 3,297 78 Volkswagen AG # (BV) ..................................... 6,108 276 ------- 16,626 Greece - 0.5% Alpha Credit Bank (JP) ................................... 5,656 196 Bank of Piraeus (JP) ..................................... 4,775 83 Commercial Bank of Greece (JP) ........................... 1,460 46 Cosmote Mobile Telephone (J2) ............................ 3,298 66 Duty Free Shops (JD) ..................................... 490 9 EFG Eurobank (JP) ........................................ 5,270 180 Folli-Folie (BY) ......................................... 400 12 Germanos SA (JE) ......................................... 696 21 Hellenic Bottling Co. SA (JH) ............................ 2,360 57 Hellenic Petroleum SA (BB) ............................... 2,860 31 Hellenic Technodomiki Tev SA (BJ) ........................ 2,404 11 Hellenic Telecommunication Organization SA (J1) .......... 6,960 125 Hyatt Regency Hotel (BZ) ................................. 1,225 14 Intracom SA (JW) ......................................... 1,970 11 National Bank of Greece SA (JP) .......................... 7,502 247 OPAP SA (BZ) ............................................. 4,523 124 Public Power Corp. (J3) .................................. 2,962 82 Technical Olympic SA (BJ) ................................ 2,130 11 Titan Cement Co. (BI) .................................... 1,630 48 Viohalco (BF) ............................................ 2,940 27 ------- 1,401 Hong Kong - 2.1% Aluminum Corp. of China, Ltd. # (BF) ..................... 82,000 49 Angang Steel (BF) ........................................ 28,000 14 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Hong Kong - Continued Anhui Conch Cement Co., Ltd. # (BD) ..................... 14,000 $ 15 ASM Pacific Technology, Ltd. # (J0) ..................... 4,500 16 Avichina Industry (BV) .................................. 48,000 5 Bank of East Asia, Ltd. # (JP) .......................... 30,792 96 Beijing Capital International (BT) ...................... 32,000 14 Beijing Datang Power Generation Co., Ltd. # (J3) ........ 44,990 34 Beijing Enterprise (BL) ................................. 8,000 12 BOC Hong Kong Holdings, Ltd. (JP) ....................... 85,000 162 Brilliance China Automotive Holdings, Ltd. # (BV) ....... 68,000 13 BYD Co., Ltd. # (BL) .................................... 4,500 12 Cathay Pacific Airways (BQ) ............................. 24,000 45 Cheung Kong Holdings, Ltd.(JS) .......................... 35,000 350 Cheung Kong Infrastructure Holdings, Ltd. # (BD) ........ 10,000 29 China East Airline # * (BQ) ............................. 50,000 11 China Everbright, Ltd. (JQ) ............................. 24,000 12 China Life Insurance Co., Ltd. # * (JR) ................. 221,000 148 China Merchants Holdings International Co., Ltd. # (BL) ................................................. 34,000 64 China Overseas and Land Invest (JS) ..................... 98,000 24 China Petroleum (BB) .................................... 442,000 181 China Pharma Group(JO) .................................. 22,000 6 China Res Beijing (JS) .................................. 30,000 5 China Resources Enterprise, Ltd. # (JB) ................. 32,000 50 China Shipping Container Lines # * (BR) ................. 69,000 28 China Shipping Development(BR) .......................... 40,620 36 China Southern Airlines Co. Ltd * (BQ) .................. 36,300 14 China Telecom Corp.(J1) ................................. 434,000 159 China Telecom, Ltd.(J2) ................................. 161,699 548 China Travel International # (BZ) ...................... 60,000 19 Citic Pacific, Ltd.(BL) ................................. 36,000 102 CLP Holdings, Ltd. (J3) ................................. 41,900 240 CNOOC, Ltd. (BB) ........................................ 405,000 218 Cofco International, Ltd. # (JH) ........................ 18,000 8 Cosco Pacific, Ltd. (BR) ................................ 34,000 71 Denway Motors, Ltd. # (BV) .............................. 142,000 51 Digital China Holdings * (JY) ........................... 14,000 4 Esprit Holdings, Ltd. (JE) .............................. 20,500 124 Fujian Zijin Minin (BF) ................................. 26,000 12 Giordano International Ltd. (JE) ........................ 38,000 24 Guangshen Railway Co., Ltd.(BS) ......................... 48,990 20 Guangzhou Investment Co., Ltd. (BL) ..................... 96,000 10 Hang Lung Properties # (JS) ............................. 42,000 65 Hang Seng Bank, Ltd. (JP) ............................... 17,600 245 Henderson Land Development Co., Ltd. (JS) ............... 17,000 89 Hong Kong & China Gas Co., Ltd. (J4) .................... 84,490 175 Hong Kong Electric Holding, Ltd. (J3) ................... 32,000 146 Hong Kong Exchange & Clearing, Ltd. # (JQ) .............. 24,000 $ 64 Hopewell Holdings, Ltd. (BL) ............................ 14,000 36 Huadian Power International Corp. (J3) .................. 44,000 13 Huaneng Power International # (J3) ..................... 102,000 76 Hutchison Telecom # * (J1) .............................. 31,000 28 Hutchison Whampoa, Ltd. # (BL) .......................... 48,800 457 Hysan Development Co., Ltd. # (JS) ...................... 15,375 32 Jiangxi Copper Co., Ltd. # (BF) ......................... 22,000 12 Jianssu Expressway Company, Ltd. # (BT) ................. 38,000 17 Johnson Electric Holdings, Ltd. (BK) .................... 35,000 34 Kerry Properties, Ltd. (JS) ............................. 11,156 24 Kingboard Chemical Holding Co., Ltd.(JY) ................ 10,000 21 Legend Holdings # (JX) .................................. 104,899 31 Li & Fung, Ltd.(JB) ..................................... 38,000 64 Maanshan Iron & Steel Co., Ltd. # (BF) .................. 50,000 19 MTR Corp. # (BS) ........................................ 31,867 51 New World Development Co., Ltd. (JS) .................... 53,000 59 Orient Overseas International, Ltd. # (BR) .............. 5,000 19 PCCW, Ltd. # (J1) ....................................... 82,860 52 PetroChina Company, Ltd. # (BB) ......................... 520,000 278 PICC Property & Casualty # * (JR) ....................... 82,000 28 Ping An Insurance * (JR) ................................ 42,500 73 Quinling Motors # (BM) .................................. 42,000 6 Semiconductor Manufacturing * (J0) ...................... 171,000 38 Shanghai Industrial Holdings, Ltd. # (BL) ............... 12,000 26 Shanghai Petrochemical Co., Ltd. (BC) ................... 72,000 27 Shangri-La Asia, Ltd. # (BZ) ............................ 24,249 36 Shenzen Investments (JQ) ................................ 42,000 6 Shenzhen Expressway Co., Ltd. (BT) ...................... 24,000 9 Sino Landco # (JS) ...................................... 22,257 22 Sinopec Beijing Yanhua Petrochemical Co., Ltd. # (BC) ... 32,000 15 Sinotrans, Ltd. (BT) .................................... 44,000 13 Smartone Telecommunication Holdings, Ltd. (J2) .......... 7,500 8 South China MP Group Ltd. (JA) .......................... 24,000 10 Sun Hung Kai Properties, Ltd. (JS) ...................... 30,000 300 Swire Pacific, Ltd. - Cl. A (JQ) ........................ 21,500 180 TCL Communication Equipment # * (JW) .................... 9,600 1 TCL International Holdings, Ltd. # (BW) ................. 44,000 11 Techtronic Industrials # (BM) ........................... 20,000 44 Television Broadcasts (JA) .............................. 7,000 32 Texwinca Holdings # (BY) ................................ 14,000 13 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Hong Kong - Continued Travelesky Technology, Ltd. (BO) ........................ 10,000 $ 8 Tsingtao Brewery - Ser. H (JG) .......................... 10,000 10 Weiqiao Textile Co., Ltd. # (BY) ........................ 12,000 19 Wharf Holdings, Ltd. # (JS) ............................. 28,000 98 Yanzhou Coal Mining # (BF) .............................. 40,000 57 Yizheng Chemical Fibre Co., Ltd. - Cl. A (BC) ........... 44,000 9 Yue Yuen Industrial Holdings, Ltd. # (JE) ............... 11,500 32 Zhejiang Expressway Co., Ltd # (BT) ..................... 44,000 30 ------ 6,323 Hungary - 0.1% Gedeon Richter (JO) ..................................... 386 48 Magyar Tavkozlesi (J1) .................................. 12,959 62 Mol Magyar Olaj-es Gazipari (BB) ........................ 2,093 147 OTP Bank (JP) ........................................... 6,957 213 ------ 470 India - 0.6% ABB, Ltd. (BK) .......................................... 277 6 Ashok Leyland (BV) ...................................... 11,340 6 Asian Paints, Ltd. (BC) ................................. 784 6 Associated Cement Companies, Ltd. (BD) .................. 1,118 9 Bajaj Auto, Ltd. (BV) ................................... 800 21 Bank of Baroda (JP) ..................................... 1,258 7 Bharat Heavy Electricals, Ltd. (BK) ..................... 1,601 28 Bharat Petroleum Corp., Ltd. (BB) ....................... 1,635 17 Britannia Industries, Ltd. (JH) ......................... 164 4 Castrol, Ltd. (BB) ...................................... 809 4 Cipla (JO) .............................................. 1,529 11 Colgate Palmolive Co. (JJ) .............................. 889 4 Dr. Reddys Labs (JO) .................................... 1,355 27 Flex Solutions * (BL) ................................... 1,018 15 Gail LD (J4) ............................................ 6,914 37 GlaxoSmithKline Pharmaceuticals (JO) .................... 380 7 Grasim Industries, Ltd. (BL) ............................ 924 28 Gujarat Ambuja Cements Ltd. (BD) ........................ 1,221 11 HDFC Bank Ltd. (JP) ..................................... 4,269 51 Hero Honda Motors, Ltd. (BV) ............................ 2,177 29 Hindlaco Industries (BF) ................................ 1,008 33 Hindustan Lever Ltd. (JJ) ............................... 20,996 70 Hindustan Petroleum Corp., Ltd. (BB) .................... 2,219 21 Housing Development Financing Corp., Ltd. (JQ) .......... 4,683 83 Icici Banking (JP) ...................................... 12,848 110 Indian Hotels Co., Ltd. (BZ) ............................ 443 6 Indian Petrochemical (BC) ............................... 2,097 9 Infosys Technologies, Ltd. (JU) ......................... 4,708 227 ITC, Ltd. (JI) .......................................... 1,889 57 Larsen & Toubro (BJ) .................................... 1,004 23 Mahanagar Telephone Nigam, Ltd. (J1) .................... 5,151 18 Mahindra & Mahindra (BV) ................................ 1,107 $ 14 Maruti Udyog (BV) ....................................... 1,890 20 Moser Baer * (JX) ....................................... 912 5 Nestle India, Ltd. (JH) ................................. 492 7 Oil & Natural Gas (BB) .................................. 4,663 88 Punjab Tractors, Ltd. (BM) .............................. 497 2 Ranbaxy Laboratories, Ltd. (JO) ......................... 1,922 56 Reliance Industries, Inc. (BC) .......................... 17,125 211 Satyam Computer Services, Ltd. (JU) ..................... 6,117 58 State Bank of India (JP) ................................ 2,237 37 Sun Pharmaceutical (JO) ................................. 1,264 16 Tata Ironsteel (BF) ..................................... 3,619 32 Tata Consultancy Services, Ltd. (JU) .................... 1,538 47 Tata Engineering and Locomotive Co., Ltd. (BM) .......... 4,410 51 Tata Power Co. (J3) ..................................... 1,051 10 Tata Tea Ltd. (JH) ...................................... 582 6 Ultratech Cemco * (BI) .................................. 314 2 Videsh Sanchar Nigam, Ltd. (J1) ......................... 1,553 8 Wipro Ltd. * (JU) ....................................... 2,472 43 Zee Telefilms Ltd. (JA) ................................. 5,509 22 ------ 1,720 Indonesia - 0.1% Astra International (BV) ................................ 47,000 49 Bank Central Asia (JP) .................................. 104,000 33 Bank Danamon (JP) ....................................... 31,500 15 Bank Mandiri (JP) ....................................... 149,500 31 Bank Rakyat (JP) ........................................ 100,000 31 Bumi Resources Tbk * (BF) ............................... 290,000 25 HM Sampoerna (JI) ....................................... 73,000 52 Indofood Suskes Mak Tbk (JH) ............................ 90,500 8 PT Gudang Garam Tbk (JI) ................................ 14,500 21 PT Telekomunikasi Indonesia - ADR * (J1) ................ 8,229 173 ------ 438 Ireland - 0.7% Allied Irish Banks plc (JP) ............................. 24,715 514 Bank of Ireland (JP) .................................... 27,805 461 CRH plc (BD) ............................................ 15,251 407 DCC plc (BL) ............................................ 2,187 49 Eircom Group plc (J1) ................................... 12,556 29 Elan Corp. * (JO) ....................................... 11,125 295 Fyffes plc (JF) ......................................... 8,095 21 Grafton Group * (BI) .................................... 5,853 63 Greencore Group plc (JH) ................................ 3,727 15 Independent Newspapers, Ltd. (JA) ....................... 16,479 52 Irish Life & Permanent plc (JR) ......................... 7,774 145 Kerry Group plc (JH) .................................... 3,756 90 Kingspan Group plc (BI) ................................. 3,014 29 Waterford Wedgewood plc * (BW) .......................... 23,583 2 ------ 2,172 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Israel - 0.3% AudioCodes, Ltd. * (JW) ................................. 612 $ 10 Bank Hapoalim (JP) ...................................... 20,565 69 Bank Leumi Le-Israel (JP) ............................... 17,471 48 Bezeq Israeli Telecommunication Corp., Ltd. * (J1) ...... 25,030 29 CLAL Industries (BL) .................................... 1,333 6 CLAL Insurance Enterprises (JR) ......................... 428 9 Discount Investor Corp. (JQ) ............................ 504 13 Elbit Systems, Ltd. (BH) ................................ 419 11 ICL Israel Chemicals, Ltd. (BC) ......................... 13,243 31 IDB Development Corp, Ltd. (JQ) ......................... 631 17 Israel Discount Bank - Ser. A * (JP) .................... 12,114 15 Koor Industries, Ltd. * (BL) ............................ 303 16 Makteshim-Agan Industries, Ltd. (BC) .................... 5,706 31 Migdal Insurance (JR) ................................... 4,413 7 Nice Systems, Ltd. * (JW) ............................... 286 9 Osem Investment, Ltd. (JH) .............................. 796 9 Partner Communications * (J2) ........................... 1,754 15 Retalix, Ltd. * (JV) .................................... 416 9 Strauss Elite, Ltd. - Ser. A * (JH) ..................... 676 7 Supersol, Ltd. * (JF) ................................... 2,619 7 Teva pharmaceutical Industries, Ltd. (JO) ............... 15,958 475 The Israel Corp., Ltd. * (JQ) ........................... 47 10 United Mizrahi Bank (JP) ................................ 2,090 9 ------- 862 Italy - 3.4% Alleanza Assicurazioni # (JR) ........................... 12,111 168 Assicurazioni Generali # (JR) ........................... 25,488 862 Autogrill SpA # * (BZ) .................................. 2,959 49 Autostrade SpA (BT) ..................................... 6,819 182 Banca Antonveneta SpA # * (BL) .......................... 5,997 157 Banca Fideuram # (JQ) ................................... 7,686 40 Banca Intesa SpA (JP) ................................... 86,767 416 Banca Intesa SpA (JP) ................................... 24,140 103 Banca Nazionale del Lavoro # (JP) ....................... 42,734 127 Banca Popolare di Milano (JP) ........................... 10,987 97 BCA Di Roma (JP) ........................................ 37,316 170 BCE Pop Unite * (J1) .................................... 8,926 181 BCP Pop Veron (JP) ...................................... 9,901 200 Benetton Group SpA (BY) ................................. 1,441 19 Bulgari SpA (BY) ........................................ 3,421 42 Edison International # * (J3) ........................... 21,263 45 Enel SpA(J3) ............................................ 97,420 953 ENI # (BB) .............................................. 69,257 1,727 Fiat SpA # * (BV) ....................................... 14,415 115 FinecoGroup # * (JP) .................................... 4,168 32 Finmeccanica SA (BH) .................................... 163,218 147 GR Education L Espresso # (JA) .......................... 4,435 27 Italcementi SpA # (BD) .................................. 1,775 28 Luxottica Group # (JL) .................................. 3,589 73 Mediaset SpA # (JA) ..................................... 15,405 195 Mediobanca SpA # (JP) ................................... 12,493 $ 201 Mediolanum SpA # (JQ) ................................... 6,564 47 Mondadori Editore SpA (JA) .............................. 3,396 39 Monte Paschi Siena # (JP) ............................... 30,594 109 Pirelli & Co. SpA # (BL) ................................ 47,334 64 Riunione Adriatica di Sicorta SpA (JR) .................. 7,867 177 San Paolo-IMI SpA # (JP) ................................ 27,540 395 Seat Pagine Gialle # (JA) ............................... 111,332 51 Snam Rete Gas (J4) ...................................... 24,326 141 T.E.R.N.A # (J3) ........................................ 25,503 73 Telecom Italia (J1) ..................................... 154,510 500 Telecom Italia # (J1) ................................... 219,638 895 Telecom Italia Media # * (JA) ........................... 32,454 15 Telecom Italia Mobile SpA # (J2) ........................ 101,095 753 Tiscali SpA # * (JT) .................................... 4,811 18 UniCredito Italiano SpA (JP) ............................ 117,387 672 ------- 10,305 Japan - 17.7% Acom Co., Ltd. (JQ) ..................................... 2,030 152 Aderans Co., Ltd. (JK) .................................. 900 21 Advantest # (J0) ........................................ 1,900 163 Aeon Co., Ltd. # (JD) ................................... 15,700 261 Aeon Credit Service Co., Ltd. (JQ) ...................... 600 45 Aiful Corp. (JQ) ........................................ 1,150 126 Aisin Seiki Co. (BU) .................................... 4,600 116 Ajinomoto Co., Inc. (JH) ................................ 16,000 190 Alfresa Holdings Corp. # (JL) ........................... 500 18 All Nippon Airways Co., Ltd. # (BQ) ..................... 12,000 42 Alps Electric Co. # (JY) ................................ 5,000 74 Amada Co., Ltd (BM) ..................................... 9,000 50 Amano Corp. (BO) ........................................ 2,000 20 Anritsu Corp. # (JY) .................................... 2,000 15 Aoyama Trading Co. (JE) ................................. 1,300 35 Ariake Japan Co., Ltd. # (JH) ........................... 400 10 Asahi Breweries, Ltd. # (JG) ............................ 10,900 135 Asahi Chemical Industry Co., Ltd. # (BC) ................ 34,000 170 Asahi Glass Co., Ltd. # (BI) ............................ 21,000 231 Asatsu DK # (JA) ........................................ 1,000 28 Autobacs Seven Co. # (JE) ............................... 700 20 Bandai Co. (BX) ......................................... 2,200 50 Bank of Yokohama, Ltd.(JP) .............................. 33,000 208 Benesse Corp. (BO) ...................................... 1,600 56 Bridgestone Corp. # (BU) ................................ 18,000 357 Canon, Inc. (JZ) ........................................ 22,900 1,233 CAPCOM Co. # (JV) ....................................... 1,100 10 Casio Computer Co. # (BW) ............................... 5,300 82 Central Glass Co. (BI) .................................. 4,000 28 Central Japan Railway Co. (BS) .......................... 28 228 Chiba Bank, Ltd. (JP) ................................... 20,000 133 Chubu Electric Power # (J3) ............................. 18,000 431 Chugai Pharmaceutical Co., Ltd. # (JO) .................. 7,100 117 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Japan - Continued Circle Kingdom Sunkus Co. Ltd. # * (JE) .................. 1,100 $ 28 Citizen Watch Co., Ltd. # (JY) ........................... 7,000 67 Coca Cola West Japan Co., Ltd. # (JG) .................... 1,200 31 Comsys Holdings (BJ) ..................................... 3,000 28 Credit Saison Co., Ltd. (JQ) ............................. 3,600 131 CSK Corp. # (JU) ......................................... 1,700 77 Dai-Ichi Pharmaceutical Co., Ltd. (JO) ................... 6,600 142 Dai-Nippon Ink & Chemicals, Inc. (BC) .................... 17,000 39 Dai-Nippon Printng Co., Ltd. (BO) ........................ 18,000 288 Daicel Chemical Industries, Ltd. (BC) .................... 7,000 40 Daikin Industries, Ltd. # (BM) ........................... 5,500 158 Daimaru, Inc. # (JD) ..................................... 6,000 49 Dainippon Screen Manufacturing Co., Ltd. # (JY) .......... 5,000 31 Daito Trust Construction Co., Ltd. # (BW) ................ 2,500 119 Daiwa House Industry Co., Ltd. (BW) ...................... 14,000 159 Daiwa Securities Group, Inc. # (JQ) ...................... 32,900 237 Denki Kagaku Kogyo (BC) .................................. 10,000 33 Denso Corp. (BU) ......................................... 14,400 385 Dentsu, Inc. # (JA) ...................................... 43 116 Dowa Mining Co. (BF) ..................................... 7,000 45 East Japan Railway Co. (BS) .............................. 92 510 Ebara Corp. # (BM) ....................................... 7,000 32 Eisai Co. Ltd. (JO) ...................................... 6,900 226 Electric Power Development * (J3) ........................ 3,900 109 FamilyMart Co., Ltd. (JF) ................................ 1,600 46 Fanuc, Ltd. (BK) ......................................... 4,000 261 Fast Retailing Co. (JE) .................................. 1,400 106 Fuji Electric Holdings Co. (BK) .......................... 13,000 35 Fuji Photo Film (BX) ..................................... 12,500 455 Fuji Soft ABC, Inc. # (JV) ............................... 800 26 Fuji Television Network, Inc. (JA) ....................... 18 39 Fujikura # (BK) .......................................... 10,000 46 Fujisawa Pharmeceutical Co., Ltd. # (JO) ................. 7,700 210 Fujitsu, Ltd. # (JX) ..................................... 47,000 305 Furukawa Electric Co. # * (BK) ........................... 14,000 77 Goodwill Group, Inc. (BO) ................................ 9 22 Gunze, Ltd. (BY) ......................................... 5,000 23 Hankyu Department Stores (JD) ............................ 4,000 29 Hino Motors, Ltd. # (BM) ................................. 6,000 44 Hirose Electric Co., Ltd. # (JY) ......................... 900 105 Hitachi Cable, Ltd. (BK) ................................. 4,000 19 Hitachi Chemical (JY) .................................... 2,600 46 Hitachi Construction Macinery Co., Ltd. (BM) ............. 3,000 41 Hitachi Credit Corp. # (JQ) .............................. 1,400 29 Hitachi Software (JV) .................................... 700 16 Hitachi, Ltd. (JY) ....................................... 88,000 608 Hogukin Financial Group, Inc. (JQ) ....................... 28,000 76 Hokkaido Electric Power Co., Inc. (J3) ................... 4,600 $ 90 Honda Motor Co. (BV) ..................................... 20,400 1,054 House Foods Corp. # (JH) ................................. 1,700 24 Hoya Corp. # (JY) ........................................ 2,900 327 Isetan Co., Ltd. (JD) .................................... 4,200 49 Ishihara Sangyo Kaisha # (BC) ............................ 7,000 16 Ishikawajima-Harima Heavy Industries Co., Ltd. * (BM) .... 28,000 38 Ito En, Ltd. (JG) ........................................ 700 36 Ito-Yokado Co., Ltd. (JD) ................................ 9,100 381 Itochu Corp. * (BN) ...................................... 38,000 175 Itochu Techno-Sciences Corp. # (JU) ...................... 1,000 40 JAFCO Co., Ltd. (JQ) ..................................... 700 47 Japan Airlines * (BQ) .................................... 20,000 58 Japan Real Estate # (JS) ................................. 6 50 Japan Retail Fund Investment Corp. # (JS) ................ 5 42 Japan Tobacco, Inc. (JI) ................................. 25 285 JFE Holdings, Inc. # (BF) ................................ 14,300 407 JGC Corp. (BJ) ........................................... 5,000 46 Joyo Bank, Ltd. (JP) ..................................... 20,000 97 JSR Corp. (BC) ........................................... 4,700 103 Kajima Corp. # (BJ) ...................................... 25,000 107 Kamigumi Co., Ltd. # (BR) ................................ 6,000 48 Kanebo, Ltd. # * (JK) .................................... 1,100 16 Kaneka Corp. (BC) ........................................ 7,000 79 Kansai Electric Power Co., Inc. (J3) ..................... 19,800 401 Kansai Paint Co., Ltd. (BC) .............................. 5,000 30 KAO Corp. (JJ) ........................................... 14,000 357 Kaken Pharmaceuticals Co., Ltd. # (JO) ................... 3,000 20 Katokichi Co., Ltd. (JH) ................................. 1,100 22 Kawasaki Heavy Industry, Ltd. # (BM) ..................... 30,000 49 Kawasaki Kisen # (BR) .................................... 12,000 77 Keihin Electric Express Railway Co., Ltd. # (BS) ......... 10,000 61 Keio Teito Electric Railway (BS) ......................... 15,000 88 Keyence Corp. (JY) ....................................... 900 201 Kikkoman Corp. (JH) ...................................... 5,000 48 Kinden Corp. (BJ) ........................................ 4,000 30 Kintetsu Corp. (BH) ...................................... 42,000 145 Kirin Brewery Co. # (JG) ................................. 19,000 187 Kobe Steel International # (BF) .......................... 62,000 95 Kokuyo Co. (BO) .......................................... 1,900 23 Komatsu, Ltd. (BM) ....................................... 26,000 181 Komori Corp. (BM) ........................................ 1,000 15 Konami Co., Ltd. # (JV) .................................. 2,100 49 Konica Corp. # (BX) ...................................... 11,500 152 Koyo Seiko Co., Ltd. # (BM) .............................. 3,000 42 Kubota Corp.(BM) ......................................... 29,000 143 Kuraray Co., Ltd. # (BC) ................................. 10,500 94 Kuraya Sanseido, Inc. (JM) ............................... 2,300 26 Kurita Water Industries, Ltd. (BJ) ....................... 2,500 36 Kyocera Corp. (JY) ....................................... 4,400 338 Kyowa Hakko Kogyo Co., Ltd. (JO) ......................... 10,000 75 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued Kyushu Electric Power (J3) .............................. 10,900 $ 220 Lawson (JF) ............................................. 1,500 55 LeoPalace21 Corp. (JS) .................................. 3,400 60 Mabuchi Motor Co. # (JY) ................................ 800 58 Makita Corp. # (BW) ..................................... 3,000 52 Marubeni Corp. # (BN) ................................... 33,000 91 Marui Co., Ltd. # (JD) .................................. 8,900 119 Matsumotokiyoshi Co., Ltd. # (JF) ....................... 1,000 28 Matsushita Electric Industrial Co. # (BW) ............... 60,000 950 Matsushita Electric Works # (BK) ........................ 8,000 70 Meiji Diaries Corp. (JH) ................................ 6,000 36 Meiji Seika Kaisha, Ltd. # (JH) ......................... 7,000 32 Meitic Corp. (JU) ....................................... 900 33 Millea Holdings, Inc. (JR) .............................. 40 592 Minebea Co., Ltd. # (BM) ................................ 10,000 44 Mitsubishi Chemical Corp. (BC) .......................... 46,000 140 Mitsubishi Corp. # (BN) ................................. 29,800 384 Mitsubishi Electric Corp. (BK) .......................... 46,000 225 Mitsubishi Estate Co., Ltd. # (JS) ...................... 26,000 304 Mitsubishi Gas Co. (BC) ................................. 9,000 42 Mitsubishi Heavy Industries, Ltd. # (BM) ................ 76,000 215 Mitsubishi Logistics Corp. # (BR) ....................... 3,000 29 Mitsubishi Materials Corp. (BF) ......................... 23,000 48 Mitsubishi Rayon Co., Ltd. (BC) ......................... 12,000 44 Mitsubishi Tokyo Finance (JP) ........................... 124 1,255 Mitsui & Co., Ltd. # (BN) ............................... 34,000 304 Mitsui Engineering & Shipbuilding Co., Ltd. (BM) ........ 16,000 27 Mitsui Fudosan Co., Ltd. # (JS) ......................... 19,000 230 Mitsui Mining & Smelting Co., Ltd. (BF) ................. 14,000 62 Mitsui OSK Lines, Ltd. (BR) ............................. 25,000 150 Mitsui Petrochemical Co. (BC) ........................... 17,000 92 Mitsui Sumitomo Insurance Co., Ltd. # (JR) .............. 35,000 303 Mitsui Trust Holdings # (JQ) ............................ 14,000 140 Mitsukoshi, Ltd. # (JD) ................................. 9,000 44 Mitsumi Electric (JX) ................................... 1,700 19 Mizuho Financial GB (JP) ................................ 212 1,065 Murata Manufacturing Co., Ltd. (J0) ..................... 6,100 340 Namco, Ltd. # (BZ) ...................................... 2,000 26 NEC Corp. # (JX) ........................................ 45,000 279 NEC Electronics Corp. # (J0) ............................ 1,000 49 Net One Systems Co., Ltd. (JU) .......................... 14 58 NGK Insulators # (BM) ................................... 7,000 67 NGK Spark Plug Co. (BU) ................................. 5,000 52 Nichii Gakkan Co. # (BO) ................................ 500 16 Nichirei Corp. # (JH) ................................... 7,000 28 Nidec Corp. # (JY) ...................................... 1,300 158 Nikko Cordial Corp. (JQ) ................................ 42,000 222 Nikon Corp. # (J0) ...................................... 8,000 99 Nintendo Corp., Ltd. (BW) ............................... 2,700 $ 338 Nippon Building Fund (JS) ............................... 8 68 Nippon Express Co., Ltd. (BS) ........................... 22,000 108 Nippon Kayaku Co., Ltd. (BC) ............................ 4,000 22 Nippon Light Metal, Inc. # (BF) ......................... 11,000 28 Nippon Meat Packers, Inc. (JH) .......................... 5,000 68 Nippon Mining & Holding (BB) ............................ 21,500 101 Nippon Mitsubishi Oil Co., Ltd. # (BB) .................. 35,000 224 Nippon Sanso Corp. (BC) ................................. 8,000 47 Nippon Sheet Glass Co., Ltd. # (BI) ..................... 9,000 37 Nippon Shokubai Co., Ltd. (BC) .......................... 4,000 35 Nippon Steel Co. (BF) ................................... 166,000 406 Nippon Telegraph & Telephone Corp. (J1) ................. 143 640 Nippon Unipac Holding, Co. (BG) ......................... 25 112 Nippon Yusen Kabushiki Kaisha (BR) ...................... 25,000 134 Nippon Zeon Co., Ltd. # (BC) ............................ 4,000 33 Nishimatsu Construction Co., Ltd. # (BJ) ................ 6,000 21 Nissan Chemical Industries # (BC) ....................... 5,000 39 Nissan Motor Acceptance Corp. # (BV) .................... 68,300 741 Nisshin Seifun Group, Inc. (JH) ......................... 4,000 44 Nisshin Steel Co. (BF) .................................. 20,000 46 Nisshinbo Industries, Inc. (BY) ......................... 4,000 30 Nissin Food Products Co., Ltd. (JH) ..................... 2,100 53 Nitori Co., Ltd. # (JE) ................................. 450 29 Nitto Denko Corp. (BK) .................................. 4,600 252 NOK Corp. # (BU) ........................................ 2,500 78 Nomura Research Institute, Ltd. (JU) .................... 600 56 Nomura Securities Co., Ltd. (JQ) ........................ 51,000 742 NSK, Ltd. (BM) .......................................... 11,000 55 NTN Corp. # (BM) ........................................ 12,000 69 NTT Data Corp. (JU) ..................................... 33 106 NTT Mobile Communications Network, Inc. (J2) ............ 546 1,005 Obayashi Corp. (BJ) ..................................... 16,000 101 OBIC, Co. (JU) .......................................... 200 40 Odakyu Electric Railway (BS) ............................ 17,000 98 Oji Paper Co. (BG) ...................................... 21,000 120 Oki Electric Industry Co. * (JY) ........................ 13,000 56 Okumura Corp. (BJ) ...................................... 4,000 25 Olympus Optical Co. # (JL) .............................. 6,000 128 Omron Corp. (JY) ........................................ 5,900 140 Onward Kashiyama Co., Ltd. (BY) ......................... 4,000 58 Oracle Corp. # (JV) ..................................... 1,000 52 Oriental Land Co., Ltd. # (BZ) .......................... 1,400 97 Orix Corp. (JQ) ......................................... 2,200 298 Osaka Gas Co. (J4) ...................................... 56,000 174 Pioneer Corp. # (BW) .................................... 3,900 76 Promise Co., Ltd. (JQ) .................................. 2,300 164 QP Corp. # (JH) ......................................... 2,800 24 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued Rakuten, Inc. * (JU) .................................... 117 $ 105 Rakuten, Inc. # (JC) .................................... 13 15 Resona Holdings, Inc. # * (BH) .......................... 123,000 249 Ricoh Co., Ltd. # (JZ) .................................. 18,000 346 Rinnai Corp. # (BW) ..................................... 1,000 27 Rohm Co., Ltd. (JY) ..................................... 2,900 299 Ryohin Keikaku Co., Ltd. (JD) ........................... 600 30 Saizyeria Co., Ltd. # (BZ) .............................. 700 12 Sanden Corp. # (BU) ..................................... 3,000 19 Sanken Electric Co., Ltd. (J0) .......................... 3,000 39 Sankyo Co. (BX) ......................................... 1,200 60 Sankyo Co., Ltd. (JO) ................................... 10,300 232 Sanwa Shutter Corp. (BI) ................................ 5,000 28 Sanyo Electric Co. (BW) ................................. 39,000 134 Sapporo Holdings # (JG) ................................. 7,000 33 Secom Co. (BO) .......................................... 6,000 239 Sega Sammy Holdings, Inc. * (BX) ........................ 1,840 101 Seiko Epson Corp. (J0) .................................. 2,600 115 Seino Transportion (BS) ................................. 4,000 37 Sekisui Chemical Co. # (BW) ............................. 12,000 87 Sekisui House, Ltd. # (BW) .............................. 13,000 151 Seven-Eleven Japan # (JF) ............................... 10,200 321 Sharp Corp. (BW) ........................................ 26,000 423 Shimacu Co. (JE) ........................................ 1,200 30 Shimamura Co., Ltd. # (JE) .............................. 500 36 Shimano, Inc. # (BX) .................................... 1,900 54 Shimizu Corp. (BJ) ...................................... 13,000 65 Shin-Etsu Chemical Co. (BC) ............................. 9,900 405 Shinsei Bank, Ltd. # (JP) ............................... 14,000 95 Shionogi & Co., Ltd. # (JO) ............................. 8,000 110 Shiseido Co., Ltd. (JK) ................................. 9,000 130 Shizuoka Bank, Ltd. # (JP) .............................. 16,000 151 Showa Denko # (BC) ...................................... 26,000 67 Showa Shell Sekiyu KK # (BB) ............................ 3,500 32 Skylark Co., Ltd. # (BZ) ................................ 2,000 34 SMC Corp. (BM) .......................................... 1,500 171 Snow Brand Milk Products Co., Ltd. # * (JH) ............. 3,500 11 Softbank Corp. # (JT) ................................... 6,200 301 Sojitz Holdings Corp. # * (BN) .......................... 4,800 21 Sony Corp. # (BW) ....................................... 25,200 971 Stanley Electric # (BU) ................................. 3,800 65 Sumitomo Bakelite Co., Ltd. (BC) ........................ 5,000 31 Sumitomo Chemical Co. (BC) .............................. 35,000 171 Sumitomo Corp. (BN) ..................................... 24,000 207 Sumitomo Electric Industries (BK) ....................... 18,000 195 Sumitomo Heavy Industry * (BM) .......................... 13,000 48 Sumitomo Metal Industries (BF) .......................... 98,000 133 Sumitomo Metal Mining Co. # (BF) ........................ 15,000 107 Sumitomo Mitsui GR # (JP) ............................... 111 805 Sumitomo Osaka Cement (BD) .............................. 10,000 24 Sumitomo Realty & Development # (JS) .................... 11,000 143 Sumitomo Trust & Banking # (JQ) ......................... 33,000 238 Suruga Bank (JP) ........................................ 5,000 $ 40 Suzuken Co., Ltd. (JM) .................................. 1,200 32 T&D Holdings, Inc. * (JR) ............................... 4,850 231 Taiheiyo Cement (BD) .................................... 20,000 50 Taisei Corp. (BJ) ....................................... 20,000 78 Taisho Pharmaceutical Co., Ltd. (JO) .................... 5,000 109 Taiyo Yuden Co., Ltd. (JY) .............................. 3,000 35 Takara Shuzo Co., Ltd. # (JG) ........................... 4,000 26 Takashimaya Co. # (JD) .................................. 8,000 77 Takeda Chemical Industries (JO) ......................... 24,200 1,216 Takefuji Corp. (JQ) ..................................... 1,870 126 Takuma Co., Ltd. (BM) ................................... 1,000 8 TDK Corp. (JY) .......................................... 3,300 244 Teijin, Ltd. (BC) ....................................... 20,000 87 Teikoku Oil Co., Ltd. # (BB) ............................ 5,000 28 Terumo Corp. (JL) ....................................... 4,800 129 The 77 Bank, Ltd. (JP) .................................. 10,000 70 The Bank of Fukuoka, Ltd. # (JP) ........................ 14,000 92 The Gunma Bank, Ltd. (JP) ............................... 10,000 58 THK Co. # (BM) .......................................... 2,500 49 TIS, Inc. # (JU) ........................................ 900 39 Tobu Railway Co., Ltd. (BS) ............................. 22,000 84 Toda Corp. (BJ) ......................................... 5,000 24 Toho Co., Ltd. (JA) ..................................... 3,500 55 Tohoku Electric Power (J3) .............................. 11,500 206 Tokyo Broadcasting (JA) ................................. 1,000 16 Tokyo Electric Power (J3) ............................... 31,600 774 Tokyo Electron, Ltd. (J0) ............................... 4,700 289 Tokyo Gas Co. # (J4) .................................... 68,000 278 Tokyo Style Co. # (BY) .................................. 2,000 23 Tokyu Corp. # (BS) ...................................... 26,000 140 Tokyu Land Corp. # (JS) ................................. 9,000 37 Tonengeneral Sekiyu # (BB) .............................. 9,000 82 Toppan Printing Co. # (BO) .............................. 15,000 166 Toray Industries, Inc. (BC) ............................. 34,000 159 Toshiba Corp. (JX) ...................................... 79,000 338 Tosoh Corp. ADR # (BC) .................................. 12,000 54 Tostem Corp. (BI) ....................................... 6,900 125 Toto, Ltd. # (BI) ....................................... 9,000 86 Toyo Seikan Kaisha, Ltd. # (BE) ......................... 4,000 74 Toyo Suisan Kaisha # (JH) ............................... 2,000 29 Toyobo Co. (BY) ......................................... 14,000 34 Toyoda Gosei # (BU) ..................................... 1,800 37 Toyota Industries (BU) .................................. 5,300 132 Toyota Motor Corp. (BV) ................................. 78,900 3,203 Trend Micro, Inc. (JV) .................................. 2,500 135 Ube Industries * (BC) ................................... 19,000 32 UFJ Holdings, Inc. * (JP) ............................... 105 635 Uni-Charm Corp. (JJ) .................................... 1,300 62 Uniden Corp. # (JW) ..................................... 2,000 39 UNY Co., Ltd. (JD) ...................................... 4,000 46 Ushio, Inc. (BK) ........................................ 3,000 56 USS Co., Ltd. # (JE) .................................... 690 58 Wacoal Corp. # (BY) ..................................... 2,000 24 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND
Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Japan - Continued West Japan Railway (BS) ................................... 47 $ 189 World Co., Ltd. (BY) ...................................... 1,100 39 Yahoo Japan Corp. # * (JT) ................................ 53 254 Yakult Honsha Co. (JH) .................................... 3,000 53 Yamada Denki Co. # (JE) ................................... 2,000 85 Yamaha Corp. (BX) ......................................... 4,900 75 Yamaha Motor Co. # (BV) ................................... 4,800 72 Yamanouchi Pharmaceutical Co., Ltd. # (JO) ................ 8,500 330 Yamato Transport Co., Ltd. (BP) ........................... 11,000 163 Yamazaki Baking Co., Ltd. # (JH) .......................... 4,000 37 Yasuda F & M Insurance (JR) ............................... 21,000 213 Yokogawa Electric (JY) .................................... 6,000 80 ------- 53,472 Malaysia - 0.4% AMMB Holdings (JQ) ........................................ 25,400 22 Astro All Asia Network plc * (JA) ......................... 15,300 22 Bandar Raya Developments Berhad (BL) ...................... 6,000 3 Berjaya Sports Toto Berhad (BZ) ........................... 10,800 12 British American Tobacco Berhad * (JI) .................... 3,600 43 Cimb Berhad (JP) .......................................... 5,000 7 Commerce Asset Holdings(JP) ............................... 39,800 49 DRB-Hicom Berhad (BV) ..................................... 11,000 6 Edaren Otomobil (JE) ...................................... 2,000 2 EON Capital Berhad (BD) ................................... 2,792 4 Gamuda Berhad (BJ) ........................................ 15,100 21 Genting Berhad (BZ) ....................................... 10,000 50 Golden Hope Plants (JH) ................................... 6,000 6 Guiness Anchor Berhad (JG) ................................ 4,000 5 Highlands & Lowlands Bhd (JH) ............................. 4,000 4 Hong Leong Bank Berhad (JP) ............................... 12,700 18 Hong Leong Credit (JQ) .................................... 6,000 7 Hong Leong Industries Berhad (BL) ......................... 2,000 2 IGB Corp. Berhad (JS) ..................................... 16,000 5 IJM Corporation Berhad (BJ) ............................... 6,000 7 IOI Corp. (JH) ............................................ 17,300 43 IOI Properties (JS) ....................................... 2,000 4 Kuala Lumpur Kepong Berhad (JH) ........................... 7,000 13 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 26 Malay Airline Systems (BQ) ................................ 5,000 6 Malayan Banking Berhad (JP) ............................... 44,800 139 Malaysia Airport Holdings, Berhad (BT) .................... 8,000 3 Malaysia International Shipping Berhad (BR) ............... 12,800 52 Malaysian Bulk Carriers Berhad (BR) ....................... 7,000 5 Malaysian Oxygen Berhad (BC) .............................. 2,000 6 Malaysian Pacific Industries (J0) ......................... 2,000 8 Maxis Communications Bhd (J2) ............................. 17,300 $ 43 MK Land Holdings Berhad (JS) .............................. 8,000 4 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 23 Petronas Dagangan Berhad (BB) ............................. 3,000 6 Petronas Gas Berhad (J4) .................................. 11,300 21 Plus Expressways Berhad (BT) .............................. 36,100 27 PPB Group Berhad (JH) ..................................... 4,000 7 Proton Holdings Berhad (BU) ............................... 7,000 17 Public Bank Berhad (JQ) ................................... 26,775 54 Resorts World Berhad (BZ) ................................. 13,100 34 RHB Capital Berhad (JP) ................................... 17,000 10 Road Builder, Inc. (BJ) ................................... 8,000 5 Sime Darby Berhad (BL) .................................... 30,800 49 SP Setia (JS) ............................................. 12,000 14 Star Publications (JA) .................................... 4,000 7 TA Enterprise Berhad (JQ) ................................. 18,000 4 Tan Chong Motor Holdings (BV) ............................. 9,000 4 Tanjong plc (BZ) .......................................... 5,000 19 Telekom Malaysia Berhad (J1) .............................. 22,800 70 Tenaga Nasional Berhad (J3) ............................... 21,800 63 Transmile Group Berhad (BP) ............................... 3,000 7 UMW Holdings Berhad (BU) .................................. 4,000 5 Unisem Berhad (J0) ........................................ 2,000 4 YTL Corp., Berhad (J3) .................................... 12,060 17 ------- 1,171 Mexico - 0.7% Alfa, S.A.(BL) ............................................ 9,138 47 America Movil SA de CV - Ser L (J2) ....................... 181,793 477 Cemex SA de CV * (BD) ..................................... 40,376 295 Coca-Cola Femsa, SA - Ser. L NPV (JG) ..................... 7,812 19 Consoricoara SA * (BW) .................................... 4,300 13 Control Common Mexico (JD) ................................ 6,800 8 Corp. GEO SA De CV - Ser. B * (BW) ........................ 9,700 19 Corporacion Interamericana de Entretenimiento SA * (JA) ... 6,763 21 Fomento Economico Mexicano SA de CV(JG) ................... 17,940 94 GPO Continental (JG) ...................................... 4,100 8 Grupo Aeroportuario del Sureste SA de CV (BT) ............. 6,222 17 Grupo Carso SA de CV - Ser. A1 (BL) ....................... 6,978 37 Grupo Financiero Banorte SA (JP) .......................... 9,324 59
SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Value Name of Issuer Shares (000's) -------------- ------- ------- COMMON STOCK - Continued Mexico - Continued Grupo Modelo SA de CV - Ser. C (JG) ..................... 14,825 $ 41 Grupo SA de CV - Ser. A (JH) ............................ 7,946 20 Grupo Televisa SA (JA) .................................. 57,826 174 Industrias Penoles SA (BF) .............................. 1,948 10 Kimberly-Clark de Mexico SA de CV(JJ) ................... 13,426 46 Nuevo Grupo Mexico * (BF) ............................... 9,850 50 Telephonos de Mexico SA - Ser. L (J1) ................... 198,243 380 TV Azteca (JA) .......................................... 33,398 21 Vitro Sa de CV - Ser. A (BE) ............................ 4,500 5 WalMart de Mexico - Ser. V(JE) .......................... 50,114 172 ------- 2,033 Monacco - 0.0% BQE Maroccomm (JP) ...................................... 118 8 ONA (BL) ................................................ 111 12 ------- 20 Netherlands - 3.9% ABN Amro Holding NV (JP) ................................ 43,182 1,139 Aegon NV (JR) ........................................... 38,247 519 Akzo Nobel NV (BC) ...................................... 7,418 315 ASM Lithography Holding NV * (J0) ....................... 13,514 216 Corio NV (JS) ........................................... 1,149 67 DSM NV (BC) ............................................. 2,137 138 Elsevier NV(JA) ......................................... 19,594 266 Getronics NV # * (JU) ................................... 13,351 30 Hagemeyer NV # * (BN) ................................... 13,276 31 Heineken NV (JG) ........................................ 6,686 222 IHC Caland NV (BM) ...................................... 841 53 ING Groep NV (JQ) ....................................... 51,134 1,541 Koninklijke(Royal) Philips Electronics NV (BW) .......... 36,463 963 Koninklijke Ahold NV * (JF) ............................. 43,246 334 Koninklijke KPN NV (J1) ................................. 55,341 524 Koninklijke Numico N.V. * (JH) .......................... 4,017 144 Oce NV (JZ) ............................................. 2,107 32 Randstad Holdings NV (BO) ............................... 1,208 47 Rodamco Europe NV (JS) .................................. 1,203 95 Royal Dutch Petroleum Co. # (BB) ........................ 57,627 3,304 TNT Post Group NV (BP) .................................. 10,538 285 Unilever NV(JH) ......................................... 15,834 1,058 Vedior (BO) ............................................. 4,384 71 VNU NV # (JA) ........................................... 6,717 198 Wereldhave NV (JS) ...................................... 555 60 Wolters Kluwer NV (JA) .................................. 7,651 153 ------- 11,805 New Zealand - 0.2% Auckland International (BT) ............................. 6,406 37 Carter Holt Harvey, Ltd. (BG) ........................... 17,438 26 Contact Energy Limited # (J3) ........................... 7,747 36 Fisher & Paykel AP (BW) ................................. 6,188 19 Fisher & Paykel Industries, Inc. (JL) ................... 12,235 $ 28 Fletcher Building (BD) .................................. 11,515 55 Fletcher Challenge Forests (BG) ......................... 543 1 Independent Newspapers, Ltd. (JA) ....................... 2,928 12 NGC Holdings, Ltd. (J4) ................................. 3,744 8 Sky City Entertainment Group, Ltd. (BZ) ................. 10,903 42 Sky Network Television, Ltd. * (JA) ..................... 2,653 12 Telecom Corp. of New Zealand, Ltd. (J1) ................. 51,474 228 The Warehouse Group, Ltd. (JD) .......................... 3,629 9 Tower, Ltd. * (JR) ...................................... 7,494 12 Waste Management, Inc. (BO) ............................. 2,576 10 ------- 535 Norway - 0.5% Den Norske Bank (JP) .................................... 18,800 185 Frontlinel, Ltd. # (BR) ................................. 1,100 49 Norsk Hydro ASA # (BB) .................................. 4,120 323 Norske Skogindustrier ASA - Cl. A # (BG) ................ 3,050 66 Orkla ASA # (JG) ........................................ 5,450 178 Petroleum Geo-Services SA # * (BB) ...................... 464 29 Schibsted ASA (JA) ...................................... 1,400 40 Smedvig # (BA) .......................................... 850 14 Statoil ASA (BB) ........................................ 15,500 242 Storebrand ASA (JR) ..................................... 6,400 61 Tandberg ASA # (JY) ..................................... 3,775 47 Telenor AS (J1) ......................................... 23,000 208 Tomra Systems ASA # (BM) ................................ 4,700 26 Yara International * (BC) ............................... 5,903 77 ------- 1,545 Peru - 0.0% Credicorp, Ltd. (JP) .................................... 1,076 17 Minas Buenaventura SA (BF) .............................. 1,722 39 Southern Peru Copper Corp. (BF) ......................... 272 13 ------- 69 Philippines - 0.0% Ayala Corp (JQ) ......................................... 90,000 10 Ayala Land, Inc.(JS) .................................... 91,000 12 Bank of the Philippine Islands (JP) ..................... 15,141 14 Globe Telecom, Inc. (J2) ................................ 586 10 Philippine Long Distance Telephone Co. * (J1) ........... 816 20 San Miguel Corp. - Cl. B (JG) ........................... 6,500 9 SM Prime Holdings, Inc. (JS) ............................ 63,000 9 ------- 84 Poland - 0.2% AGORA * (JA) ............................................ 888 17 Bank Pekao SA (JP) ...................................... 1,873 86 Bank Przemyslowo-Handlowy (JP) .......................... 243 41 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Poland - Continued Bank Zachodni (JP) ....................................... 620 $ 20 BRE Bank SA (JP) ......................................... 245 9 Budimex SA - Ser. B * (BJ) ............................... 325 5 Celuloza Swiecie (BG) .................................... 355 7 Computerland SA * (JX) ................................... 170 6 DEBICA - Ser. A (BU) ..................................... 175 6 Echo Investment * (JS) ................................... 167 5 Globe Trade Center * (BO) ................................ 143 5 Grupa Kety SA (BF) ....................................... 165 7 KGHM Polska Miedz * (BF) ................................. 3,102 32 Orbis SA (BZ) ............................................ 715 6 Polska Groupa Farmaceutyczna (JM) ........................ 260 5 Polski Koncern Nafto (BB) ................................ 8,450 107 Powszechna Kasa OS * (JP) ................................ 11,308 105 Prokom Software SA * (JU) ................................ 272 13 Telekomunikacja (J1) ..................................... 19,753 130 ------ 612 Portugal - 0.3% Banco Comercial Portgues SA (JP) ......................... 48,062 123 Banco Espirito Santo SA (JP) ............................. 2,782 50 BPI-SGPS SA (JQ) ......................................... 9,147 37 Brisa-Auto Estradas de Portugal SA (BT) .................. 9,652 88 Cimpor-Cimentos de Portugal (BD) ......................... 5,487 31 Electricidade de Portugal SA (J3) ........................ 58,937 178 Jeronimo Martins SGPS SA * (JF) .......................... 1,007 13 Part Multimedia SGPS (JA) ................................ 1,267 32 Portugal Telecom SA (J1) ................................. 21,888 269 Sonae SGPS SA (BL) ....................................... 24,051 35 ------ 856 Russia - 0.0% Rostelecom - ADR # * (J1) ................................ 2,660 29 Singapore - 0.7% Allgreen Properties, Ltd. (JS) ........................... 13,000 9 Ascendas Real Estate * (JS) .............................. 1,300 1 Ascendas Real Estate Investment Trust # (JS) ............. 13,000 14 Capitaland, Ltd. # (JS) .................................. 26,000 34 CapitaMall Trust (JS) .................................... 16,500 18 Chartered Semiconductor Manufacturing # * (J0) ........... 25,000 15 City Developments, Ltd. (JS) ............................. 13,000 56 Comfort DelGro Corp., Ltd. (BS) .......................... 47,000 45 Creative Technology, Ltd. # (JX) ......................... 1,400 21 Cycle & Carriage, Ltd. (JB) .............................. 3,041 20 Datacraft Asia, Ltd. # * (JW) ........................... 6,000 6 DBS Group Holdings, Ltd. (JP) ............................ 31,000 306 Fraser and Neave, Ltd. (JG) .............................. 4,620 46 Haw Par Value Corp., Ltd. (BL) ........................... 2,490 8 Keppel Corp., Ltd. - Cl. A # (JQ) ........................ 15,000 79 Keppel Land, Ltd. (JS) ................................... 9,000 12 Neptune Orient Lines, Ltd. (BR) .......................... 14,000 26 Oversea-Chinese Banking Corp., Ltd. (JP) ................. 30,000 $ 248 Overseas Union Enterprise, Ltd. (BZ) ..................... 1,000 5 Parkway Holdings, Ltd. (JM) .............................. 15,000 14 Saint Assembly Test Service * (J0) ....................... 28,000 17 Sembcorp Industries, Ltd. (BL) ........................... 25,000 25 Sembcorp Logistics, Ltd. (BT) ............................ 8,000 8 Sembcorp Marine (BM) ..................................... 13,000 11 Singapore Airlines (BQ) .................................. 16,000 112 Singapore Exchange, Ltd. (JQ) ............................ 19,000 21 Singapore Land, Ltd. (JS) ................................ 4,000 12 Singapore Post, Ltd. (BP) ................................ 36,000 20 Singapore Press (JA) ..................................... 44,500 125 Singapore Technology Engineering, Ltd.(BH) ............... 36,000 51 Singapore Telecom (J1) ................................... 183,080 267 SMRT Corp. (BS) .......................................... 17,000 9 United Overseas Bank, Ltd.(JP) ........................... 33,000 279 United Overseas Land, Ltd. (BZ) .......................... 10,000 12 Venture Manufacturing, Ltd. (JY) ......................... 6,000 58 Wing Tai Holdings, Ltd. (JS) ............................. 12,000 7 ------ 2,017 South Africa - 1.6% African Bank Investments, Ltd. (JQ) ...................... 12,310 40 Alexander Forbes, Ltd. (JQ) .............................. 9,096 17 Anglo American Platinum Corp., Ltd. (BF) ................. 1,744 64 Anglo American plc (BF) .................................. 39,202 926 Anglogold (BF) ........................................... 3,719 131 Aveng, Ltd. (BJ) ......................................... 11,769 25 AVI, Ltd. (BL) ........................................... 8,722 35 Barlow, Ltd. (BL) ........................................ 5,931 112 Bidvest Group, Ltd. (BL) ................................. 7,094 101 Edgars Consolidated Stores (JE) .......................... 1,307 70 FirstRand, Ltd. (JP) ..................................... 85,775 203 Foschini, Ltd. (JE) ...................................... 5,930 42 Gold Fields Mining (BF) .................................. 11,009 135 Harmony Gold Mining (BF) ................................. 9,598 87 Impala Platinum Holdings, Ltd. (BF) ...................... 1,805 153 Imperial Holdings, Ltd. (JE) ............................. 5,627 104 Investec Ltd. (JQ) ....................................... 971 31 Ispat Iscor, Ltd. (BF) ................................... 5,433 63 JD Group, Ltd. (JE) ...................................... 4,381 53 Liberty Life Association of Africa, Ltd. (JR) ............ 3,345 39 M-Cell, Ltd. (J2) ........................................ 37,754 291 Massmart Holdings, Ltd.(JF) .............................. 5,428 44 Metoz Holdings, Ltd. * (BO) .............................. 46,981 21 Metropolitan Holdings, Ltd. (JR) ......................... 15,632 30 Murray & Roberts Holdings, Ltd. (BL) ..................... 9,733 24 Nampak, Ltd. (BE) ........................................ 15,580 43 Naspers, Ltd. - N Shares (JA) ............................ 8,473 112 Nedcor, Ltd. (JP) ........................................ 5,640 78 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued South Africa - Continued Network Healthcare Holdings, Ltd. (JM) .................. 31,257 $ 28 Old Mutual plc(JR) ...................................... 109,136 276 Pick'n Pay Stores, Ltd. (JF) ............................ 6,378 26 Reunert, Ltd. (JY) ...................................... 4,999 33 Sanlam, Ltd. (JR) ....................................... 73,747 170 Sappi, Ltd.(BG) ......................................... 6,159 90 Sasol, Ltd.(BB) ......................................... 16,227 348 Shoprite Holdings, Ltd. (JF) ............................ 11,051 25 Spar Group, Ltd. * (JB) ................................. 4,510 17 Standard Bank Group, Ltd. (JQ) .......................... 34,448 401 Steinhoff International Holdings (BW) ................... 22,957 51 Telkom Group, Ltd. (J1) ................................. 7,051 122 Tiger Brands Ltd. (JH) .................................. 4,827 83 Tongaat Hulett Group (JH) ............................... 1,500 14 Truworths International, Ltd. (JE) ...................... 12,417 38 Woolworth's Holdings, Ltd. (JD) ......................... 22,783 46 ------ 4,842 South Korea - 1.8% Amorepacific Corp. (JK) ................................. 130 33 Cheil Communications, Inc. (JA) ......................... 110 16 Cheil Industries (BY) ................................... 1,210 19 CJ Corp. (JH) ........................................... 540 37 Dae Duck Electronic (JY) ................................ 1,010 9 Daegu Bank (JP) ......................................... 3,420 24 Daelim Industrial Co., Ltd. (BJ) ........................ 680 35 Daewoo Engineering & Construction (BL) .................. 4,050 25 Daewoo Heavy Industries, Ltd. * (BM) .................... 1,800 14 Daewoo Securities Co. * (JQ) ............................ 2,610 13 Daewoo Shipbuilding & Marine(BM) ........................ 2,600 39 Daishin Securities(JQ) .................................. 1,280 17 Daum Communications Corp. * (JT) ........................ 280 6 Hana Bank (JP) .......................................... 3,650 91 Hanjin Shipping Co., Ltd. (BR) .......................... 1,260 29 Hankook Tire Co., Ltd. (BU) ............................. 2,630 26 Hanwha Chemical (BC) .................................... 1,480 15 Hite Brewery Co. (JG) ................................... 230 19 Honam Petrochemical (BC) ................................ 440 21 Hyosung (BC) ............................................ 620 6 Hyundai Department Store (JD) ........................... 450 15 Hyundai Heavy Industries Co., Ltd. (BM) ................. 1,230 41 Hyundai Industrial & Development (BJ) ................... 1,720 27 Hyundai Mobis (BU) ...................................... 1,620 102 Hyundai Motor Co., Ltd. (BV) ............................ 5,062 271 Hyundai Securities Co. * (JQ) ........................... 3,690 18 Kangwon Land, Inc. (BZ) ................................. 2,890 38 KIA Motors Corp. (BV) ................................... 4,364 46 Kookmin Bank * (JP) ..................................... 8,763 343 Korea Electric Power Corp. (J3) ......................... 7,441 193 Korea Exchange Bank * (JP) .............................. 3,310 27 Korea Telecom Corp. (J1) ................................ 4,050 $ 162 Korean Air Lines * (BQ) ................................. 1,090 20 KT & G Corp. (JI) ....................................... 3,640 109 Kumgang Korea Che (BI) .................................. 140 18 LG Cable & Machinery, Ltd. (BK) ......................... 570 12 LG Chemical (BC) ........................................ 1,332 53 LG Electronics, Inc. (BW) ............................... 2,636 163 LG Engineering & Construction Co. (BJ) .................. 960 26 LG Household & health (JJ) .............................. 300 8 LG Investment & Securities Co., Ltd. * (JQ) ............. 2,635 22 LG Petrochemical (BC) ................................... 730 18 NCsoft Corp. * (JT) ..................................... 330 27 NHN Corp. (JT) .......................................... 371 30 Nong Shimco Co., Ltd. (JH) .............................. 90 22 Pohang Iron & Steel Co., Ltd. (BF) ...................... 2,060 372 Poongsan Corp. (BF) ..................................... 610 7 Pusan Bank (JP) ......................................... 3,240 25 S-Oil Corp. (BB) ........................................ 1,320 85 S1 Corp. (BO) ........................................... 640 23 Samsung Corp. (BN) ...................................... 4,341 54 Samsung Display Devices Co. (JY) ........................ 1,020 111 Samsung Electro-Mechanics Co. (JY) ...................... 1,616 41 Samsung Electronics * (J0) .............................. 3,829 1,666 Samsung Fine Chemicals Co., Ltd. (BC) ................... 450 8 Samsung Fire & Marine Insurance (JR) .................... 1,070 84 Samsung Heavy Industries (BM) ........................... 4,670 29 Samsung Securities Co., Ltd. (JQ) ....................... 1,444 35 Shinhan Financial (JP) .................................. 6,641 150 Shinsegaeco, Ltd. (JD) .................................. 300 82 SK Corp. (BB) ........................................... 2,590 142 SK Telecom Co., Ltd. (J2) ............................... 1,171 223 Yuhan Corp. (JO) ........................................ 178 15 ------ 5,457 Spain - 3.2% Abertis Infrastructuras SA # (BT) ....................... 6,929 152 Acciona SA # (BJ) ....................................... 779 69 Acerinox SA # (BF) ...................................... 5,324 85 ACS Actividades de Construccion y Servicos SA # (BJ) .... 7,089 161 Aguas De Barcelona # * (J6) (a) ......................... 14 0 Altadis SA -Ser. A # (JI) ............................... 7,284 332 Amadeus Global Travel - Ser. A # (BO) ................... 8,926 92 Antena 3 TV # * (JA) .................................... 549 40 Banco Bilbao Vizcaya SA # (JP) .......................... 86,766 1,533 Banco Popular Espanol SA # (JP) ......................... 4,312 283 Banco Santander Central Hispano SA # (JP) ............... 159,911 1,976 Cintra Concesiones de Infrae * (BS) ..................... 5,053 55 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Spain - Continued Corp. Mapfre SA # (JR) .................................. 2,943 $ 43 Endesa SA # (J3) ........................................ 25,559 598 Fomento de Construcciones y Contratas SA # (BJ) ......... 1,172 56 Gamesa Corp. Tecnologica, SA # (BA) ..................... 2,883 40 Gas Natural SDG SA # (J4) ............................... 4,163 128 Grupo Ferrovial SA # (BJ) ............................... 1,726 92 Iberdrola SA # (J3) ..................................... 20,692 524 Iberia Lineas Aereas de Espana SA # (BQ) ................ 11,781 41 Inditex # (JE) .......................................... 5,934 174 Indra Sistemas SA (JU) .................................. 3,278 56 Metrovacesa SA # (JS) ................................... 997 46 NH Hoteles SA (BZ) ...................................... 2,106 28 Promotora de Informaciones SA # (JA) .................... 1,976 42 Repsol SA # (BB) ........................................ 24,558 637 Sociedad General de Aguas de Barcelona SA * (J6) ........ 1,488 31 Soge Cable # * (JA) ..................................... 995 44 Telefonica Publicidad e Informacion SA # (JA) ........... 4,312 40 Telefonica SA (J1) ...................................... 120,085 2,253 Union Electrica Fenosa SA # (J3) ........................ 5,744 150 Vallehermoso SA (JS) .................................... 2,605 43 Zeltia SA # (JN) ........................................ 3,894 27 ------ 9,871 Sweden - 2.0% Alfa Laval AB # (BM) .................................... 1,818 29 Assa Abloy # (BI) ....................................... 8,000 136 Atlas Copco AB (BM) ..................................... 1,800 75 Atlas Copco AB - Ser. A (BM) ............................ 3,000 135 Axfood AB (JF) .......................................... 686 23 Billerud # (BE) ......................................... 1,400 25 Capio AB * (JM) ......................................... 1,963 23 Carnegie & Co. (JQ) ..................................... 1,496 19 Castellumab (JS) ........................................ 1,043 37 Electrolux AB - Ser. B # (BW) ........................... 7,500 171 Elekta AB - Ser. B * (JL) ............................... 798 23 Eniro AB Seki # (JA) .................................... 4,444 45 Gambro - Ser. A (JM) .................................... 4,700 67 Gambro - Ser. B (JM) .................................... 2,300 32 Getinge AB - Ser. B (JL) ................................ 4,112 51 Hennes & Mauritz AB # (JE) .............................. 12,650 439 Hoganas AB - Cl. B (BF) ................................. 700 19 Holmen AB - Ser. B (BG) ................................. 1,300 45 Lundlin Petroleum AB * (BB) ............................. 4,477 26 Modern Times Group # * (JA) ............................. 1,350 37 NetCom Systems, Inc. - Cl. B # (J1) ..................... 2,600 102 Nordic Baltic Holding AB (JP) ........................... 58,500 588 Omhex AB # * (JQ) ....................................... 1,600 20 Oriflame Cosmetics SA # * (JK) .......................... 750 17 Sandvik AB (BM) ......................................... 5,900 237 SAS AB # * (BQ) ......................................... 2,400 22 Scania AB - Ser. B (BM) ................................. 2,600 $ 102 Securitas AB # (BO) ..................................... 8,000 137 Skand Enskilda Banken - Cl. A (JP) ...................... 12,600 243 Skandia Forsakrings AB (JR) ............................. 27,000 134 Skanska AB - Ser. B (BJ) ................................ 9,900 118 SKF AB - Ser. B # (BM) .................................. 2,500 111 SSAB Svensktal AB - Ser. A (BF) ......................... 1,600 38 SSAB Svensktal AB - Ser. B (BF) ......................... 800 19 Svenska Cellulosa AB - Cl. B (BG) ....................... 5,200 221 Svenska Handelsbanken, Inc. # (JP) ...................... 13,900 360 Swedish Match # (JI) .................................... 9,000 104 Telefonaktiebolaget LM Ericsson AB * (JW) ............... 385,200 1,224 Telia AB (J1) ........................................... 50,100 299 Trelleborg AB - Ser. B # (BU) ........................... 2,000 34 Volvo AB (BM) ........................................... 6,000 237 Volvo AB - Ser. A (BM) .................................. 2,600 99 Wihlborgs Fastigheter AB (JS) ........................... 2,119 44 WM Data AB - Ser. B # (JU) .............................. 10,000 22 ------ 5,989 Switzerland - 5.7% ABB, Ltd. * (BK) ........................................ 53,151 296 Adecco SA (BO) .......................................... 3,726 187 Ciba Specialty Chemicals AG (BC) ........................ 1,962 149 Clariant AG (BC) ........................................ 6,633 107 Credit Suisse Group (JP) ................................ 32,288 1,353 Geberit AG (BI) ......................................... 96 70 Givaudan (BC) ........................................... 206 135 Holcim (BD) ............................................. 4,535 272 Kudelski SA # * (JY) .................................... 879 32 Kuoni Reisen Holding AG - Ser. B (BZ) ................... 80 35 Logitech International SA * (JX) ........................ 1,252 76 Lonza Group AG (BC) ..................................... 1,010 57 Micronas Semiconductor Holdings AG * (J0) ............... 860 42 Nestle SA (JH) .......................................... 11,451 2,986 Nobel Biocare AG (JL) ................................... 663 120 Novartis AG (JO) ........................................ 67,567 3,393 Phonak Holdings AG (JL) ................................. 1,150 38 Richemont (JE) .......................................... 14,759 490 Rieter Holdings AG (BM) ................................. 124 36 Roche Holdings AG (JO) .................................. 19,940 2,287 Serono SA # (JN) ........................................ 183 120 SGS Holdings (BO) ....................................... 125 87 Straumann Holdings (JL) ................................. 210 43 Sulzer AG (BM) .......................................... 93 37 Swatch Group (BY) ....................................... 954 139 Swatch Group AG (BY) .................................... 1,811 54 Swiss Reinsurance Co. (JR) .............................. 9,097 647 Swisscom AG (J1) ........................................ 749 294 Syngenta AG (BC) ........................................ 3,023 320 Synthes, Inc. (JL) ...................................... 1,298 145 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Switzerland - Continued UBS AG (JP) ............................................. 30,341 $ 2,535 Unaxis Holding AG (J0) .................................. 336 33 Valora Holding AG (JE) .................................. 105 26 Zurich Finance (JR) ..................................... 4,067 676 ------- 17,317 Taiwan - 1.5% Accton Technollogies, Inc. * (JW) ....................... 10,000 5 Acer Communicaton (JX) .................................. 38,279 44 Acer, Inc. (JX) ......................................... 44,233 73 Advanced Semiconductor Engineering, Inc. (J0) ........... 67,376 51 Advantech Co., Ltd. (JX) ................................ 4,099 10 Arima Computer (JX) ..................................... 14,000 4 Asia Cement Corp. (BD) .................................. 20,235 14 Asia Optical Co., Inc. (BX) ............................. 2,297 13 Asustek Computer (JX) ................................... 41,712 111 AU Optronics Corp. (JY) ................................. 87,088 126 BES Engineering Corp. (BJ) .............................. 22,440 5 Cathay Construction (JS) ................................ 23,000 14 Cathay Financial Holding Co., Ltd. (JR) ................. 97,000 198 Chang Hwa Commercial Bank * (JP) ........................ 79,000 55 Cheng Shin Indiana (BU) ................................. 9,864 13 Chi Mei Optoelectronics Corp. (JX) ...................... 52,210 70 China Airlines (BQ) ..................................... 23,650 13 China Dev Fin Holding * (JP) ............................ 197,787 95 China Motor Corp. (BV) .................................. 10,000 13 China Steel Corp. (BF) .................................. 158,095 178 China Trust Finance (JP) ................................ 93,914 112 Chungwa Picture Tubes, Ltd. * (JY) ...................... 82,216 37 Chungwa Telecom Co., Ltd. (J1) .......................... 43,000 85 CMC Magnetics Corp. (JX) ................................ 59,775 31 Compal Electronics, Inc. (JX) ........................... 65,981 66 Compeq Manufacturing Co., Ltd. * (JX) ................... 12,000 4 Continental Engineering (BJ) ............................ 8,000 4 DD Link (JW) ............................................ 8,406 10 Delta Electronics Inc. (JY) ............................. 23,500 41 E. Sun Financial (JP) ................................... 35,879 30 Elite Group Computers (JX) .............................. 9,000 6 Eternal Chemical Co., Ltd. (BC) ......................... 7,000 5 Eva Airways (BQ) ........................................ 18,669 9 Evergreen Marine Corp. (BR) ............................. 13,779 14 Far East Textile (BL) ................................... 46,301 37 First Financial Holding, Co., Ltd. * (JQ) ............... 90,000 77 Formosa Chemical & Fibre (BC) ........................... 26,496 50 Formosa Plastic (BC) .................................... 82,396 141 Formosa Taffeta Co., Ltd. (BY) .......................... 12,240 6 Fu Sheng Industrail Co., Ltd. (BL) ...................... 14,000 21 Fubon Financial Holding Co. (JQ) ........................ 85,000 87 Giant Manufacturing Co., Ltd. (BX) ...................... 3,000 5 Gigabyte Technology Co. (JX) ............................ 8,400 10 Hon Hai Precision Insustry Co., Ltd. - Cl. G (JY) ....... 51,740 $ 239 Hua Nan Financial Holding Co. (JP) ...................... 65,920 56 International Bank of Taipei (JP) ....................... 43,500 35 Inventec Co., Ltd. (JX) ................................. 23,100 12 Kinpo Electronics (JZ) .................................. 16,200 7 Largan Precision Co. (BL) ............................... 2,100 12 Lite on Technology (JX) ................................. 44,712 48 Macronix International Co., Ltd. * (J0) ................. 106,177 24 MediaTek, Inc. (J0) ..................................... 13,628 93 Mega Financial Holding Co., Ltd. (JP) ................... 200,000 138 Micro Star International (JX) ........................... 13,670 10 Nan Ya Plastic Corp. (BC) ............................... 102,723 157 Nien Hsing Textile Co., Ltd. (BY) ....................... 6,000 6 Nien Made Enterprises Co., Ltd. (JH) .................... 3,840 6 Optimax Technology Corp. (JY) ........................... 4,804 12 Oriental Union Chemical Corp. (BC) ...................... 8,000 9 Phoenixtec Power (BK) ................................... 7,000 8 Polaris Securities (JQ) ................................. 18,051 10 Pou Chen Corp. (BY) ..................................... 31,334 28 Premier Image Technology (BX) ........................... 6,300 6 President Chain Store Corp. (JF) ........................ 12,594 20 Prodisc Technology, Inc. (JX) ........................... 11,867 5 Quanta Computer, Inc. (JX) .............................. 37,100 67 Quanta Display, Inc. * (JY) ............................. 53,000 31 Realtek Semiconductor Corp. (J0) ........................ 14,130 16 Ritek Corp. (JX) ........................................ 46,561 17 Sampo Corp. (BW) ........................................ 18,900 4 Shihlin Electric (BK) ................................... 6,000 4 Shin Kong Financial Holding Co., Ltd. (JR) .............. 41,161 40 Siliconware Precision (J0) .............................. 37,111 31 Sinopac Holding (JP) .................................... 70,389 41 Synnex Technology International Corp. (JY) .............. 9,900 15 SYSTEX Corp. (JU) ....................................... 14,718 5 Taishin Financial Holding Co., Ltd. (JP) ................ 71,877 67 Taiwan Cellular Corp. (J2) .............................. 49,000 55 Taiwan Cement (BD) ...................................... 31,840 21 Taiwan Glass Industrial Corp. (BI) ...................... 13,560 13 Taiwan Secom Co. (BO) ................................... 5,000 6 Taiwan Semiconductor (J0) ............................... 367,527 584 Taiwan Styrene Monomer Corp. (BC) ....................... 8,000 6 Tatung * (BL) ........................................... 76,146 30 Teco Electric & Machine (BK) ............................ 28,000 9 Uni-President Enterprises Co. (JH) ...................... 56,000 29 United Microelectronics Corp. (J0) ...................... 333,567 215 Via Technologies Inc. * (J0) ............................ 15,310 8 Walshin Lihwa W&C * (BK) ................................ 51,000 28 Wan Hai Lines, Ltd. (BR) ................................ 10,600 11 Winbond Electronic * (J0) ............................... 80,084 32 WUS Printed Circuit (JY) ................................ 7,212 3 Ya Hsing Indiana Co. (JY) ............................... 11,728 11 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ---------- ------- (000's) COMMON STOCK - Continued Taiwan - Continued Yageo Corp. * (JY) ................................... 38,000 $ 14 Yang Ming Marine (BR) ................................ 25,845 25 Yieh Phuients Co. (BD) ............................... 14,000 10 Yuanta Core Pacific * (JQ) ........................... 47,140 36 Yue Loong Motor Co. (BV) ............................. 17,210 20 Yuen Foong Yu Manufacturing Co., Ltd. (BG) ........... 19,440 11 Zyxel Communication (JW) ............................. 6,600 15 ------ 4,464 Thailand - 0.2% Advanced Information Services (J2) ................... 24,700 71 Airports of Thailand * (BT) .......................... 11,700 14 Bangkok Bank (JP) .................................... 7,500 20 Bangkok Bank Co., Ltd. (JP) .......................... 26,200 77 Bangkok Expressway Public Co., Ltd. (BT) ............. 9,700 6 Banpu Co. (BF) ....................................... 2,700 10 Bec World (JA) ....................................... 25,200 10 Charoen Pokphand Public Co., Ltd. (JH) ............... 64,100 6 Delta Electronics (JY) ............................... 10,000 4 Electricity Generating Public Co., Ltd. (J3) ......... 3,400 6 GMM Grammy Public Co., Ltd. (JA) ..................... 6,900 4 Hana Micorelectronic Public Co., Ltd. (JY) ........... 11,500 6 Italian Thai Development Public Co., Ltd. * (BJ) ..... 33,500 8 ITV PCL * (JA) ....................................... 8,400 2 Kasikornbank Public Co., Ltd. * (JP) ................. 5,900 8 Kiatnakin Finance Public Co., Ltd. (JQ) .............. 5,600 5 Kim England Securities, Ltd. (FB) (a) ................ 3,100 3 Krung Thai Bank Public Co., Ltd. (JP) ................ 78,300 18 Land & Houses (BJ) ................................... 65,300 19 Land & Houses Public Co., Ltd. (JS) .................. 30,500 8 National Finance Public Co., Ltd. (BD) ............... 18,300 6 National Petrochemical Public Co., Ltd. (BC) ......... 2,100 7 PTT Exploration & Production Public Co., Ltd. (BB) ... 7,300 56 PTT Public Co. (BB) .................................. 23,500 112 Ratchaburi Electric (J3) ............................. 6,200 3 Sahaviriya Steel (BF) (a) ............................ 111,000 9 Seven Eleven (JE) .................................... 2,500 4 Shin Corp. (J2) ...................................... 28,800 30 Siam Cement Co. (BD) ................................. 8,437 60 Siam City Cement Public Co., Ltd. (BD) ............... 1,300 8 Siam Commercial Bank Public Co. (JP) ................. 15,500 19 Siam Makro (JD) ...................................... 2,400 3 Sino Thai Engineering & Construction (BJ) ............ 13,800 $ 6 TelecomAsia Corp. Public Co., Ltd. * (J1) ............ 37,800 8 Thai Airways International plc (BQ) .................. 14,200 18 Thai Farmers Bank Public Co., Ltd. (JP) .............. 32,300 47 Thai Olefin Public * (BC) ............................ 5,500 9 Thai Union Frozen Products Public Co., Ltd. (JH) ..... 8,400 5 The Siam Cement Public Co., Ltd. (BI) ................ 3,700 23 Tisco Finance plc (JQ) ............................... 8,500 5 ------ 743 Turkey - 0.2% Akbank TAS * (JP) .................................... 14,899,355 92 Akrilik Kimya Sanayii SA * (BY) ...................... 308,000 4 Aksigorta * (JR) ..................................... 1,520,000 6 Alarko Holdings * (JQ) ............................... 137,000 4 Anadolu Efes Biracilik ve Malt Sanayii AS * (JG) ..... 1,601,883 32 Arcelik AS * (BW) .................................... 2,270,521 14 Aygaz AZ * (J4) ...................................... 1,848,000 4 CIMSA (BD) ........................................... 1,377,000 5 Dogan Sirketler Grubu Holding AS * (JQ) .............. 7,303,750 16 Dogan Yayin Holding Corp. * (JA) ..................... 2,232,000 10 Eregli Demir ve Celik Fabrikalari T.A.S (BF) ......... 11,198,336 51 Ford Otomotiv Sanayi AS * (BV) ....................... 1,659,934 13 Haci Omer Sabanci Holding AG * (JQ) .................. 6,811,211 27 Hurriyet Gazete * (JA) ............................... 4,139,500 10 Koc Holding AS * (JQ) ................................ 4,482,155 29 Migros Turk T.A.S. * (JF) ............................ 1,463,000 12 T Sise Co. * (BW) .................................... 4,206,625 12 Tofas Otomobil * (BV) ................................ 3,193,000 6 Trakya * (BI) ........................................ 2,261,000 6 Tupras-Turkiye Petrol Rafinerileri A/S * (BB) ........ 2,487,737 25 Turkcell Iletisim Hizmetleri AS * (J2) ............... 5,859,747 41 Turkiye Garanti Bankasi AS * (JP) .................... 11,920,126 38 Turkiye Is Bankasi - Cl. C * (JP) .................... 13,968,769 77 Vestel Elektronik Sanayi ve Ticaret AS * (BW) ........ 2,258,000 9 Yapi ve Kredi Bankasi AS * (JP) ...................... 9,608,380 30 ------ 573 United Kingdom - 19.9% 3I GROUP (JQ) ........................................ 16,900 216 Aegis Group plc (JA) ................................. 28,822 60 Aggreko plc (BO) ..................................... 6,663 21 Alliance Unichem (JM) ................................ 7,173 104 AMEC plc (BJ) ........................................ 7,702 44 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued United Kingdom - Continued Amvescap plc (JQ) ...................................... 20,442 $ 126 Anglo American plc (BF) ................................ 1,021 24 ARM Holdings plc (J0) .................................. 26,334 56 Arriva plc (BS) ........................................ 5,876 61 Association British Ports (BT) ......................... 8,519 78 AstraZeneca Group plc (JO) ............................. 45,296 1,639 Balfour Beatty plc (BJ) ................................ 10,767 65 Barclays (JP) .......................................... 175,644 1,972 Barratt Developments plc (BW) .......................... 6,152 70 BBA Group plc (BT) ..................................... 11,712 64 Bellway plc (BW) ....................................... 3,406 53 Berkeley Group Holdings * (BJ) ......................... 2,816 44 BG Group plc (BB) ...................................... 97,165 659 Billiton plc (BF) ...................................... 67,785 793 BOC Group plc (BC) ..................................... 13,417 255 Boots Group (JF) ....................................... 20,920 263 BP Amoco plc (BB) ...................................... 592,194 5,764 BPB (BD) ............................................... 14,214 129 Brambles Industries (BO) ............................... 18,705 93 British Aerospace plc (BH) ............................. 82,266 363 British Airport Authority plc (BT) ..................... 28,893 323 British Airways plc (BQ) ............................... 13,903 63 British American Tobacco plc (JI) ...................... 44,211 760 British Land Co. plc (JS) .............................. 14,430 248 British Sky Broadcast plc (JA) ......................... 33,809 364 BT Group (J1) .......................................... 234,594 912 Bunzl (BO) ............................................. 11,871 99 Cable & Wireless plc(J1) ............................... 66,883 153 Cadbury Schweppes plc(JH) .............................. 56,105 521 Capita Group plc (BO) .................................. 17,224 121 Carnival plc (BZ) ...................................... 4,540 276 Cattles plc (JQ) ....................................... 8,424 59 Centrica (J4) .......................................... 103,957 471 CGU plc (JR) ........................................... 62,126 747 Close Brothers Group plc (JQ) .......................... 3,596 51 Cobham plc (BH) ........................................ 2,834 67 Compass Group plc (BZ) ................................. 58,942 278 Cookson Group plc * (BL) ............................... 43,751 30 Corus Group plc * (BF) ................................. 111,904 108 Daily Mail & General Trust (JA) ........................ 7,843 112 Davis Service (BO) ..................................... 5,245 41 De La Rue plc (BO) ..................................... 4,733 31 Diageo plc (JG) ........................................ 83,973 1,195 Dixons Group plc (JE) .................................. 51,695 151 Electrocomponents plc (BN) ............................. 11,177 61 EMAP plc (JA) .......................................... 7,402 116 EMI Group plc (JA) ..................................... 20,296 103 Enterprise Inns (BZ) ................................... 9,944 151 Exel (BP) .............................................. 7,708 107 Firstgroup (BS) ........................................ 10,517 70 FKI plc (BL) ........................................... 14,956 33 Friends Provident plc (JR) ............................. 55,972 165 George Wimpey plc (BW) ................................. 9,843 76 GKN (BU) ............................................... 18,806 85 GlaxoSmithKline plc (JO) ............................... 160,737 $3,763 Great Portland Estates plc (JS) ........................ 3,306 21 Group 4 Securicor * (BO) ............................... 29,946 80 Hammerson plc (JS) ..................................... 7,096 118 Hanson Building Materials (BD) ......................... 20,409 175 Hays plc (BO) .......................................... 48,586 116 HBOS (JP) .............................................. 105,910 1,721 Hilton Group plc (BZ) .................................. 42,775 233 HMV Group plc (JE) ..................................... 11,615 58 HSBC Holdings plc (JP) ................................. 302,248 5,090 ICAP (JQ) .............................................. 13,694 71 IMI (BM) ............................................... 9,010 68 Imperial Chemical Industries plc (BC) .................. 33,434 154 Imperial Tobacco Group plc (JI) ........................ 19,722 539 Inchcape plc (JB) ...................................... 2,209 83 Intercontinental Hotels (BZ) ........................... 16,938 210 Intertek Group plc (BL) ................................ 4,581 62 Invensys plc * (BM) .................................... 146,432 43 ITV (JA) ............................................... 110,294 222 Johnson Matthey (BF) ................................... 6,237 118 Kelda Group plc (J6) ................................... 9,945 121 Kesa Electricals (JE) .................................. 13,591 74 Kidde plc (BK) ......................................... 21,333 68 Kingfisher (JE) ........................................ 64,670 384 Land Securities SGP (JS) ............................... 12,564 337 Legal & General Group plc (JR) ......................... 174,723 368 Liberty National (JP) .................................. 6,369 118 Lloyds TSB Group plc (JP) .............................. 152,005 1,377 Logica plc (JU) ........................................ 19,306 71 London Stock Exchange (FB) ............................. 7,500 84 Manitoba Group (JQ) .................................... 7,541 213 Marconi Group plc * (JW) ............................... 5,940 64 Marks & Spencer (JD) ................................... 45,006 296 Meggitt plc (BH) ....................................... 12,585 63 MFI Furniture Group (BW) ............................... 15,783 37 Misys plc (JV) ......................................... 14,419 58 Mitchells & Butler (BZ) ................................ 13,419 87 National Express Group (BS) ............................ 4,101 65 National Grid Group (J3) ............................... 84,419 802 National Power plc * (J5) .............................. 38,019 113 Next Group (JD) ........................................ 7,039 223 Novar plc (BI) ......................................... 11,031 40 Pearson plc (JA) ....................................... 21,624 260 Peninsular & Oriental Steam Navigation Co. (BR) ........ 19,050 109 Persimmon plc (BW) ..................................... 7,847 104 Pilkington plc (BI) .................................... 27,334 58 Premier Farnell plc (JY) ............................... 8,500 28 Provident Financial (JQ) ............................... 6,532 84 Prudential Corp. (JR) .................................. 64,039 556 Punch Taverns plc (BZ) ................................. 7,184 95 Rank Group plc (BZ) .................................... 15,289 77 Reckitt Benckiser (JJ) ................................. 16,095 485 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- --------- ------- (000's) COMMON STOCK - Continued United Kingdom - Continued Reed International plc (JA) ........................... 34,135 $ 314 Rentokil Initial plc (BO) ............................. 47,252 134 Reuters Group plc (JA) ................................ 38,619 279 Rexam (BE) ............................................ 15,492 136 Rio Tinto plc (BF) .................................... 29,301 861 RMC Group plc (BD) .................................... 7,566 123 Rolls Royce Group (BH) ................................ 41,874 198 Royal & Sun Alliance Insurance Group (JR) ............. 82,106 122 Royal Bank of Scotland Group (JP) ..................... 85,664 2,875 Ryanair Holdings * (BQ) ............................... 680 5 Sainsbury J plc (JF) .................................. 37,554 195 Schroders (JQ) ........................................ 3,199 46 Scottish & Newcastle (JG) ............................. 22,288 186 Scottish and Southern Energy (J3) ..................... 23,115 386 Scottish Power plc (J3) ............................... 50,379 389 Serco Group plc (BO) .................................. 11,270 52 Severn Trent (J6) ..................................... 9,586 178 Shell Transport & Trading Co. plc (BB) ................ 263,043 2,238 Signet Group (JE) ..................................... 44,166 93 Slough Estates Finance plc (JS) ....................... 10,753 113 Smith & Nephew (JL) ................................... 25,078 256 Smiths Group (BL) ..................................... 15,172 239 South African Breweries plc (JG) ...................... 21,561 357 SSL International plc (JL) ............................ 4,886 29 Stagecoach Group (BS) ................................. 21,318 46 Tate & Lyle (JH) ...................................... 10,539 95 Taylor Woodrow (BW) ................................... 15,717 82 Tesco plc (JF) ........................................ 211,371 1,303 The Great Universal Stores plc (JC) ................... 27,431 493 The Sage Group plc (JV) ............................... 35,956 139 Tomkins plc (BL) ...................................... 19,882 97 Trinity Mirror plc (JA) ............................... 8,297 101 Unilever plc (JH) ..................................... 75,989 745 United Business Media (JA) ............................ 8,633 79 United Utilites - Cl. A (J6) .......................... 7,960 68 United Utilities plc (J5) ............................. 15,471 187 Vodafone AirTouch plc (J2) ............................ 1,804,314 4,883 Whitbread (BZ) ........................................ 8,431 137 William Hill (BZ) ..................................... 10,830 117 Wolseley (BN) ......................................... 15,683 293 WPP Group plc (JA) .................................... 30,694 337 Yell Group plc (JA) ................................... 19,543 165 ------- 60,199 United States - 1.5% Alvarion, Ltd. * (JW) ................................. 998 13 AO Mosenergo - ADR # * (J3) ........................... 2,476 37 Banco Bradesco SA - ADR # * (JP) ...................... 7,287 176 Banco Santander Chile - ADR * (JP) .................... 2,767 94 Brasil Telecom Participacoes SA * (J1) ................ 966 37 Braskem SA - ADR * (BC) ............................... 7,493 382 Centrais Electricas Brasileirias SA - ADR Cl. B # * (J3) ............................................... 2,207 $ 16 Check Point Software Technologies, Ltd. * (JT) ........ 5,126 126 Companhia De Bebidas ADR (JG) ......................... 4,804 136 Companhia Energetica de Minas Gerias - ADR # * (J3) ... 1,994 49 Companhia Siderurgica Nacional - SA - ADR # * (BF) .... 3,152 60 Companhia Vale do Rio Doce - ADR * (BF) ............... 8,856 214 Companhia Vale Do Rio Doce - ADR * (BF) ............... 6,282 182 Compania Anonima Nacional Telefonos De Venezuela - ADR * (J1) .......................... 2,697 60 Compania Brasileira de Distribuicao Grupo Pao de Acucar - ADR * (JF) ......................... 485 12 Compania Cervecerias Unidas SA - ADR * (JG) ........... 470 12 Compania de Telecomunicaciones de Chile SA # * (J1).... 8,006 90 Distribucion y Servicio D&S SA - ADR * (JF) ........... 1,002 18 ECI Telecommunications, Ltd. * (JW) ................... 1,334 11 Embotelladora Andina SA - ADR # * (JG) ................ 935 12 Embotelladora Andina SA - Ser. B * ADR (JG) ........... 1,052 14 Embratel Participacoes SA - ADR # * (J1) .............. 3,384 36 Empresa Brasileira de Aeronautica SA * (BH) ........... 1,584 53 Empresa Nacional de Electricidad SA - ADR # * (J3) .... 6,680 122 Enersis SA - ADR * (J3) ............................... 15,963 136 Gerdeau SA - ADR # * (BF) ............................. 2,792 50 Given Imaging, Ltd. # * (JL) .......................... 316 11 JSC Norilsk Nickel - ADR * (BL) ....................... 1,861 103 Kinross Gold Corp. * (BF) ............................. 7,600 54 Lukoil Holding - ADR (BB) ............................. 2,907 353 M-Systems Flash Disk Pioneers, Ltd.* # (JX) ........... 602 12 Orbotech, Ltd. * (JY) ................................. 835 18 Petrobas Energia Participacoes SA - ADR Cl. B * (JQ)... 2,541 30 Petroleo Brasileiro SA * (BB) ......................... 6,036 242 Petroleo Brasileiro SA - ADR * (BB) ................... 8,385 307 PT Indonesian Satellite Corp. - ADR * (J1) ............ 1,984 62 Radware, Ltd. * (JT) .................................. 401 10 Ryanair Holdings plc - ADR # * (BQ) ................... 881 36 Ship Finance International, Ltd. # * (BR) ............. 247 5 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Market Name of Issuer Shares Value -------------- -------- -------- (000's) COMMON STOCK - Continued United States - Continued Surgutneftegaz - ADR * (BB) ........................... 3,038 $ 166 Surgutneftegaz - ADR # * (BB) ......................... 13,139 493 Tele Centro Oeste Celular Participacoes - ADR * (J2) ............................................... 1,301 13 Tele Norte Leste Participacoes SA - ADR # * (J1) ...... 5,501 93 Telesp Celular Participacoes SA - ADR # * (J2) ........ 4,894 33 Tenaris SA - ADR * (BA) ............................... 1,125 55 Unibanco - Uniao de Bancos Brasileiros SA - GDR * (JP) ............................................... 1,735 55 Unified Energy Systems Russia - ADR * (J3) ............ 3,060 87 Vina Concha y Toro SA - ADR # * (JG) .................. 371 27 Votorantim Celulose e Papel SA - ADR * (BG) ........... 1,325 21 -------- 4,434 -------- TOTAL COMMON STOCK-(Cost $233,368) 96.1% 290,676 PREFERRED STOCK Brazil - 0.2% BCO Itau Holdings (JP) ................................ 1,440 217 Caemi Mieracao e Metalurgia SA * (BF) ................. 40,000 34 Compahnia de Bebidas das Americas * (JG) .............. 120,000 33 Companhia Vale do Rio Doce (BF) ....................... 2,400 59 Empresa Bras De Aerona (BH) ........................... 3,200 27 Klabin SA (BG) ........................................ 11,000 22 Petroleo Brasileiro SA - Petrobras (BB) ............... 2,200 80 Sadia SA (JH) ......................................... 11,000 25 Tele Norte Leste (J1) ................................. 1,500 25 Usinas Siderurgicas de Minas SA * (BF) ................ 1,200 24 Votorantim Celulos (BG) ............................... 1,000 16 -------- 562 Germany - 0.1% Fresenius Medical Care AG (JM) ........................ 667 39 Henkel KGAA # (JJ) .................................... 1,639 142 Porsche AG # (BV) .................................... 217 138 Prosiebebensati Medi (JA) ............................. 1,982 36 RWE AG (J5) ........................................... 1,004 46 Volkswagen AG (BV) .................................... 2,925 97 -------- 498 New Zealand - 0.0% Tenon, Ltd. * (BG) .................................... 1,385 2 South Korea - 0.1% Hyundai Motor Co. (BV) ................................ 1,000 30 LG Electronics, Inc. (BW) ............................. 490 $ 17 Samsung Electronics (BL) .............................. 626 181 -------- 228 Switzerland - 0.0% Schindler Holding AG (BM) ............................. 147 58 Thailand - 0.0% Siam Commercial Bank Public Co. - (JP) ................ 5,600 7 -------- TOTAL PREFERRED STOCK-(Cost $936) 0.4% 1,355 WARRANTS Mexico - 0.0% Cemex SA (BI) (a) expires 12/21/04 ...................................... 137 0 -------- TOTAL WARRANTS-(Cost $0) 0.0% 0 RIGHTS Ireland - 0.0% Waterford Wedgewood * (JE) expires 01/07/05 ........... 39,305 0 Taiwan - 0.0% Oriental Union Chemical * (BC) (a) expires 01/17/05 ... 8,000 0 Thailand - 0.0% True Corporation Public Co., Ltd * (J1) (a) expires 04/30/08 ................................... 35,747 0 -------- TOTAL RIGHTS-(Cost $0) 0.0% 0 Par Value -------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 24.5% State Street Navigator Securities Lending Portfolio .................................. $ 74,222 74,222 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND Par Market Name of Issuer Value Value -------------- ------- --------- (000's) (000's) SHORT-TERM INVESTMENTS - 3.1% Investment in joint trading account 2.29% due 01/03/05 (Cost $9,304) ................... $9,304 $ 9,304 ------ -------- TOTAL INVESTMENTS-(Cost $317,830) 124.1% 375,557 Payables, less cash and receivables- (24.1)% (72,996) ----- -------- NET ASSETS- 100.0% $302,561 ===== ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. (a) At December 31, 2004 this security was fair valued. ADR-American Depository Receipt GDR-Global Depository Receipt See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY % of Industry Market Long-Term Industry Abbreviation Value Investments -------- ------------ -------- ----------- (000s) Banks .................................. JP $ 51,211 17.6% Oil & Gas .............................. BB 25,928 8.9% Pharmaceuticals ........................ JO 18,337 6.3% Diversified Telecommunication Services ............................ J1 14,400 4.9% Insurance .............................. JR 13,421 4.6% Metals & Mining ........................ BF 11,701 4.0% Electric Utilities ..................... J3 9,771 3.3% Diversified Financials ................. JQ 8,991 3.1% Wireless Telecommunications Services ............................ J2 8,821 3.0% Chemicals .............................. BC 8,154 2.8% Automobiles ............................ BV 8,153 2.8% Food Products .......................... JH 7,581 2.6% Media .................................. JA 6,604 2.3% Household Durables...................... BW 5,652 1.9% Real Estate ............................ JS 5,377 1.8% Food & Drug Retailing .................. JF 4,899 1.7% Semiconductor Equipment & Products ..... J0 4,754 1.6% Communications Equipment ............... JW 4,479 1.5% Electrical Equipment ................... BK 4,209 1.4% Beverages .............................. JG 4,116 1.4% Electronic Equipment & Instruments ..... JY 4,046 1.4% Machinery .............................. BM 3,649 1.3% Hotels Restaurants & Leisure............ BZ 3,164 1.1% Specialty Retail ....................... JE 3,033 1.0% Industrial Conglomerates ............... BL 2,968 1.0% Construction Materials ................. BD 2,778 1.0% Road & Rail ............................ BS 2,628 1.0% Commercial Services & Supplies ......... BO 2,619 0.9% Multiline Retail ....................... JD 2,355 0.8% Tobacco ................................ JI $ 2,345 0.8% Auto Components ........................ BU 2,322 0.8% Gas Utilities .......................... J4 2,114 0.7% Multi-Utilities ........................ J5 1,864 0.6% Construction & Engineering ............. BJ 1,818 0.6% Aerospace & Defense .................... BH 1,814 0.6% Computers & Peripherals ................ JX 1,808 0.6% Building Products ...................... BI 1,805 0.6% Software ............................... JV 1,718 0.6% Trading Companies & Distributors ....... BN 1,621 0.6% Office Electronics ..................... JZ 1,618 0.6% Paper & Forest Products ................ BG 1,568 0.5% Transportation Infrastructure .......... BT 1,533 0.5% Health Care Equipment & Supplies ....... JL 1,506 0.5% Textiles & Apparel ..................... BY 1,497 0.5% IT Consulting & Services ............... JU 1,438 0.5% Marine ................................. BR 1,227 0.4% Household Products ..................... JJ 1,174 0.4% Leisure Equipment & Products ........... BX 1,100 0.4% Air Freight & Couriers ................. BP 990 0.3% Personal Products ...................... JK 889 0.3% Internet Software & Services ........... JT 792 0.3% Airlines ............................... BQ 740 0.2% Health Care Providers & Services ....... JM 638 0.2% Internet & Catalog Retail .............. JC 508 0.2% Containers & Packaging ................. BE 442 0.2% Water Utilities ........................ J6 398 0.1% Energy Equipment & Services ............ BA 308 0.1% Distributors ........................... JB 248 0.1% Finance ................................ FB 199 0.1% Biotechnology .......................... JN 190 0.1% -------- ----- $292,031 100.0% ======== ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock International Equity Index Fund (the "Fund" or "VST International Equity Index") 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 twenty-three different funds as of December 31, 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"). This Fund offers three classes of shares, Series I and Series II were offered for the first time on May 3, 2004. 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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 December 31, 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. 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 December 31, 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. 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 December 31, 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 - -------------------------- ------------------- $70,514 $74,222 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 2004, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Appreciation --------- -------- ---------------- ------------ CAC 40 10 Euro Index Futures 22 Long March 05 $ 10 EOE Dutch Stock Index Futures 4 Long January 05 1 OMX 30 Stock Index Futures 42 Long January 05 6 TOPIX Index Futures 19 Long March 05 96 Share Price Index 200 Futures 3 Long March 05 8 S&P Canada 60 Index Futures 8 Long March 05 14 DAX Index Futures 5 Long March 05 10 IBEX 35 Index Futures 5 Long January 05 8 MIB 30 Index Futures 3 Long March 05 7 Hang Seng Stock Index Futures 5 Long January 05 (1) FTSE 100 Index Futures 30 Long March 05 47 ---- $206 ====
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued 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 December 31, 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/ Currency Purchased Covered by Contract Expiration Month (Depreciation) - ------------------ ------------------- ---------------- -------------- Australian Dollar 219 March 05 $ 4 Canadian Dollar 637 March 05 17 Euro 2,930 March 05 10 Pound Sterling 2,519 March 05 (4) Hong Kong Dollar 336 March 05 1 Japanese Yen 1,692 March 05 16 Swedish Krona 441 March 05 2 --- $46 === 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $1,346, $7,680 and $7,444 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $598. 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 December 31, 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 $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 $123 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 in expenses of $2. John Hancock has entered into a Sub-Advisory Agreement with State Street Global Advisers Funds Managment, Inc., which under John Hancock's 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 each respective class. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $130,624 $42,921 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $320,400 $61,661 $(6,504) $55,157 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $1,064 $-- $16,470 $55,325 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 - ---- ------------------ ---------------------- ----------------- 2004 $4,243 $-- $ -- 2003 3,685 -- 479 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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:
Target Fund Trust Shares Unrealized Acquiring Fund Acquiring Fund Issued by Target Fund Appreciation/ Net Assets Prior Aggregate Net Assets Acquiring Fund Acquiring Fund Net Assets (Depreciation) to Combination After Combination - -------------- -------------- ----------- -------------- ---------------- -------------------- Series I 1,750 $24,566 $ (621) $33,341 $57,907 Series II 1,462 $20,531 $6,020 $ 536 $21,067
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matter:
For Against Abstain --- ------- ------- To approve, as to the International Equity Index Fund, an amendment to the 88% 7% 5% current investment mangement agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses.
Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the International Equity Index Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the International Equity Index Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: March 29, 1986 - -------------------------------------------------------------------------------- Large Cap Growth Fund Independence Investment LLC Paul F. McManus - -------------------------------------------------------------------------------- .. The manager uses both fundamental equity research and quantitative analysis to construct a portfolio having stocks with both favorable valuations and improving earnings growth prospects. The Fund is broadly diversified across sectors with sector weights similar to the benchmark. Fund Commentary Performance: For the year ending December 31, 2004, the Large Cap Growth Fund returned +4.34%, underperforming the Russell 1000(R) Growth Index return of +6.30%. Environment: The large cap equity markets struggled through much of 2004, but finished in positive territory with a very solid fourth quarter. Growth significantly trailed value as a style. Within the growth style, telecom and utilities were the strongest performing sectors. Throughout most of the year, investor sentiment was muted by fears of terrorism, the maturing economic recovery, higher energy prices, and the uncertainty over the Presidential election. Oil was the big story of 2004 climbing throughout most of the year to record high prices. Although energy prices tailed off in time for the holiday spending season, consumer spending was pinched by higher oil prices. With the decline in oil prices in Q4, as well as a stronger corporate and consumer picture, the equity markets regained traction. The Growth Fund underperformed earlier in the year but performed well in the fourth quarter. For 2004, stock selection in consumer staples and financials was strong while stock selection in consumer discretionary and technology detracted from performance. Sector weightings in healthcare, utilities and energy contributed to performance. Outlook: Overall, our forecast for U.S. stock performance in 2005 is favorable. We expect continued recovery in corporate spending, an improved employment picture, and a healthy consumer to drive stocks higher. We are attuned to potential risks including weakness in the US dollar, accelerating inflation, and an increase in bond yields. [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (10-Year Period) Russell 1000(R) Large Cap Growth Fund Growth Index --------------------- --------------- $10,000 $10,000 Jan-95 10,187 10,213 Feb-95 10,573 10,641 Mar-95 10,812 10,952 Apr-95 11,080 11,192 May-95 11,457 11,582 Jun-95 11,649 12,029 Jul-95 12,026 12,529 Aug-95 12,118 12,543 Sep-95 12,610 13,121 Oct-95 12,465 13,130 Nov-95 12,983 13,640 Dec-95 13,164 13,719 Jan-96 13,472 14,177 Feb-96 13,631 14,437 Mar-96 13,804 14,455 Apr-96 14,036 14,835 May-96 14,346 15,354 Jun-96 14,330 15,375 Jul-96 13,378 14,474 Aug-96 13,805 14,847 Sep-96 14,650 15,929 Oct-96 14,758 16,025 Nov-96 15,829 17,228 Dec-96 15,569 16,891 Jan-97 16,460 18,075 Feb-97 16,582 17,953 Mar-97 15,801 16,981 Apr-97 16,637 18,109 May-97 17,595 19,416 Jun-97 18,291 20,193 Jul-97 20,057 21,979 Aug-97 19,058 20,692 Sep-97 20,246 21,710 Oct-97 19,430 20,908 Nov-97 20,152 21,796 Dec-97 20,388 22,040 Jan-98 20,933 22,699 Feb-98 22,914 24,407 Mar-98 24,210 25,379 Apr-98 24,394 25,731 May-98 23,867 25,000 Jun-98 25,053 26,532 Jul-98 24,931 26,356 Aug-98 21,027 22,401 Sep-98 22,257 24,121 Oct-98 23,935 26,060 Nov-98 25,836 28,042 Dec-98 28,444 30,571 Jan-99 30,027 32,366 Feb-99 28,581 30,888 Mar-99 29,785 32,514 Apr-99 30,224 32,556 May-99 29,349 31,556 Jun-99 31,535 33,766 Jul-99 30,491 32,693 Aug-99 30,666 33,227 Sep-99 29,963 32,529 Oct-99 31,719 34,985 Nov-99 32,789 36,873 Dec-99 35,289 40,708 Jan-00 33,178 38,799 Feb-00 34,226 40,696 Mar-00 37,877 43,609 Apr-00 36,590 41,534 May-00 35,265 39,442 Jun-00 37,305 42,432 Jul-00 36,093 40,663 Aug-00 39,615 44,344 Sep-00 35,465 40,150 Oct-00 34,411 38,250 Nov-00 29,828 32,612 Dec-00 28,978 31,580 Jan-01 30,656 33,762 Feb-01 25,752 28,030 Mar-01 22,879 24,980 Apr-01 26,025 28,139 May-01 25,717 27,725 Jun-01 25,180 27,083 Jul-01 24,414 26,406 Aug-01 22,648 24,247 Sep-01 20,491 21,826 Oct-01 21,733 22,971 Nov-01 23,818 25,178 Dec-01 23,895 25,130 Jan-02 23,647 24,686 Feb-02 22,686 23,662 Mar-02 23,472 24,480 Apr-02 22,002 22,482 May-02 21,500 21,938 Jun-02 19,647 19,909 Jul-02 18,287 18,814 Aug-02 18,351 18,871 Sep-02 16,431 16,913 Oct-02 17,810 18,465 Nov-02 18,445 19,467 Dec-02 17,248 18,123 Jan-03 16,646 17,683 Feb-03 16,644 17,602 Mar-03 16,928 17,929 Apr-03 18,042 19,255 May-03 18,766 20,216 Jun-03 18,864 20,494 Jul-03 19,205 21,004 Aug-03 19,776 21,527 Sep-03 19,677 21,296 Oct-03 20,905 22,492 Nov-03 21,073 22,728 Dec-03 21,666 23,514 Jan-04 21,907 23,994 Feb-04 21,951 24,147 Mar-04 21,495 23,699 Apr-04 21,004 23,423 May-04 21,382 23,860 Jun-04 21,731 24,158 Jul-04 20,417 22,792 Aug-04 20,246 22,680 Sep-04 20,418 22,895 Oct-04 20,906 23,252 Nov-04 21,874 24,052 Dec-04 22,605 24,995 Value on 12/31/04: - ------------------ $22,605 Large Cap Growth Fund $24,995 Russell 1000(R) Growth Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Microsoft Corp. 3.5% Johnson & Johnson 3.2% Intel Corp. 2.7% Cisco Systems, Inc. 2.7% Dell, Inc. 2.7% Procter & Gamble Co. 2.5% Wal-Mart Stores, Inc. 2.4% Home Depot, Inc. 2.3% AES Corp. 2.2% Yahoo, Inc. 2.2% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Large Cap Russell 1000(R) Growth Fund Growth Index ----------- --------------- 1 Year 4.34% 6.30% 3 Years -1.83% -0.18% 5 Years -8.52% -9.29% 10 Years 8.50% 9.59% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Information Technology 30.8% Consumer Discretionary 20.7% Health Care 12.5% Financials 12.4% Industrials 12.2% Consumer Staples 5.2% Utilities 2.2% Governments 1.8% Energy 1.3% Materials 0.9% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Large Cap Growth Fund Independence Investment LLC Paul F. McManus - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Large Cap Growth Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,040.30 Expense paid per $1,000* $ 4.73 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.50 Expense paid per $1,000* $ 4.68 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $29,790 of securities loaned (Note B)) .............................................. $ 588,699 Net unrealized appreciation of investments ....................... 64,505 Short-term investments at value .................................. 40,442 ---------- Total investments .......................................... 693,646 Receivable for: Fund shares sold .............................................. 122 Dividends ..................................................... 526 ---------- Total assets ..................................................... 694,294 ---------- LIABILITIES Payables for: Collateral for securities on loan ............................. 30,542 Accrued operating expenses .................................... 446 Other payables ................................................ 13 ---------- Total liabilities ................................................ 31,001 ---------- Net assets ....................................................... $ 663,293 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ................................................... 45,866 ---------- Net asset value per share ........................................ $ 14.46 ========== Composition of net assets: Capital paid-in ............................................... $1,007,618 Accumulated net realized loss on investments .................. (408,830) Net unrealized appreciation of investments .................... 64,505 ---------- Net assets ....................................................... $ 663,293 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 274 Dividends ..................................................... 9,100 Securities lending ............................................ 59 ------- Total investment income ............................................. 9,433 ------- EXPENSES Investment advisory fee ....................................... 4,822 Auditors fees ................................................. 81 Custodian fees ................................................ 143 Fidelity Bond fees ............................................ 1 Legal fees .................................................... 101 Printing & mailing fees ....................................... 244 Trustees' fees ................................................ 19 Other fees .................................................... 22 ------- Total expenses ...................................................... 5,433 Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................. (480) ------- Net expenses ........................................................ 4,953 ------- Net investment income ............................................... 4,480 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................. 3,570 Change in unrealized appreciation on Investments ................. 20,299 ------- Net realized and unrealized gain .................................... 23,869 ------- Net increase in net assets resulting from operations ................ $28,349 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Large Cap Growth Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ....................................................... $ 4,480 $ 2,810 Net realized gain (loss) .................................................... 3,570 (28,345) Change in net unrealized appreciation ....................................... 20,299 144,822 --------- -------- Net increase in net assets resulting from operations ..................... 28,349 119,287 Distributions to shareholders from: Net investment income ....................................................... (4,480) (1,489) Capital paid-in ............................................................. -- (2,175) --------- -------- Decrease in net assets resulting from distributions ...................... (4,480) (3,664) From fund share transactions: Proceeds from shares sold ................................................... 77,626 78,014 Shares issued in reorganization ............................................. 51,214 12,462 Distributions reinvested .................................................... 4,480 3,664 Payment for shares redeemed ................................................. (118,297) (81,990) --------- -------- Increase in net assets from fund share transactions ...................... 15,023 12,150 --------- -------- NET INCREASE IN NET ASSETS ..................................................... 38,892 127,773 NET ASSETS Beginning of Period ......................................................... 624,401 496,628 --------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ............................................................ $ 663,293 $624,401 ========= ======== Analysis of fund share transactions: Sold ........................................................................ 5,604 5,685 Issued in reorganization .................................................... 3,808 1,083 Reinvested .................................................................. 320 285 Redeemed .................................................................... (8,602) (6,731) --------- -------- Net increase in fund shares outstanding ........................................ 1,130 322 ========= ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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 Growth Fund -------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------- 2004 2003(e) 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 .......................... 0.10 0.06 0.04 0.04 0.03 Net Realized and Unrealized Gain (Loss) on Investment(a) ............................... 0.50 2.80 (4.36) (3.36) (4.89) -------- -------- -------- -------- ---------- Total From Investment Operations ............... 0.60 2.86 (4.32) (3.32) (4.86) Less Distributions: Distribution from Net Investment Income ........ (0.10) (0.03) (0.04) (0.03) (0.04) Distribution from Net Realized Gains on Investments ................................. (2.69) Distribution from Excess of Net Investment Income/Gains ................................ (0.78) Distribution from Capital Paid-in .............. (0.05) (0.07) -------- -------- -------- -------- ---------- Total Distributions ............................ (0.10) (0.08) (0.04) (0.03) (3.58) -------- -------- -------- -------- ---------- Net Assets Value at End of Period ................. $ 14.46 $ 13.96 $ 11.18 $ 15.54 $ 18.89 ======== ======== ======== ======== ========== Total Investment Return(b) ........................ 4.34% 25.62% (27.82)% (17.54)% (17.89)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ...................................... 0.89%(d) 0.86%(d) 0.55% 0.41% 0.46% Ratio of Net Investment Income to Average Net Assets ...................................... 0.74% 0.51% 0.33% 0.23% 0.10% Portfolio Turnover Rate ........................ 127.93%(c) 99.47%(c) 95.04% 63.96% 89.30% Net Assets End of Period (000s Omitted) ........... $663,293 $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 related to expense offset arrangements. (e) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- LARGE CAP GROWTH FUND Market Name of Issuer Shares Value -------------- --------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.7% Boeing Co. ............................................ 120,900 $ 6,259 United Defense Industries, Inc. * ..................... 204,900 9,682 United Technologies Corp. ............................. 16,700 1,726 ------- 17,667 Air Freight & Couriers - 0.8% Fedex Corp. ........................................... 53,700 5,289 Airlines - 1.3% JetBlue Airways Corp. # * ............................. 382,100 8,872 Auto Components - 1.0% Johnson Controls, Inc. ................................ 104,700 6,642 Chemicals - 0.9% Praxair, Inc. ......................................... 130,700 5,770 Commercial Services & Supplies - 1.0% Automatic Data Processing, Inc. ....................... 56,900 2,524 ITT Educational Services, Inc. # * .................... 82,300 3,913 ------- 6,437 Communications Equipment - 5.5% Cisco Systems, Inc. * ................................. 913,100 17,623 Motorola, Inc. ........................................ 372,100 6,400 Qualcomm, Inc. ........................................ 294,600 12,491 ------- 36,514 Computers & Peripherals - 7.9% Apple Computer, Inc. * ................................ 162,300 10,452 Dell, Inc. * .......................................... 417,400 17,589 EMC Corp. * ........................................... 505,800 7,521 International Business Machines Corp. ................. 128,700 12,688 Network Appliance, Inc. * ............................. 135,400 4,498 ------- 52,748 Diversified Financials - 9.0% American Express Co. .................................. 205,100 11,561 Bear Stearns Cos., Inc. ............................... 39,500 4,041 BlackRock, Inc. # ..................................... 101,600 7,850 Capital One Financial Corp. ........................... 71,000 5,979 Chicago Mercantile Exchange # ......................... 25,600 5,855 Citigroup, Inc. ....................................... 66,700 3,213 Eaton Vance Corp. ..................................... 95,200 4,965 Goldman Sachs Group, Inc. ............................. 88,600 9,218 SLM Corp. ............................................. 128,000 6,834 ------- 59,516 Electric Utilities - 2.2% AES Corp. * ........................................... 1,061,700 14,513 Electronic Equipment & Instruments - 1.6% Ametek, Inc. # ........................................ 126,500 4,512 Vishay Intertechnology, Inc. # * ...................... 394,800 5,930 ------- 10,442 Finance - 0.7% First Marblehead Corp. # * ............................ 88,200 $ 4,961 Health Care Equipment & Supplies - 3.5% C.R. Bard, Inc. ....................................... 104,800 6,705 St. Jude Medical, Inc. * .............................. 176,800 7,413 Stryker Corp. ......................................... 91,600 4,420 Zimmer Holdings, Inc. * ............................... 62,100 4,976 ------- 23,514 Health Care Providers & Services - 1.5% Caremark Rx, Inc. * ................................... 102,700 4,049 UnitedHealth Group, Inc. .............................. 65,100 5,731 ------- 9,780 Hotels Restaurants & Leisure - 5.8% Carnival Corp. ........................................ 190,400 10,973 Las Vegas Sands Corp. * ............................... 96,300 4,622 McDonald's Corp. ...................................... 143,300 4,594 Starwood Hotels & Resorts Worldwide, Inc. ............. 153,700 8,976 Station Casinos, Inc. ................................. 176,500 9,651 ------- 38,816 Household Products - 2.5% Procter & Gamble Co. .................................. 300,700 16,563 Industrial Conglomerates - 2.3% General Electric Co. .................................. 186,500 6,807 Tyco International, Ltd. .............................. 231,800 8,285 ------- 15,092 Insurance - 2.5% AFLAC, Inc. ........................................... 6,400 255 American International Group, Inc. .................... 179,500 11,788 Wellpoint, Inc. * ..................................... 37,300 4,289 ------- 16,332 Internet & Catalog Retail - 1.8% eBay, Inc. * .......................................... 103,100 11,988 Internet Software & Services - 2.6% McAfee, Inc. * ........................................ 95,000 2,749 Yahoo, Inc. * ......................................... 384,800 14,499 ------- 17,248 IT Consulting & Services - 0.5% Affiliated Computer Services, Inc. - Cl. A * .......... 55,500 3,341 Machinery - 3.9% Danaher Corp. # ....................................... 96,200 5,523 Illinois Tool Works, Inc. ............................. 49,000 4,541 Oshkosh Truck Corp. ................................... 111,700 7,638 Pall Corp. ............................................ 288,600 8,355 ------- 26,057 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- LARGE CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Media - 2.0% Getty Images, Inc. * ................................... 77,900 $ 5,363 Lamar Advertising Co. - Cl. A * ........................ 93,700 4,009 The Walt Disney Co. .................................... 132,600 3,686 -------- 13,058 Multiline Retail - 4.6% Nordstrom, Inc. ........................................ 145,200 6,785 Target Corp. ........................................... 146,300 7,598 Wal-Mart Stores, Inc. .................................. 300,000 15,846 -------- 30,229 Oil & Gas - 1.3% EOG Resources, Inc. .................................... 72,800 5,195 Murphy Oil Corp. ....................................... 42,000 3,379 -------- 8,574 Personal Products - 0.8% Estee Lauder Cos., Inc. - Cl. A ........................ 114,000 5,218 Pharmaceuticals - 7.3% Bristol-Myers Squibb Co. ............................... 371,100 9,508 Johnson & Johnson ...................................... 326,300 20,694 Par Pharmaceutical Cos., Inc. # * ...................... 105,800 4,378 Pfizer, Inc. ........................................... 517,200 13,907 -------- 48,487 Semiconductor Equipment & Products - 6.0% Applied Materials, Inc. * .............................. 286,700 4,902 Intel Corp. ............................................ 761,600 17,814 QLogic Corp. * ......................................... 204,800 7,522 Texas Instruments, Inc. ................................ 390,200 9,607 -------- 39,845 Software - 6.2% Gtech Holdings Corp. ................................... 45,500 1,181 Microsoft Corp. ........................................ 847,100 22,626 Oracle Corp. * ......................................... 404,000 5,543 Sap Aktiengesellschaft - ADR # ......................... 66,300 2,931 Symantec Corp. * ....................................... 345,800 8,908 -------- 41,189 Specialty Retail - 4.7% CDW Corp. .............................................. 3,000 199 Chicos Fas, Inc. # * ................................... 64,400 2,932 Home Depot, Inc. ....................................... 351,800 15,036 PETsMart, Inc. ......................................... 222,900 7,919 Sherwin-Williams Co. ................................... 114,400 5,106 -------- 31,192 Textiles & Apparel - 0.5% Coach, Inc. * .......................................... 58,700 3,311 Tobacco - 1.9% Altria Group, Inc. ..................................... 205,200 12,538 U.S. Government Agencies - 1.7% Federal Home Loan Mortgage Corp. ....................... 41,500 $ 3,058 Federal National Mortgage Assoc. ....................... 118,000 8,403 -------- 11,461 -------- TOTAL COMMON STOCK- (Cost $588,699) 98.5% 653,204 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 4.6% State Street Navigator Securities Lending Portfolio............................................ $30,542 30,542 SHORT-TERM INVESTMENTS - 1.5% Investment in joint trading account 2.29% due 01/03/05 (Cost $9,900) ....................................... 9,900 9,900 ------- ------- TOTAL INVESTMENTS- (Cost $629,141) 104.6% 693,646 Payables, less cash and receivables- (4.6)% (30,353) ------- ------- NET ASSETS- 100.0% 663,293 ======= ======= * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Large Cap Growth Fund (the "Fund" or "VST Large Cap Growth") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $3,783 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 December 31, 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 - -------------------------- ------------------- $29,790 $30,542 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $64, $9,020, $219,147, $137,940 and $35,899 which expire in 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred approximately $3,311 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, 2005. Dividend and Interest: 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. 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 year ended December 31, 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 in expenses of $480. 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, which under John Hancock's 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $779,415 $771,651 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $632,589 $78,613 $(17,556) $61,057 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $402,070 $61,057 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital - ---- ------------------ ---------------------- ----------------- 2004 $4,480 $-- $ -- 2003 1,489 -- 2,175 Included in the Fund's 2004 distributions from ordinary income is $667 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed 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: Acquiring Fund Target Fund - -------------------- -------------------------- VST Large Cap Growth John Hancock VA Technology 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 a tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Depreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 1,083 $12,462 $(8,081) $504,397 $516,859
On October 15, 2004, 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 VST Fundamental Growth VST Large Cap Growth VST Large Cap Growth B These combinations provided for the transfer of substantially all of the assets and liabilities of the target funds to the acquiring fund in exchange solely for the fund shares of the acquiring fund. The acquisitions were accounted for as a tax-free exchanges as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION--Continued
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Target Fund Acquiring Fund Net Assets Appreciation to Combination After Combination - --------------- -------------- ----------- ------------ ---------------- -------------------- VST Fundamental Growth 1,730 $23,265 $ 749 $575,514 $598,779 VST Large Cap Growth B 2,078 $27,949 $1,045 $598,779 $626,728
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on October 15, 2004 on the following matters:
For Against Abstain --- ------- ------- To approve, as to the Large Cap Growth Fund, a proposal to combine with the 91% 3% 6% Fundamental Growth Fund of John Hancock Variable Series Trust I. Share holders in the Fundamental Growth Fund would receive Large Cap Growth Fund shares having the same value as their prior Fundamental Growth Fund shares. To approve, as to the Large Cap Growth Fund, a proposal to combine with the 89% 2% 9% Large Cap Growth B Fund of John Hancock Variable Series Trust I. Share holders in the Large Cap Growth B Fund would receive Large Cap Growth Fund shares having the same value as their prior Large Cap Growth B Fund shares.
Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Large Cap Growth Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Large Cap Growth Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Large Cap Value Fund T. Rowe Price Associates, Inc. Brian C. Rogers - -------------------------------------------------------------------------------- .. The Fund employs a bottom-up, value-oriented investment approach, focusing on companies with above-average dividend yields and low P/E ratios. The Fund's sector allocations are broadly diversified but are driven primarily by stock selection. Fund Commentary Performance: For the year 2004, the Large Cap Value Fund returned +15.00%, underperforming the +16.49% return of the Russell 1000 Value Index. Environment: U.S. stocks posted their second consecutive year of gains for the first time since 1998-1999. Value shares outstripped growth by an impressive margin in 2004, while small- and mid-cap stocks outpaced large-company shares. The past year ended on a positive note as consumer confidence recovered. The weakness in recent months was most likely related to uncertainty about employment prospects, spiking oil prices and uneasiness surrounding the election -- concerns that moderated during the final weeks of the year. The Fund posted strong absolute results but trailed the Russell 1000 Value Index for the year due mainly to stock selection in the Financials sector and an overweight in Consumer Discretionary stocks. Within the Consumer Discretionary sector, newspaper stocks were hurt because of sluggish advertising trends. Health Care was another problematic area, as pharmaceutical stocks were negatively affected by limited growth prospects, generic competitive pressures, and well-publicized safety problems with high-profile drugs. However, good stock selection provided a partial offset, adding to relative results. Outlook: We are cautious heading into 2005. The market is fairly valued, and the corporate profit outlook appears to be moderating. Earnings have reached record levels over the past year, and profit growth will likely be pressured by relatively high energy prices and higher short-term interest rates. Additionally, the trade and budget deficits, along with the ongoing war in Iraq, could make for a tougher environment. Nevertheless, we continue to view the economic environment as favorable. Corporate balance sheets appear strong with healthy levels of cash, and value stocks should benefit from favorable tax treatments for dividends and capital gains. [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/96 (Fund Inception date) Large Cap Value Fund Russell 1000(R) Value Index -------------------- --------------------------- Apr-1996 $10,000 $10,000 May-1996 10,190 10,125 Jun-1996 10,255 10,133 Jul-1996 9,977 9,750 Aug-1996 10,186 10,029 Sep-1996 10,618 10,428 Oct-1996 10,860 10,831 Nov-1996 11,451 11,616 Dec-1996 11,391 11,468 Jan-1997 11,699 12,024 Feb-1997 11,979 12,201 Mar-1997 11,724 11,762 Apr-1997 12,016 12,256 May-1997 12,582 12,941 Jun-1997 13,059 13,496 Jul-1997 13,805 14,511 Aug-1997 13,447 13,994 Sep-1997 14,081 14,840 Oct-1997 13,703 14,425 Nov-1997 14,220 15,063 Dec-1997 14,644 15,503 Jan-1998 14,539 15,283 Feb-1998 15,250 16,312 Mar-1998 15,954 17,310 Apr-1998 15,869 17,426 May-1998 15,598 17,167 Jun-1998 15,561 17,387 Jul-1998 15,107 17,081 Aug-1998 13,634 14,539 Sep-1998 14,373 15,373 Oct-1998 15,261 16,564 Nov-1998 15,884 17,336 Dec-1998 15,999 17,926 Jan-1999 15,600 18,069 Feb-1999 15,470 17,814 Mar-1999 15,889 18,183 Apr-1999 17,601 19,881 May-1999 17,469 19,662 Jun-1999 17,932 20,233 Jul-1999 17,538 19,641 Aug-1999 17,003 18,912 Sep-1999 16,394 18,251 Oct-1999 16,974 19,301 Nov-1999 16,678 19,151 Dec-1999 16,524 19,243 Jan-2000 15,752 18,615 Feb-2000 14,461 17,232 Mar-2000 16,067 19,335 Apr-2000 16,209 19,110 May-2000 16,987 19,311 Jun-2000 16,141 18,429 Jul-2000 16,308 18,659 Aug-2000 17,100 19,697 Sep-2000 17,218 19,878 Oct-2000 18,044 20,366 Nov-2000 17,845 19,610 Dec-2000 18,667 20,593 Jan-2001 18,863 20,672 Feb-2001 18,597 20,097 Mar-2001 18,092 19,387 Apr-2001 18,861 20,337 May-2001 19,494 20,794 Jun-2001 19,104 20,333 Jul-2001 19,166 20,290 Aug-2001 18,813 19,477 Sep-2001 17,551 18,106 Oct-2001 17,547 17,950 Nov-2001 18,573 18,994 Dec-2001 18,900 19,441 Jan-2002 18,872 19,291 Feb-2002 19,145 19,323 Mar-2002 19,744 20,237 Apr-2002 19,187 19,543 May-2002 19,399 19,640 Jun-2002 18,172 18,513 Jul-2002 16,596 16,792 Aug-2002 16,778 16,919 Sep-2002 15,033 15,037 Oct-2002 15,970 16,152 Nov-2002 17,102 17,169 Dec-2002 16,397 16,423 Jan-2003 15,898 16,026 Feb-2003 15,365 15,598 Mar-2003 15,395 15,624 Apr-2003 16,750 17,000 May-2003 17,811 18,097 Jun-2003 17,972 18,323 Jul-2003 18,078 18,596 Aug-2003 18,397 18,886 Sep-2003 18,231 18,702 Oct-2003 19,146 19,846 Nov-2003 19,236 20,115 Dec-2003 20,580 21,355 Jan-2004 20,909 21,731 Feb-2004 21,345 22,196 Mar-2004 20,952 22,002 Apr-2004 20,854 21,464 May-2004 20,949 21,683 Jun-2004 21,508 22,196 Jul-2004 21,096 21,883 Aug-2004 21,314 22,194 Sep-2004 21,660 22,538 Oct-2004 21,887 22,913 Nov-2004 22,839 24,071 Dec-2004 23,668 24,877 Value on 12/31/04: - ------------------ $23,668 Large Cap Value Fund $24,877 Russell 1000(R) Value Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- General Electric Co. 2.1% JP Morgan Chase & Co. 2.0% Exxon Mobil Corp. 1.9% ChevronTexaco Corp. 1.8% Marsh & McLennan Cos., Inc. 1.7% Viacom, Inc. 1.7% Merck & Co., Inc. 1.6% Royal Dutch Petroleum Co. 1.5% Bank of America Corp. 1.5% Honeywell International, Inc. 1.5% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Large Cap Russell 1000(R) Value Fund Value Index ---------- --------------- 1 Year 15.00% 16.49% 3 Years 7.79% 8.57% 5 Years 7.45% 5.27% Since Inception (5/1/96) 10.44% 11.09% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 19.9% Consumer Discretionary 16.1% Industrials 13.5% Health Care 9.7% Energy 9.3% Consumer Staples 7.9% Materials 6.6% Telecommunication Services 6.2% Information Technology 5.2% Utilities 4.9% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Large Cap Value Fund T. Rowe Price Associates, Inc. Brian C. Rogers - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Large Cap Value Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,100.40 Expense paid per $1,000* $ 4.36 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.99 Expense paid per $1,000* $ 4.19 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted) ASSETS Long term investments at cost (including $45,773 of securities loaned (Note B)) ...................................... $370,368 Net unrealized appreciation of investments .......................... 65,663 Short-term investments at value ..................................... 64,560 -------- Total investments ............................................. 500,591 Receivable for: Investments sold ................................................. 1,787 Fund shares sold ................................................. 178 Interest ......................................................... 51 Dividends ........................................................ 760 Foreign dividend tax withholdings reclaim ........................ 14 -------- Total assets ........................................................ 503,381 -------- LIABILITIES Payables for: Investments purchased ............................................ 324 Foreign dividend tax withholding ................................. 1 Collateral for securities on loan ................................ 46,904 Accrued operating expenses ....................................... 138 -------- Total liabilities ................................................... 47,367 -------- Net assets .......................................................... $456,014 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 28,654 -------- Net asset value per share ........................................... $ 15.91 ======== Composition of net assets: Capital paid-in .................................................. $389,409 Accumulated net realized gain on investments and foreign currency transactions ................................. 932 Undistributed net investment income .............................. 10 Net unrealized appreciation of investments ....................... 65,663 -------- Net assets .......................................................... $456,014 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 381 Dividends (net of foreign withholding tax of $71) 9,432 Securities lending ............................................... 20 ------- Total investment income ............................................. 9,833 ------- EXPENSES Investment advisory fee .......................................... 3,043 Auditors fees .................................................... 48 Custodian fees ................................................... 108 Fidelity Bond fees ............................................... 1 Legal fees ....................................................... 61 Printing & mailing fees .......................................... 61 Trustees' fees ................................................... 11 Other fees ....................................................... 13 ------- Total expenses ...................................................... 3,346 Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (44) ------- Net expenses ........................................................ 3,302 ------- Net investment income ............................................... 6,531 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 14,132 Foreign currency transactions ................................. (27) Change in unrealized appreciation on: Investments ................................................... 37,125 ------- Net realized and unrealized gain .................................... 51,230 ------- Net increase in net assets resulting from operations ................ $57,761 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Large Cap Value Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .................................... $ 6,531 $ 5,467 Net realized gain ........................................ 14,105 5,115 Change in net unrealized appreciation .................... 37,125 61,944 -------- -------- Net increase in net assets resulting from operations .. 57,761 72,526 Distributions to shareholders from: Net investment income .................................... (6,530) (5,790) Realized gains ........................................... (12,780) (5,006) -------- -------- Decrease in net assets resulting from distributions ... (19,310) (10,796) From fund share transactions: Proceeds from shares sold ................................ 131,687 120,218 Distributions reinvested ................................. 19,310 10,796 Payment for shares redeemed .............................. (98,997) (87,322) -------- -------- Increase in net assets from fund share transactions ... 52,000 43,692 -------- -------- NET INCREASE IN NET ASSETS .................................. 90,451 105,422 NET ASSETS Beginning of Period ...................................... 365,563 260,141 -------- -------- End of Period (including undistributed net investment income of $10 and $123, respectively) ................. $456,014 $365,563 ======== ======== Analysis of fund share transactions: Sold ..................................................... 8,815 9,472 Reinvested ............................................... 1,234 801 Redeemed ................................................. (6,672) (6,839) -------- -------- Net increase in fund shares outstanding ..................... 3,377 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 ----------------------------------------------------------- Year Ended December 31, ----------------------------------------------------------- 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 ........................................ 0.24 0.23 0.22 0.22 0.27 Net Realized and Unrealized Gain (Loss) on Investment(a) ..... 1.91 2.76 (2.07) (0.05) 1.45 -------- -------- -------- -------- -------- Total From Investment Operations ............................. 2.15 2.99 (1.85) 0.17 1.72 Less Distributions: Distribution from Net Investment Income ...................... (0.24) (0.24) (0.22) (0.22) (0.28) Distribution from Net Realized Gains on Investments .......... (0.46) (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 .......................................... (0.70) (0.44) (0.39) (0.40) (0.83) -------- -------- -------- -------- -------- Net Assets Value at End of Period ............................... $ 15.91 $ 14.46 $ 11.91 $ 14.15 $ 14.38 ======== ======== ======== ======== ======== Total Investment Return(b) ...................................... 15.00% 25.51% (13.24)% 1.25% 12.97% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............. 0.83%(c) 0.82%(c) 0.83% 0.82% 0.78% Ratio of Net Investment Income to Average Net Assets ......... 1.61% 1.83% 1.67% 1.54% 2.04% Portfolio Turnover Rate ...................................... 26.42% 17.73% 16.04% 18.19% 42.12% Net Assets End of Period (000s Omitted) ......................... $456,014 $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. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.7% Lockheed Martin Corp. .................................. 77,000 $ 4,277 Raytheon Co. ........................................... 107,800 4,186 Rockwell Collins, Inc. ................................. 97,700 3,853 ------- 12,316 Banks - 7.1% AmSouth Bancorp. # ..................................... 11,700 303 Bank of America Corp. .................................. 136,424 6,411 Bank of Ireland * ...................................... 130,300 2,147 JP Morgan Chase & Co. .................................. 225,286 8,787 Mellon Financial Corp. ................................. 134,100 4,172 Mercantile Bankshares Corp. ............................ 35,700 1,864 National City Corp. .................................... 54,100 2,031 Northern Trust Corp. # ................................. 33,600 1,632 Suntrust Banks, Inc. ................................... 55,500 4,100 Wilmington Trust Corp. ................................. 27,100 980 ------- 32,427 Beverages - 1.4% Coca-Cola Co. .......................................... 144,800 6,028 Coca-Cola Enterprises, Inc. ............................ 6,400 133 ------- 6,161 Biotechnology - 0.7% Chiron Corp. * ......................................... 3,100 104 MedImmune, Inc. * ...................................... 120,000 3,253 ------- 3,357 Chemicals - 3.0% Dow Chemical Co. ....................................... 89,400 4,426 E.I. du Pont de Nemours & Co. .......................... 75,800 3,718 Great Lakes Chemical Corp. ............................. 62,300 1,775 Hercules, Inc. * ....................................... 104,100 1,546 International Flavors & Fragrances, Inc. ............... 50,400 2,159 ------- 13,624 Commercial Services & Supplies - 1.4% Cendant Corp. .......................................... 88,700 2,074 Dun & Bradstreet Corp. * .............................. 6,200 370 Waste Management, Inc. ................................. 134,090 4,014 ------- 6,458 Communications Equipment - 1.6% Lucent Technologies, Inc. # * .......................... 256,000 962 Motorola, Inc. ......................................... 202,200 3,478 Nokia Oyj - ADR ........................................ 186,700 2,926 ------- 7,366 Computers & Peripherals - 0.8% Hewlett-Packard Co. .................................... 179,488 3,764 Construction Materials - 0.5% Vulcan Materials Co. # ................................. 44,700 2,441 Diversified Financials - 4.2% American Express Co. ................................... 63,200 3,563 Charles Schwab Corp. ................................... 402,200 $ 4,810 Citigroup, Inc. ........................................ 55,066 2,653 Janus Capgroup, Inc. # ................................. 51,500 866 Morgan Stanley, Dean Witter, Discover & Co. ............ 89,400 4,963 Wells Fargo & Co. ...................................... 32,900 2,045 ------- 18,900 Diversified Telecommunication Services - 5.9% Alltel Corp. ........................................... 70,600 4,149 AT&T Corp. # ........................................... 160,920 3,066 Qwest Communications International, Inc.* ............. 820,100 3,641 SBC Communications, Inc. ............................... 152,555 3,932 Sprint Corp. ........................................... 216,900 5,390 Telus Corp. ............................................ 20,500 617 Telus Corp. ............................................ 29,900 864 Verizon Communications ................................. 132,516 5,368 ------- 27,027 Electric Utilities - 2.7% Constellation Energy Group, Inc. ....................... 77,300 3,379 Firstenergy Corp. ...................................... 61,500 2,430 Progress Energy, Inc. # ................................ 32,000 1,448 Teco Energy, Inc. # .................................... 64,100 983 TXU Corp. # ............................................ 25,200 1,627 Xcel Energy, Inc. # .................................... 122,200 2,224 ------- 12,091 Electric/Gas - 1.0% Duke Energy Co. ........................................ 179,100 4,537 Electrical Equipment - 1.8% Cooper Industries, Ltd. - Cl. A ........................ 57,400 3,897 Emerson Electric Co. ................................... 26,200 1,837 Rockwell International Corp. ........................... 50,500 2,502 ------- 8,236 Electronic Equipment & Instruments - 0.0% Agilent Technologies, Inc. * ........................... 5,400 130 Energy Equipment & Services - 0.7% Baker Hughes, Inc. ..................................... 24,900 1,063 Schlumberger, Ltd. ..................................... 31,700 2,122 ------- 3,185 Finance - 2.7% Dow Jones & Co., Inc. # ................................ 114,200 4,918 Marsh & McLennan Cos., Inc. ............................ 229,800 7,560 ------- 12,478 Food Products - 2.6% Campbell Soup Co. ...................................... 126,400 3,778 ConAgra, Inc. .......................................... 63,800 1,879 General Mills, Inc. .................................... 76,700 3,813 Unilever NV * .......................................... 36,100 2,410 ------- 11,880 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Health Care Equipment & Supplies - 0.8% Baxter International, Inc. .............................. 108,100 $ 3,734 Health Care Providers & Services - 1.0% Cardinal Health, Inc. ................................... 50,400 2,931 CIGNA Corp. ............................................. 16,600 1,354 ------- 4,285 Hotels Restaurants & Leisure - 1.9% Hilton Hotels Corp. ..................................... 127,200 2,893 McDonald's Corp. ........................................ 100,700 3,228 Starwood Hotels & Resorts Worldwide, Inc. ............... 42,400 2,476 ------- 8,597 Household Durables - 2.9% Fortune Brands, Inc. .................................... 46,300 3,573 Newell Rubbermaid, Inc. # ............................... 191,500 4,632 Sony Corp. * ............................................ 58,000 2,236 Whirlpool Corp. ......................................... 38,300 2,651 ------- 13,092 Household Products - 2.5% Clorox Co. .............................................. 32,700 1,927 Colgate-Palmolive Co. ................................... 108,500 5,551 Kimberly-Clark Corp. .................................... 56,400 3,712 ------- 11,190 Industrial Conglomerates - 3.4% General Electric Co. .................................... 252,900 9,231 Honeywell International, Inc. ........................... 179,100 6,342 ------- 15,573 Insurance - 4.5% Chubb Corp. ............................................. 41,200 3,168 Lincoln National Corp. .................................. 76,631 3,577 Safeco Corp. # .......................................... 73,500 3,840 St. Paul Cos., Inc. ..................................... 99,836 3,701 Unumprovident Corp. * ................................... 39,700 1,221 UnumProvident Corp. # ................................... 168,000 3,014 XL Capital, Ltd. - Cl. A ................................ 25,800 2,003 ------- 20,524 Leisure Equipment & Products - 2.0% Eastman Kodak Co. # ..................................... 134,700 4,344 Mattel, Inc. ............................................ 245,100 4,777 ------- 9,121 Machinery - 0.7% Pall Corp. .............................................. 116,400 3,370 Media - 7.2% Comcast Corp. - Cl. A * ................................. 186,081 6,193 Knight-Ridder, Inc. ..................................... 38,900 2,604 New York Times Co. - Cl. A # ............................ 151,700 6,189 The Walt Disney Co. ..................................... 171,900 4,779 Time Warner, Inc. * ..................................... 295,600 5,746 Viacom, Inc. - Cl. B .................................... 201,400 $ 7,329 ------- 32,840 Metals & Mining - 1.0% Alcoa, Inc. ............................................. 81,300 2,555 Nucor Corp. # ........................................... 34,800 1,821 ------- 4,376 Multi-Utilities - 1.0% NiSource, Inc. .......................................... 205,200 4,674 Multiline Retail - 0.5% May Department Stores Co. ............................... 74,650 2,195 Oil & Gas - 8.2% Amerada Hess Corp. ...................................... 57,500 4,737 Anadarko Petroleum Corp. ................................ 48,400 3,137 BP Amoco plc - ADR ...................................... 74,332 4,341 ChevronTexaco Corp. .................................... 151,626 7,962 Exxon Mobil Corp. ....................................... 159,534 8,178 Royal Dutch Petroleum Co. # ............................. 113,700 6,524 Unocal Corp. ............................................ 57,900 2,503 ------- 37,382 Paper & Forest Products - 1.8% International Paper Co. ................................. 127,670 5,362 MeadWestvaco Corp. ...................................... 83,700 2,837 ------- 8,199 Pharmaceuticals - 6.8% Abbott Laboratories ..................................... 76,600 3,573 Bristol-Myers Squibb Co. ................................ 222,900 5,711 Johnson & Johnson ....................................... 92,500 5,866 Merck & Co., Inc. ....................................... 219,500 7,055 Schering-Plough Corp. ................................... 166,500 3,476 Wyeth ................................................... 123,800 5,273 ------- 30,954 Real Estate Investment Trust - 0.5% Simon Property Group, Inc. .............................. 37,900 2,451 Road & Rail - 2.0% Norfolk Southern Corp. .................................. 88,400 3,199 Union Pacific Corp. ..................................... 86,100 5,790 ------- 8,989 Semiconductor Equipment & Products - 1.2% Freescale Semiconductor, Inc. - Cl. B * ................. 11,242 206 Intel Corp. ............................................. 68,100 1,593 Texas Instruments, Inc. ................................. 154,500 3,804 ------- 5,603 Software - 0.9% Microsoft Corp. ......................................... 157,600 4,209 Specialty Retail - 0.8% Home Depot, Inc. ........................................ 81,700 3,492 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- LARGE CAP VALUE FUND Market Name of Issuer Shares Value -------------- -------- -------- (000's) COMMON STOCK - Continued Tobacco - 1.2% Altria Group, Inc. ................................... 38,500 $ 2,352 UST, Inc. ............................................ 64,300 3,094 -------- 5,446 Trading Companies & Distributors - 0.8% Genuine Parts Co. .................................... 85,400 3,763 U.S. Government Agencies - 0.7% Federal National Mortgage Assoc. ..................... 43,800 3,119 -------- TOTAL COMMON STOCK- (Cost $368,355) 95.1% 433,556 PREFERRED STOCK Automobiles - 0.1% Ford Motor Co. Capital Trust II # .................... 766 -------- TOTAL PREFERRED STOCK- (Cost $725) 0.1% 766 Par Value ------- (000's) PUBLICLY-TRADED BONDS Communications Equipment - 0.4% Lucent Technologies, Inc. - Sub. Debs. # 8.0% due 08/01/31 .................................... $ 1,535 1,709 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $1,288) 0.4% 1,709 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 10.3% State Street Navigator Securities Lending Portfolio .. 46,904 46,904 SHORT-TERM INVESTMENTS - 3.9% Investment in joint trading account 2.29% due 01/03/05 (Cost $17,656) .................................... 17,656 17,656 ------- -------- TOTAL INVESTMENTS- (Cost $434,928) 109.8% 500,591 Payables, less cash and receivables- (9.8)% (44,577) ------- -------- NET ASSETS- 100.0% $456,014 ======= ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETFs in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 year ended December 31, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 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 - -------------------------- ------------------- $45,773 $46,904 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, 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, 2004, 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $71. Realized gains and losses from security transactions are determined on the basis of identified cost. 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 0.75% on an annual basis of the Fund's net assets. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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. For the year ended December 31, 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 in expenses of $44. John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price Associates, Inc., which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $133,275 $102,807 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $437,465 $75,257 $(12,131) $63,126 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $899 $2,579 $-- $63,126 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 - ---- ------------------ ---------------------- ----------------- 2004 $9,564 $9,746 $-- 2003 8,294 2,502 -- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Large Cap Value Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Large Cap Value Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 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. .. Independence Investment LLC has a target mix of 60% stocks and 40% bonds and selects securities using fundamental research and quantitative portfolio construction. .. Capital Guardian Trust Company 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. Fund Commentary Overall Performance: For the year ending December 31, 2004, the Managed Fund returned +8.18%, underperforming the +8.29% return of the combined benchmark 60% S&P 500 Index/40% Lehman Brothers Aggregate Bond. Independence Investment LLC Equity Environment: The large cap equity markets struggled through much of 2004, but finished in positive territory with a very solid fourth quarter. Throughout most of the year, investor sentiment was muted by fears of terrorism, the maturing economic recovery, higher energy prices, and the uncertainty of the Presidential election. Oil was the big story of 2004 climbing throughout most of the year to record high prices. Although energy prices tailed off in time for the holiday spending season, consumer spending was pinched by these prices. Energy was the best performing sector for the year, followed by utilities. With the decline in oil prices in Q4, as well as a stronger corporate and consumer picture, the equity markets regained traction. The Independence portion of the Managed Fund underperformed earlier in the year but came back strong in the fourth quarter. For 2004, stock selection in utilities, healthcare and industrials was strong while stock selection in consumer discretionary detracted from performance. Sector weightings in technology detracted while an underweight in consumer staples added to performance. Equity Outlook: Overall, our forecast for U.S. stock performance in 2005 is favorable. We expect continued recovery in corporate spending, an improved employment picture, and a healthy consumer to drive stocks higher. We stay attuned to potential risks including weakness in the US dollar, accelerating inflation, and an increase in bond yields. Fixed Income Environment: Although early signs reminiscent of 1994 emerged in April, the bond market remained resilient throughout the year. Paradoxically, long-term interest rates finished the year lower in an interest rate-tightening environment. The 10-Year Treasury ended the year virtually unchanged in yield, while short-term rates rose by nearly a full percentage point. Benign inflation and concerns of chronic fatigue in the labor market kept a lid on interest rates, while the Federal Reserve lifted short-term rates higher. Despite some volatile labor market numbers, other cyclical economic indicators reaffirmed the economy's growth. There were several economic hurdles, notably investor paranoia over slower growth expectations, higher energy prices, the falling U.S. dollar, concerns over higher interest rates, geopolitical issues and slower growth in Asia. However, most spread sectors performed well as underlying improving fundamentals and strong market technicals pushed spreads tighter. Corporate bonds were the best performer. The portfolio remained overweight in corporate credit, and benefited from having a high concentration in lower rated bonds. Larger weightings in media/cable, telecommunications, energy, utilities and consumer cyclicals added to performance. Asset Backed Securities and Commercial Mortgage Backed Securities had strong performance. We remained overweight and benefited from owning a higher concentration of home equity bonds. Fixed Income Outlook: The economy is poised for gradual growth, but there are lingering issues. The Fed is still in tightening mode. Oil prices remain high, but so far this has been moderately absorbed by consumers and some industries. The falling dollar remains a concern. Interest rates will probably trend higher. Corporate bonds should still benefit from improving fundamentals and positive technicals, but profit taking could lead to short-term spread widening. The mortgage market looks relatively expensive and unattractive. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Managed Fund Independence Investment LLC J. Forelli/J. Shallcross Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- Capital Guardian Trust Company Environment: The fund benefited during the year from being overweight equities relative to the benchmark weight as stocks outperformed bonds by a wide margin. The equity portion of the fund benefited from stock selection in financials, telecomm services and consumer staples as well as from being underweight information technology, which underperformed the market for the year. From a market capitalization perspective, being underweight the largest companies in the index was a major contributor to overall returns as smaller to mid-capitalization names outperformed the mega-cap stocks for the year. Detracting from equity returns in 2004 was stock selection in health care, consumer discretionary and materials. Within the fixed-income portfolio, the fund benefited from its allocation to lower-rated bonds and from being bulleted relative to the index along the yield curve. Detracting somewhat from results within the bond portfolio was issue selection within automobiles, electronic equipment & instruments and private label mortgage bonds. Outlook: Our overweight position in equities is partially due to a somewhat negative outlook for bonds. We remain concerned about the risk of rising interest rates in the U.S. and therefore are slightly short duration within bond portfolios. Goods price inflation has turned positive for the first time in three years and the Federal Reserve is poised to continue tightening monetary policy, though it has indicated it will do this in a measured way. [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/93 (10-year period) Managed Fund Managed Benchmark (1) ------------ --------------------- 12/31/1994 $10,000 $10,000 01/31/1995 10,188 10,229 02/28/1995 10,493 10,549 03/31/1995 10,630 10,737 04/30/1995 10,866 10,969 05/31/1995 11,283 11,398 06/30/1995 11,448 11,573 07/31/1995 11,630 11,754 08/31/1995 11,769 11,841 09/30/1995 12,118 12,146 10/31/1995 12,142 12,203 11/30/1995 12,532 12,563 12/31/1995 12,709 12,767 01/31/1996 12,905 13,029 02/29/1996 12,851 12,978 03/31/1996 12,865 12,995 04/30/1996 12,892 13,054 05/31/1996 13,046 13,210 06/30/1996 13,171 13,326 07/31/1996 12,882 13,048 08/31/1996 12,993 13,175 09/30/1996 13,400 13,660 10/31/1996 13,727 13,999 11/30/1996 14,254 14,650 12/31/1996 14,071 14,439 01/31/1997 14,405 14,910 02/28/1997 14,455 14,989 03/31/1997 14,118 14,593 04/30/1997 14,500 15,139 05/31/1997 14,920 15,676 06/30/1997 15,324 16,120 07/31/1997 16,190 16,977 08/31/1997 15,732 16,434 09/30/1997 16,260 17,006 10/31/1997 16,099 16,846 11/30/1997 16,484 17,274 12/31/1997 16,708 17,509 01/31/1998 16,893 17,716 02/28/1998 17,660 18,477 03/31/1998 18,313 19,071 04/30/1998 18,437 19,225 05/31/1998 18,377 19,100 06/30/1998 18,894 19,631 07/31/1998 18,698 19,521 08/31/1998 16,947 17,956 09/30/1998 17,530 18,814 10/31/1998 18,462 19,692 11/30/1998 19,233 20,453 12/31/1998 20,119 21,185 01/31/1999 20,424 21,776 02/28/1999 19,868 21,218 03/31/1999 20,291 21,774 04/30/1999 20,876 22,308 05/31/1999 20,546 21,913 06/30/1999 21,275 22,614 07/31/1999 20,829 22,153 08/31/1999 20,699 22,082 09/30/1999 20,436 21,821 10/31/1999 21,227 22,681 11/30/1999 21,363 22,958 12/31/1999 21,950 23,725 01/31/2000 21,129 22,977 02/29/2000 20,842 22,828 03/31/2000 22,343 24,289 04/30/2000 22,012 23,823 05/31/2000 21,821 23,525 06/30/2000 22,216 24,068 07/31/2000 22,097 23,931 08/31/2000 23,108 24,962 09/30/2000 22,394 24,234 10/31/2000 22,511 24,236 11/30/2000 21,560 23,250 12/31/2000 21,955 23,491 01/31/2001 22,507 24,144 02/28/2001 21,443 22,908 03/31/2001 20,621 22,084 04/30/2001 21,773 23,075 05/31/2001 21,917 23,223 06/30/2001 21,575 22,919 07/31/2001 21,566 22,990 08/31/2001 20,815 22,231 09/30/2001 19,788 21,257 10/31/2001 20,261 21,678 11/30/2001 21,208 22,556 12/31/2001 21,331 22,617 01/31/2002 21,172 22,493 02/28/2002 20,871 22,319 03/31/2002 21,337 22,674 04/30/2002 20,717 22,026 05/31/2002 20,629 22,004 06/30/2002 19,672 21,139 07/31/2002 18,597 20,253 08/31/2002 18,756 20,470 09/30/2002 17,525 19,268 10/31/2002 18,421 20,251 11/30/2002 19,122 20,964 12/31/2002 18,509 20,398 01/31/2003 18,167 20,084 02/28/2003 18,132 20,013 03/31/2003 18,264 20,124 04/30/2003 19,243 21,186 05/30/2003 19,957 22,014 06/30/2003 20,056 22,166 07/31/2003 20,084 22,102 08/31/2003 20,437 22,418 09/30/2003 20,521 22,512 10/31/2003 21,198 23,192 11/30/2003 21,298 23,336 12/31/2003 22,026 24,164 01/31/2004 22,379 24,507 02/28/2004 22,667 24,819 03/31/2004 22,502 24,667 04/30/2004 21,957 24,179 05/30/2004 22,109 24,339 06/30/2004 22,415 24,677 07/31/2004 21,952 24,284 08/31/2004 22,062 24,527 09/30/2004 22,252 24,714 10/31/2004 22,519 25,024 11/30/2004 23,186 25,552 12/31/2004 23,828 26,167 Value on 12/31/04: - ------------------ $23,828 Managed Fund $26,167 Managed Benchmark (1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Federal National Mortgage Assoc. 11.9% General Electric Co. 2.4% U.S. Treasury 2.1% Citigroup, Inc. 1.8% Exxon Mobil Corp. 1.6% Microsoft Corp. 1.5% Johnson & Johnson 1.5% Federal Home Loan Mortgage Corp. 1.2% JP Morgan Chase & Co. 1.1% Bank of America Corp. 1.1% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Managed Managed Fund Fund Benchmark/1/ ------- ------------ 1 Year 8.18% 8.29% 3 Years 3.76% 4.98% 5 Years 1.66% 1.98% 10 Years 9.07% 10.10% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 25.8% Governments 15.7% Consumer Discretionary 10.6% Information Technology 10.4% Industrials 9.4% Health Care 8.8% Energy 5.9% Consumer Staples 4.2% Utilities 4.0% Telecommunication Services 2.8% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Managed Fund Benchmark represents 50% S&P 500/50% Lehman Brothers Aggregate Bond Index from April 1986 to December 1997, then 60% S&P 500/40% Lehman Brothers Aggregate Bond Index from 1998 to present. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Managed Fund Independence Investment LLC J. Forelli/J. Shallcross Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Managed Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,063.00 Expense paid per $1,000* $ 3.94 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,021.32 Expense paid per $1,000* $ 3.86 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Managed Fund (000's Omitted) ASSETS Long term investments at cost (including $90,783 of securities loaned (Note B)) ............................................. $1,836,426 Net unrealized appreciation of investments ...................... 224,570 Short-term investments at value ................................. 273,080 ---------- Total investments ......................................... 2,334,076 Cash ............................................................ 110 Receivable for: Investments sold ............................................. 1,144 Interest ..................................................... 6,020 Dividends .................................................... 2,297 Foreign dividend tax withholding reclaim ..................... 7 Other receivables ............................................ 2 ---------- Total assets .................................................... 2,343,656 ---------- LIABILITIES Payables for: Investments purchased ........................................ 170,454 Fund shares purchased ........................................ 210 Collateral for securities on loan ............................ 92,803 Accrued operating expenses ................................... 960 Other payables ............................................... 1 ---------- Total liabilities ............................................... 264,428 ---------- Net assets ...................................................... $2,079,228 ========== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .................................................. 153,060 ---------- Net asset value per share ....................................... $ 13.58 ========== Composition of net assets: Capital paid-in .............................................. $1,961,999 Accumulated net realized loss on investments and futures transactions .............................................. (107,341) Net unrealized appreciation of investments ................... 224,570 ---------- Net assets ...................................................... $2,079,228 ========== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Managed Fund (000's Omitted) INVESTMENT INCOME Interest .................................................. $ 28,801 Dividends (net of foreign withholding tax of $92) ......... 24,496 Securities lending ........................................ 148 ---------- Total investment income ......................................... 53,445 ---------- EXPENSES Investment advisory fee ................................... 13,922 Auditors fees ............................................. 279 Custodian fees ............................................ 664 Fidelity Bond fees ........................................ 5 Legal fees ................................................ 344 Printing & mailing fees ................................... 344 Trustees' fees ............................................ 62 Other fees ................................................ 59 ---------- Total expenses .................................................. 15,679 Less custodian expense reduction offset by commission recapture arrangement (Note C) .............. (522) ---------- Net expenses .................................................... 15,157 ---------- Net investment income ........................................... 38,288 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ............................................... 105,891 Financial futures contracts ............................... (198) Change in unrealized appreciation on investments .......... 16,108 ---------- Net realized and unrealized gain ................................ 121,801 ---------- Net increase in net assets resulting from operations ............ $ 160,089 ========== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Managed Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE(DECREASE) IN NET ASSETS From operations Net investment income .................................................... $ 38,288 $ 34,274 Net realized gain (loss) ................................................. 105,693 (6,738) Change in net unrealized appreciation .................................... 16,108 314,071 ---------- ---------- Net increase in net assets resulting from operations .................. 160,089 341,607 Distributions to shareholders from: Net investment income .................................................... (38,760) (63,275) Capital paid-in .......................................................... (8,852) ---------- ---------- Decrease in net assets resulting from distributions ................... (38,760) (72,127) From fund share transactions: Proceeds from shares sold ................................................ 121,173 80,229 Distributions reinvested ................................................. 38,760 72,127 Payment for shares redeemed .............................................. (272,779) (287,955) ---------- ---------- Decrease in net assets from fund share transactions ................... (112,846) (135,599) ---------- ---------- NET INCREASE IN NET ASSETS .................................................. 8,483 133,881 NET ASSETS Beginning of Period ...................................................... 2,070,745 1,936,864 ---------- ---------- End of Period (including undistributed net investment income of $0 and $0, respectively) ......................................................... $2,079,228 $2,070,745 ========== ========== Analysis of fund share transactions: Sold ..................................................................... 9,359 6,753 Reinvested ............................................................... 2,978 5,842 Redeemed ................................................................. (21,099) (24,528) ---------- ---------- Decrease in fund shares outstanding ......................................... (8,762) (11,933) ========== ==========
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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 ------------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------------ 2004 2003(g) 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 ...................... 0.23 0.21 0.21 0.28 0.44 Net Realized and Unrealized Gain (Loss) on Investment(a) ........................ 0.80 1.89 (1.93) (0.67) (0.45) ---------- ---------- ---------- ---------- ---------- Total From Investment Operations ........... 1.03 2.10 (1.72) (0.39) (0.01) Less Distributions: Distribution from Net Investment Income .................................. (0.25) (0.39) (0.21) (0.28) (0.44) Distribution from Net Realized Gains on Investments ............................. (0.07) (1.18) Distribution from Capital Paid-In .......... (0.06) ---------- ---------- ---------- ---------- ---------- Total Distributions ........................ (0.25) (0.45) (0.21) (0.35) (1.62) ---------- ---------- ---------- ---------- ---------- Net Assets Value at End of Period ............. $ 13.58 $ 12.80 $ 11.15 $ 13.08 $ 13.82 ========== ========== ========== ========== ========== Total Investment Return(b) .................... 8.18% 19.00% (13.23)% (2.84)% 0.03% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .................................. 0.77%(f) 0.74%(f) 0.76% 0.73% 0.46% Ratio of Net Investment Income to Average Net Assets .............................. 1.87% 1.75% 1.77% 2.10%(d) 2.86% Portfolio Turnover Rate .................... 234.27% 216.32% 234.62% 190.73%(e) 210.35% Net Assets End of Period (000s Omitted) ....... $2,079,228 $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) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND ** Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK Aerospace & Defense - 0.6% Boeing Co. (US) ...................................... 175,800 $ 9,101 General Dynamics Corp. (US) .......................... 4,700 492 Northrop Grumman Corp. (US) .......................... 14,300 777 United Technologies Corp. (US) ....................... 21,000 2,170 -------- 12,540 Air Freight & Couriers - 0.6% Fedex Corp. (US) ..................................... 126,800 12,489 Airlines - 0.0% Delta Air Lines, Inc. (US) ........................... 3,044 23 Auto Components - 0.2% Magna International, Inc. - Cl. A (US) ............... 50,400 4,161 Banks - 2.8% Bank of America Corp. (US) ........................... 488,100 22,936 Comerica, Inc. (US) .................................. 98,700 6,022 JP Morgan Chase & Co. (US) ........................... 221,892 8,656 Suntrust Banks, Inc. # (US) .......................... 64,700 4,780 UnionBanCal Corp. (US) ............................... 50,600 3,263 Wachovia Corp. (US) .................................. 246,900 12,987 -------- 58,644 Beverages - 1.2% Anheuser-Busch Cos., Inc. (US) ....................... 55,900 2,836 Coca-Cola Co. (US) ................................... 217,600 9,058 Constellation Brands, Inc. - Cl. A (US) .............. 107,800 5,014 Pepsi Bottling Group, Inc. (US) ...................... 53,000 1,433 PepsiCo, Inc. (US) ................................... 132,300 6,906 -------- 25,247 Biotechnology - 0.8% Amgen, Inc. (US) * ................................... 248,600 15,948 Biogen IDEC, Inc. (US) * ............................. 9,400 626 ImClone Systems, Inc. # (US) * ....................... 15,700 723 -------- 17,297 Building Products - 0.1% Masco Corp. (US) ..................................... 72,600 2,652 Chemicals - 1.4% Air Products & Chemicals, Inc. (US) .................. 39,200 2,272 Dow Chemical Co. (US) ................................ 271,800 13,457 E.I. du Pont de Nemours & Co. (US) ................... 69,200 3,394 Monsanto Co. (US) .................................... 85,700 4,761 NALCO Holding Co. (US) * ............................. 142,300 2,778 Rohm & Haas Co. (US) ................................. 57,500 2,543 -------- 29,205 Commercial Services & Supplies - 0.6% Allied Waste Industries, Inc. (US) * ................. 38,400 356 Automatic Data Processing, Inc. (US) ................. 158,200 $ 7,016 DST Systems, Inc. (US) * ............................. 51,500 2,684 Dun & Bradstreet Corp. (US) * ........................ 35,400 2,112 Monster Worldwide, Inc. (US) * ....................... 16,200 545 -------- 12,713 Communications Equipment - 2.0% Cisco Systems, Inc. (US) * ........................... 739,300 14,269 Comverse Technology, Inc. (US) * ..................... 132,000 3,227 JDS Uniphase Corp. # (US) * .......................... 294,000 932 Motorola, Inc. (US) .................................. 548,800 9,439 Nokia Oyj - ADR (US) ................................. 353,100 5,533 Polycom, Inc. (US) * ................................. 42,400 989 Qualcomm, Inc. (US) * ................................ 175,100 7,424 -------- 41,813 Computers & Peripherals - 2.2% Apple Computer, Inc. (US) * .......................... 121,000 7,792 Dell, Inc. (US) * .................................... 298,400 12,575 EMC Corp. (US) * ..................................... 399,400 5,939 International Business Machines Corp. (US) ........... 173,900 17,143 Lexmark International Group, Inc. - Cl. A (US) * ..... 13,500 1,147 Seagate Technology # (US) ............................ 53,400 922 Sun Microsystems, Inc. (US) * ........................ 184,500 993 -------- 46,511 Construction & Engineering - 0.4% American Standard Cos., Inc. (US) * .................. 110,900 4,582 Fluor Corp. # (US) ................................... 81,300 4,432 -------- 9,014 Credit Card - 0.4% MBNA Corp. (US) ...................................... 281,800 7,944 Diversified Financials - 6.1% AmeriCredit Corp. # (US) * ........................... 46,900 1,147 Bear Stearns Cos., Inc. # (US) * ..................... 58,900 6,026 Capital One Financial Corp. (US) ..................... 113,200 9,533 CIT Group, Inc. (US) ................................. 120,800 5,535 Citigroup, Inc. (US) ................................. 648,400 31,240 Goldman Sachs Group, Inc. (US) ....................... 113,000 11,757 Hartford Financial Services Group, Inc. (US) ......... 212,500 14,728 Morgan Stanley, Dean Witter, Discover & Co. (US) ..... 152,600 8,472 SLM Corp. (US) ....................................... 382,100 20,400 State Street Corp. (US) .............................. 14,900 732 Washington Mutual, Inc. (US) ......................... 229,900 9,720 Wells Fargo & Co. (US) ............................... 127,300 7,912 -------- 127,202 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- --------- -------- (000's) COMMON STOCK - Continued Diversified Telecommunication Services - 1.7% CenturyTel, Inc. # (US) .............................. 71,900 $ 2,550 Citizens Communications Co. (US) ..................... 180,900 2,495 Qwest Communications International, Inc. (US) * ...... 43,800 194 Sprint Corp. (US) .................................... 562,950 13,989 Verizon Communications (US) * ........................ 391,500 15,860 -------- 35,088 Electric Utilities - 1.4% AES Corp. (US) * ..................................... 711,400 9,725 Edison International (US) ............................ 254,600 8,155 TXU Corp. # (US) ..................................... 163,600 10,562 -------- 28,442 Electrical Equipment - 0.7% Cooper Industries, Ltd. - Cl. A (US) ................. 16,400 1,113 Emerson Electric Co. (US) ............................ 68,700 4,816 Rockwell International Corp. (US) .................... 189,200 9,375 -------- 15,304 Electronic Equipment & Instruments - 0.4% Agilent Technologies, Inc. (US) * .................... 33,000 795 Avnet, Inc. (US) * ................................... 64,500 1,176 Flextronics International, Ltd. (US) * ............... 71,800 992 Jabil Circuit, Inc. (US) * ........................... 49,200 1,259 Vishay Intertechnology, Inc. (US) * .................. 240,000 3,605 -------- 7,827 Energy Equipment & Services - 1.2% Baker Hughes, Inc. (US) .............................. 193,600 8,261 BJ Services Co. (US) ................................. 57,500 2,676 National-Oilwell, Inc. # (US) * ...................... 126,800 4,475 Schlumberger, Ltd. (US) .............................. 73,500 4,921 Transocean Sedco Forex, Inc. (US) * .................. 48,200 2,043 Weatherford Bermuda (US) * ........................... 49,700 2,549 -------- 24,925 Food & Drug Retailing - 0.1% Sysco Corp. (US) ..................................... 28,000 1,069 Food Products - 0.3% Campbell Soup Co. (US) * ............................. 177,700 5,311 Kraft Foods, Inc. - Cl. A (US) ....................... 47,200 1,681 -------- 6,992 Gas Utilities - 0.8% Kinder Morgan Management LLC (US) .................... 88,337 3,595 Kinder Morgan, Inc. (US) ............................. 17,770 1,300 Sempra Energy (US) ................................... 92,200 $ 3,382 Williams Cos., Inc. (US) * ........................... 500,500 8,153 -------- 16,430 Health Care Equipment & Supplies - 0.6% Applera Corporation - Applied Biosystems Group (US) .. 76,200 1,593 Becton, Dickinson & Co. (US) ......................... 120,300 6,833 Boston Scientific Corp. (US) * ....................... 41,900 1,490 Guidant Corp. (US) ................................... 44,700 3,223 -------- 13,139 Health Care Providers & Services - 2.0% Aetna US Healthcare, Inc. (US) ....................... 73,100 9,119 Amerisource Bergen Corp. # (US) * .................... 152,100 8,925 CIGNA Corp. (US) ..................................... 9,500 775 DaVita, Inc. (US) * .................................. 31,500 1,245 Humana, Inc. (US) * .................................. 124,400 3,694 Lincare Holdings, Inc. (US) * ........................ 76,200 3,250 PacifiCare Health Systems, Inc. # (US) * ............. 29,400 1,662 Triad Hospitals, Inc. # (US) * ....................... 23,600 878 United Health Group, Inc. (US) ....................... 138,700 12,210 -------- 41,758 Hotels Restaurants & Leisure - 0.4% Carnival Corp. (US) .................................. 22,100 1,274 Las Vegas Sands Corp. (US) * ......................... 22,550 1,082 Marriott International, Inc. - Cl. A (US) ............ 63,600 4,006 McDonald's Corp. (US) ................................ 38,300 1,228 Starwood Hotels & Resorts Worldwide, Inc. (US) ....... 20,400 1,191 -------- 8,781 Household Durables - 1.2% Centex Corp. (US) .................................... 90,400 5,386 Fortune Brands, Inc. (US) ............................ 118,100 9,115 Newell Rubbermaid, Inc. (US) ......................... 217,000 5,249 Stanley Works (US) ................................... 119,800 5,869 -------- 25,619 Household Products - 0.8% Kimberly-Clark Corp. (US) ............................ 140,000 9,213 Procter & Gamble Co. (US) ............................ 125,700 6,924 -------- 16,137 Industrial Conglomerates - 3.5% General Electric Co. (US) ............................ 1,297,000 47,341 Reynolds American, Inc. # (US) ....................... 83,000 6,524 Textron, Inc. (US) ................................... 141,300 10,428 Tyco International, Ltd. (US) ........................ 228,300 8,159 -------- 72,452 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Insurance - 3.8% Allstate Corp. (US) ..................................... 148,400 $ 7,675 American International Group, Inc. (US) ................. 254,700 16,726 Assurant, Inc. (US) ..................................... 21,700 663 Chubb Corp. (US) ........................................ 19,100 1,469 Everest Re Group, Ltd. (US) ............................. 74,400 6,663 Lincoln National Corp. (US) ............................. 81,800 3,818 Prudential Financial, Inc. (US) ......................... 272,500 14,977 Safeco Corp. (US) * ..................................... 56,700 2,962 St. Paul Travelers Cos., Inc. # (US) .................... 125,000 4,634 The PMI Group, Inc. (US) ................................ 70,000 2,923 Wellpoint, Inc. (US) * .................................. 120,800 13,892 XL Capital, Ltd. - Cl. A (US) ........................... 34,500 2,679 ------- 79,081 Internet & Catalog Retail - 0.0% Amazon.com, Inc. (US) * ................................. 16,900 748 Internet Software & Services - 0.5% Google, Inc. - Cl. A (US) * ............................. 4,000 772 IAC / InterActive Corp. # (US) * ........................ 169,500 4,682 McAfee, Inc. (US) * ..................................... 122,100 3,532 VeriSign, Inc. (US) * ................................... 19,500 654 ------- 9,640 IT Consulting & Services - 0.7% Accenture, Ltd. - Cl. A (US) * .......................... 154,100 4,161 Affiliated Computer Services, Inc. - Cl. A (US) * ....... 65,900 3,967 Computer Sciences Corp. (US) * .......................... 107,900 6,082 ------- 14,210 Leisure Equipment & Products - 0.4% Brunswick Corp. (US) .................................... 143,700 7,113 Mattel, Inc. (US) * ..................................... 70,400 1,372 ------- 8,485 Machinery - 0.8% Cummings Engine Co., Inc. (US) .......................... 45,900 3,846 Danaher Corp. (US) ...................................... 60,000 3,445 Ingersoll-Rand Co. - Cl. A (US) ......................... 64,900 5,212 Navistar International Corp., Inc. - Cl. B # (US) * ..... 28,500 1,253 Parker-Hannifin Corp. (US) .............................. 46,400 3,514 ------- 17,270 Media - 2.3% Cablevision Systems Corp. - Cl. A # (US) * .............. 110,361 2,748 Clear Channel Communications, Inc. (US) ................. 20,400 683 Comcast Corp. - Cl. A (US) * ............................ 378,500 12,597 Direct TV Group, Inc. (US) * ............................ 150,072 2,512 Knight-Ridder, Inc. (US) ................................ 13,600 911 McGraw-Hill Cos., Inc. (US) ............................. 50,700 4,641 Omnicom Group, Inc. (US) ................................ 16,900 $ 1,425 The Walt Disney Co. (US) * .............................. 656,700 18,256 Time Warner, Inc. (US) * ................................ 239,050 4,647 ------- 48,420 Metals & Mining - 0.4% Alcoa, Inc. (US) ........................................ 20,200 635 Nucor Corp. (US) ........................................ 77,600 4,061 Phelps Dodge Corp. (US) ................................. 38,700 3,828 ------- 8,524 Multi-Utilities - 0.0% NiSource, Inc. (US) ..................................... 30,000 683 Multiline Retail - 1.1% Costco Wholesale Corp. (US) ............................. 41,500 2,009 Dollar Tree Stores, Inc. (US) * ......................... 97,000 2,782 Federated Department Stores, Inc. (US) .................. 130,400 7,536 Nordstrom, Inc. (US) .................................... 80,700 3,771 Target Corp. (US) ....................................... 23,100 1,199 Wal-Mart Stores, Inc. (US) .............................. 118,000 6,233 ------- 23,530 Office Electronics - 0.3% Xerox Corp. (US) * ...................................... 339,500 5,775 Oil & Gas - 3.8% Ashland, Inc. (US) ...................................... 66,500 3,882 BP Amoco plc - ADR (US) ................................. 42,800 2,500 Conoco Phillips (US) .................................... 176,800 15,352 Devon Energy Corp. (US) ................................. 132,000 5,138 EOG Resources, Inc. (US) ................................ 88,500 6,315 Equitable Resources, Inc. (US) .......................... 32,900 1,996 Exxon Mobil Corp. (US) .................................. 630,300 32,309 Murphy Oil Corp. (US) ................................... 53,800 4,328 Royal Dutch Petroleum Co. (US) * ........................ 74,500 4,275 Shell Transport & Trading Co. (US) ...................... 24,600 1,264 Unocal Corp. (US) ....................................... 33,400 1,444 ------- 78,803 Paper & Forest Products - 0.3% International Paper Co. (US) ............................ 39,500 1,659 Louisiana-Pacific Corp. # (US) .......................... 163,900 4,383 ------- 6,042 Personal Products - 0.4% Avon Products, Inc. (US) ................................ 29,000 1,122 Estee Lauder Cos., Inc. - Cl. A (US) .................... 176,700 8,088 ------- 9,210 Pharmaceuticals - 5.2% Abbott Laboratories (US) ................................ 85,900 4,007 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Market Name of Issuer Shares Value -------------- --------- ---------- (000's) COMMON STOCK - Continued Pharmaceuticals - Continued Allergan, Inc. (US) ............................... 124,600 $ 10,101 AstraZeneca Group plc - ADR (US) .................. 307,000 11,172 Elan Corp. plc - ADR # (US) * ..................... 34,200 932 Eli Lilly & Co. (US) .............................. 96,500 5,476 Forest Laboratories, Inc. (US) * .................. 226,200 10,147 Johnson & Johnson (US) ............................ 487,300 30,905 Medco Health Solutions, Inc. (US) * ............... 20,400 849 Merck & Co., Inc. (US) ............................ 527,500 16,954 Pfizer, Inc. (US) ................................. 596,400 16,037 Sepracor, Inc. # (US) * ........................... 10,100 600 ---------- 107,180 Real Estate Investment Trust - 0.1% General Growth Properties (US) .................... 43,230 1,563 Road & Rail - 0.6% Burlington Northern Santa Fe Corp. (US) ........... 112,000 5,299 Norfolk Southern Corp. (US) ....................... 123,600 4,473 Union Pacific Corp. (US) .......................... 24,700 1,661 ---------- 11,433 Semiconductor Equipment & Products - 1.5% Advanced Micro Devices, Inc. # (US) * ............. 140,600 3,096 Applied Materials, Inc. (US) * .................... 482,300 8,247 Freescale Semiconductor, Inc. - Cl. B (US) * ...... 67,772 1,244 Intel Corp. (US) .................................. 272,800 6,381 KLA-Tencor Corp. (US) * ........................... 24,500 1,141 Lam Research Corp. (US) * ......................... 63,300 1,830 Linear Technology Corp. (US) * .................... 26,100 1,012 Micron Technology, Inc. # (US) * .................. 62,200 768 Novellus Systems, Inc. (US) * ..................... 124,900 3,484 Teradyne, Inc. # (US) * ........................... 84,700 1,446 Texas Instruments, Inc. (US) * .................... 114,300 2,814 ---------- 31,463 Software - 2.7% Autodesk, Inc. (US) ............................... 127,800 4,850 Cadence Design Systems, Inc. (US) * ............... 71,900 993 Citrix Systems, Inc. (US) * ....................... 125,400 3,076 Microsoft Corp. (US) .............................. 1,179,000 31,491 Oracle Corp. (US) * ............................... 374,400 5,137 Sap Aktiengesellschaft - ADR # (US) ............... 43,700 1,932 Symantec Corp. (US) * ............................. 348,600 8,980 ---------- 56,459 Specialty Retail - 3.0% Abercrombie & Fitch Co. (US) ...................... 91,300 4,286 AutoNation, Inc. (US) * ........................... 119,500 2,296 Best Buy Co., Inc. (US) ........................... 104,900 $ 6,233 Circuit City Stores, Inc. (US) .................... 467,800 7,316 Home Depot, Inc. (US) ............................. 479,400 20,489 Limited, Inc. (US) ................................ 278,304 6,407 Lowe's Cos., Inc. (US) ............................ 52,800 3,041 OfficeMax, Inc # (US) ............................. 76,300 2,394 RadioShack Corp. (US) ............................. 81,100 2,667 Sherwin-Williams Co. (US) ......................... 83,300 3,718 Williams-Sonoma, Inc. (US) * ...................... 68,900 2,414 ---------- 61,261 Textiles & Apparel - 0.4% Nike, Inc. - Cl. B (US) ........................... 88,400 8,017 Tobacco - 1.0% Altria Group, Inc. (US) ........................... 335,200 20,481 Trading Companies & Distributors - 0.4% W.W. Grainger, Inc. (US) .......................... 114,400 7,621 U.S. Government Agencies - 1.0% Federal Home Loan Mortgage Corp. (US) ............. 123,200 9,080 Federal National Mortgage Assoc. (US) ............. 155,400 11,066 ---------- 20,146 Wireless Telecommunications Services - 0.4% American Tower Corp. - Cl. A (US) * ............... 46,900 863 Nextel Communications, Inc. - Cl. A (US) * ........ 212,200 6,366 ---------- 7,229 ---------- TOTAL COMMON STOCK- (Cost $1,153,136) 65.6% 1,364,692 Par Value --------- (000's) PUBLICLY-TRADED BONDS Aerospace & Defense - 0.2% Boeing Capital Corp. - Sr. Notes # (US) 6.5% due 02/15/12 - A ............................. $ 1,797 2,014 Bombadier, Inc. - Notes 144A (a) # (US) 6.3% due 05/01/14 - BB ............................ 1,615 1,401 Systems 2001 LLC - Cl. G 144A (a) (US) 6.664% due 09/15/13 - AAA ......................... 230 254 Systems 2001 LLC - CTF Cl. B 144A (a) (US) 7.156% due 12/15/11 - BBB ......................... 301 326 ---------- 3,995 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Airlines - 0.0% Delta Airlines, Inc. - Sr. Notes (US) (c) 8.0% due 12/15/07 - NA .................................. 75 $ 47 Auto Components - 0.0% Delphi (US) 1.0% due 11/15/33 - B+ .................................. 40 38 TRW Automotive - Sr. Sub. Notes # (US) 11.0% due 02/15/13 - BB- ................................ 45 54 ------ 92 Auto Loan - 0.5% Ford Motor Credit Co. - Notes (US) 6.875% due 02/01/06 - BBB- .............................. 953 982 7.375% due 10/28/09 - # BBB- ............................ 120 129 Ford Motor Credit Co. - Bonds (US) 7.375% due 02/01/11 - BBB- .............................. 150 161 Ford Motor Credit Co. (US) 7.875% due 06/15/10 - BBB- .............................. 125 138 General Motors Acceptance Corp. - Sr. Notes # (US) 5.625% due 05/15/09 - # BBB- ............................ 900 900 7.0% due 02/01/12 - BBB- ................................ 900 927 General Motors Acceptance Corp. - Notes (US) 6.125% due 09/15/06 - BBB- .............................. 1,745 1,789 7.75% due 01/19/10 - BBB- ............................... 300 322 8.0% due 11/01/31 - BBB- ................................ 250 257 General Motors Acceptance Corp. (US) 6.875% due 08/28/12 - BBB- .............................. 1,000 1,021 GMAC Commercial Mortgage Securities, Inc. - CTF Cl. H 144A (a) (US) 5.31% due 05/10/36 - BBB- ............................... 3,000 2,995 USAA Auto Owner Trust - Notes Ser. 2004 3 Cl. A3 (US) 3.16% due 02/17/09 - AAA ................................ 275 274 ------ 9,895 Automobiles - 0.4% Daimler Chrysler NA Holding Corp. - Sr. Notes (US) 6.5% due 11/15/13 - BBB ................................. 1,040 1,128 DaimlerChrysler NA (US) 1.87% due 05/24/06 - BBB ................................ 1,833 1,842 DaimlerChrysler NA - Notes (US) 3.75% due 06/04/08 - BBB ................................ 100 100 8.0% due 06/15/10 - # BBB ............................... 250 289 DaimlerChrysler NA Holding Co. - Notes (US) 4.75% due 01/15/08 - BBB ................................ $ 125 $ 128 DaimlerChrysler NA Holding Co. (US) 7.2% due 09/01/09 - BBB ................................. 110 122 First Invs Auto Owner Trust - Notes Cl. A 144A (a) (US) 3.46% due 12/15/08 - NA ................................. 16 16 Ford Motor Co. - Bonds (US) 6.625% due 10/01/28 - BBB- .............................. 2,134 1,991 General Motors Corp. - Sr. Debs. (US) 8.375% due 07/15/33 - # BBB- ............................ 2,448 2,536 Hertz Corp. - Notes (US) 1.0% due 08/05/08 - # BBB- .............................. 180 181 Hertz Corp. - Sr. Notes (US) 6.35% due 06/15/10 - BBB- ............................... 155 159 United Rentals North America, Inc. - Sr. Notes (US) 6.5% due 02/15/12 - BB- ................................. 30 29 ------ 8,521 Banks - 2.1% Banc America Mortgage Securities, Inc. - Ser. 2004-7 Cl. 6A1 (US) 1.0% due 08/25/19 - AAA ................................. 240 235 Banc America Mortgage Securities, Inc. - Ser. 2003-F Cl. 2A1 (US) 3.734% due 07/25/33 - AAA ............................... 176 173 Banco Santander Chile - Sr. Notes 144A (a) (US) 2.8% due 12/09/09 - A ................................... 2,270 2,272 Bank of America Corp. - Sr. Notes (US) 7.125% due 09/15/06 - A+ ................................ 250 265 Bank One Corp. - Notes (US) 6.5% due 02/01/06 - A+ .................................. 1,238 1,282 Central American Bank - 144A (a) (US) 6.75% due 04/15/13 - BBB- ............................... 1,350 1,492 Corporacion Andina De Fomento - Notes (US) 5.2% due 05/21/13 - A ................................... 1,330 1,355 6.875% due 03/15/12 - A ................................. 160 180 Credit Suisse First Boston - Ser. 2004 C4 Cl. A4 (US) 1.0% due 10/15/39 - AAA ................................. 150 149 Credit Suisse First Boston - Ser. 2003 (US) 3.727% due 03/25/35 - AAA ............................... 3,642 3,585 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Banks - Continued Credit Suisse First Boston - Ser. 2003-C3 Cl. F (US) 4.518% due 05/15/38 - BBB+ .............................. $2,000 $ 1,908 Credit Suisse First Boston - Sr. Notes (US) 4.625% due 01/15/08 - A+ ................................ 1,276 1,308 Credit Suisse First Boston - Ser. 2004 AR1 Cl. II A1 144A (a) (US) 4.832% due 02/25/34 - AAA ............................... 162 161 Credit Suisse First Boston (US) 6.5% due 01/15/12 - A+ .................................. 125 139 Credit Suisse First Boston Mortgage - CTF Cl. II A2 (US) 4.375% due 04/25/33 - AAA ............................... 45 45 Credit Suisse First Boston Mortgage - Cl. A2 (US) 5.935% due 01/15/06 - AAA ............................... 250 255 Credit Suisse First Boston Mortgage - Ser. 2002 CKN2 Cl. A3 (US) 6.133% due 04/15/37 - AAA ............................... 125 136 Credit Suisse First Boston Mortgage - Ser. 2001 CP4 Cl. A4 (US) 6.18% due 12/15/35 - AAA ................................ 275 300 Credit Suisse First Boston Mortgage - CF2 Cl. A3 (US) 6.238% due 02/15/34 - AAA ............................... 250 266 Credit Suisse First Boston Mortgage Securities Corp. - Cl. A1 (US) 3.801% due 06/15/06 - AAA ............................... 143 143 Credit Suisse First Boston Mortgage Securities Corp. - Ser. 2004- AR7 Cl. 2A1 (US) 4.912% due 06/25/09 - AAA ............................... 525 528 Credit Suisse First Boston Mortgage Securities Corp. (US) 7.545% due 04/15/10 - AAA ............................... 1,533 1,750 Credit Suisse First Boston, Inc. - Ser. 2001 CKN5 CTF Cl. A 4 (US) 5.435% due 09/15/34 - AAA ............................... 250 264 CS First Boston Mortgage Securities Corp. - Cl. A1 (US) 6.91% due 01/15/08 - NA ................................. 3,268 3,438 Development Bank Singapore - Sub Notes 144A (a) (US) 7.125% due 05/15/11 - A- ................................ 100 114 Dresdner Bank AG - Sub. Notes (US) 7.25% due 09/15/15 - A- ................................. 1,395 1,631 First Union Lehman Brothers Bank - Ser. 1998 C2 CTF Cl. E (US) 6.778% due 05/18/13 - BBB ............................... 2,000 2,213 First Union National Bank Commercial & Mortgage Trust - CTF Cl. A1 (US) 5.585% due 08/12/10 - AAA ............................... $ 397 $ 417 First Union National Bank Commercial Mortgage Trust - Ser. 2001 C2 Cl. A1 (US) 6.204% due 01/12/43 - AAA ............................... 507 537 FleetBoston Financial Corp. - Sr. Notes (US) 4.875% due 12/01/06 - A+ ................................ 1,115 1,145 HBOS plc - 144A (a) (US) 3.125% due 01/12/07 - AA ................................ 250 248 5.375% due 11/29/49 - A+ ................................ 190 195 HSBC Bank USA - Sub. Notes # (US) 4.625% due 04/01/14 - A+ ................................ 500 490 Independence Community Bank Corp. - Sub. Notes (US) 1.0% due 04/01/14 - BBB ................................. 80 77 JP Morgan Chase & Co. - Notes (US) 5.25% due 05/30/07 - A+ ................................. 2,739 2,847 5.35% due 03/01/07 - A+ ................................. 2,075 2,154 JP Morgan Chase & Co. - Sub. Notes # (US) 6.75% due 02/01/11 - A .................................. 1,500 1,685 MBNA Ameribank (US) 5.375% due 01/15/08 - BBB+ .............................. 250 261 Popular North America, Inc. (US) 4.7% due 06/30/09 - BBB+ ................................ 1,500 1,529 6.125% due 10/15/06 - BBB+ .............................. 1,439 1,500 RBS Capital Trust IV (US) 1.0% due 09/29/49 - A ................................... 320 322 Wachovia Bank Commercial Mortgage Trust - Ser. 2004 C10 Cl A3 (US) 4.39% due 02/15/36 - AAA ................................ 3,000 2,980 Wachovia Bank Commercial Trust - Ser. 2003-C8 Cl. F 144A (a) (US) 5.031% due 11/15/35 - BBB+ .............................. 1,400 1,411 Zions Bancorp - Sub. Notes (US) 6.0% due 09/15/15 - BBB- ................................ 250 266 ------- 43,651 Beverages - 0.1% Anheuser Busch Cos., Inc. - Debs (US) 6.5% due 02/01/43 - A+ .................................. 1,232 1,404 Building Products - 0.0% AMH Holdings, Inc. (US) 0.0% due 03/01/14 - B- .................................. 75 54 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Building Products - Continued Building Materials Corp. America - Sr. Notes 144A (a) (US) 7.75% due 08/01/14 - B+ ............................... $ 90 $ 92 Jacuzzi Brands, Inc. - Sr. Sec. Notes (US) 9.625% due 07/01/10 - B ................................. 50 55 Nortek, Inc. - Sr. Sub. Notes 144A (a) (US) 8.5% due 09/01/14 - B- .................................. 50 52 ------ 253 Chemicals - 0.0% Equistar Chemicals LP - Notes # (US) 8.75% due 02/15/09 - B+ ................................. 55 61 ICI Wilmington, Inc. - Notes (US) 4.375% due 12/01/08 - BBB ............................... 235 236 Lubrizol Corp. - Sr. Notes (US) 4.625% due 10/01/09 - BB+ ............................... 145 145 Millenium America, Inc. - Sr. Notes (US) Sr. Notes (US) 9.25% due 06/15/08 - B+ ................................. 25 29 Yara International ASA - Notes 144A (a) (US) 5.25% due 12/15/14 - BBB ................................ 60 60 ------ 531 CMBS - 0.1% Commerce 2003 LNB1 - Ser. 2003-LB1A Cl. A2 (US) 4.084% due 06/10/38 - AAA ............................... 375 360 JP Morgan Chase & Co. Commercial Mortgage Securities - Ser. 2004 FL1 A1 144A (a) (US) 1.71% due 04/16/19 - AAA ................................ 2,340 2,343 JP Morgan Chase & Co. Commercial Mortgage Securities Corp. - Ser. 2002-C1 Cl. A3 (US) 1.0% due 07/12/37 - AAA ................................. 370 388 ------ 3,091 Commercial Services & Supplies - 0.2% Allied Waste North America, Inc. - Sr. Notes (US) 8.875% due 04/01/08 - BB- ............................... 30 32 Allied Waste North America, Inc. - Sr. Notes (US) 9.25% due 09/01/12 - BB- ................................ 55 60 Cendant Corp. - Sr. Notes (US) 6.25% due 01/15/08 - BBB ................................ 125 134 6.25% due 03/15/10 - BBB ................................ 710 768 Cendant Corp. - Notes (US) 6.875% due 08/15/06 - BBB ............................... $ 150 $ 158 Cendant Corp. - Sr. Notes (US) 7.125% due 03/15/15 - BBB ............................... 734 838 7.375% due 01/15/13 - BBB ............................... 1,417 1,639 D.R. Horton, Inc. - Notes (US) 5.625% due 09/15/14 - BB+ ............................... 1,150 1,144 Iron Mountain, Inc. Pennsylvania - Sr. Sub. Notes (US) 6.625% due 01/01/16 - B ................................. 25 23 Jean Coutu Group PJC, Inc. - Sr. Sub. Notes 144A (a) # (US) 8.5% due 08/01/14 - B ................................... 15 16 Quintiles Transnational Corp. - Sr. Sub. Notes (US) 10.0% due 10/01/13 - B .................................. 50 56 Synagro Technologies, Inc. - Sr. Sub. Notes # (US) 9.5% due 04/01/09 - B ................................... 25 27 Waste Management, Inc. - Sr. Notes (US) 6.375% due 11/15/12 - BBB ............................... 125 139 ------ 5,034 Communications Equipment - 0.0% Crown Castle International Corp. - Sr. Notes # (US) 7.5% due 12/01/13 - CCC ................................. 35 38 Construction & Engineering - 0.1% K Hovnanian Enterprises, Inc. - Gtd Sr. Notes 144A (a) (US) 6.25% due 01/15/15 - NA ................................. 1,700 1,679 Lennar Corp. - Sr. Notes # (US) 5.95% due 03/01/13 - BBB- ............................... 30 32 Lennar Corp. - Sr. Notes (US) 9.95% due 05/01/10 - BBB- ............................... 30 32 Lyon Williams Homes, Inc. - Sr. Notes (US) 10.75% due 04/01/13 - B ................................. 50 56 MDC Holdings, Inc. - Sr. Notes # (US) 5.5% due 05/15/13 - BBB- ................................ 50 51 Pulte Homes, Inc. - Sr. Notes (US) 6.25% due 02/15/13 - BBB- ............................... 100 106 Pulte Homes, Inc. - Sr. Notes # (US) 7.875% due 08/01/11 - BBB- .............................. 90 104 Pulte Homes, Inc. - Sr. Notes (US) 8.125% due 03/01/11 - BBB- .............................. 25 30 Technical Olympic USA, Inc. - Sr. Sub. Notes (US) 10.375% due 07/01/12 - B- ............................... 50 56 ------ 2,146 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Construction Materials - 0.0% Gerdau Ameristeel Corp. - Sr. Notes # (US) 10.375% due 07/15/11 - B+ ............................... $ 10 $ 12 Containers & Packaging - 0.0% Graphic Packaging International, Inc. - Sr. Sub. Notes # (US) 9.5% due 08/15/13 - B- .................................. 50 57 Jefferson Smurfit Corp. - Sr. Notes (US) 7.5% due 06/01/13 - B ................................... 35 37 Owens Brockway Glass Container - Sr. Notes (US) 8.75% due 11/15/12 - BB- ................................ 35 40 ------ 134 Credit Card - 0.1% Citibank Credit Card Issuance Trust - Cl. A1 Notes (US) 4.95% due 02/09/09 - AAA ................................ 2,000 2,061 MBNA Credit Card Master Note Trust - Notes Cl. C (US) 6.8% due 07/15/14 - BBB ................................. 500 555 Nordstrom Credit Card Master Note Trust - Notes Cl. B 144A(a) (US) 2.039% due 10/13/10 - A ................................. 150 150 Pass Through Amortizing Credit Card Trust - CTF Cl. A3 144A(a) (US) 6.298% due 06/18/12 - A- ................................ 31 32 ------ 2,798 Diversified Financials - 2.1% AXA Financial, Inc. - Sr. Notes (US) 7.75% due 08/01/10 - A .................................. 1,068 1,245 Bear Stearns & Co., Inc. - Notes (US) 5.7% due 11/15/14 - A ................................... 2,468 2,607 Capital One Financial Corp. - Notes (US) 7.25% due 05/01/06 - BBB- ............................... 190 199 Chase Commercial Mortgage Securities Corp. - Ser. 1997-1 Cl. A2 (US) 7.37% due 02/19/07 - AAA ................................ 3,983 4,206 Chase Commercial Mortgage Securities Corp. - Cl. C (US) 7.928% due 07/15/32 - NA ................................ 1,000 1,175 CIT Group, Inc - Sr. Notes (US) 5.75% due 09/25/07 - A .................................. 1,420 1,493 CIT Group, Inc. (US) 1.48% due 05/18/07 - A .................................. 1,100 1,100 CIT Group, Inc. - Sr. Notes (US) 4.0% due 05/08/08 - A ................................... $ 934 $ 937 Citigroup, Inc. - Sr. Notes (US) 5.0% due 03/06/07 - AA- ................................. 3,000 3,096 Citigroup, Inc. - Sub. Notes 144A (a) (US) 5.0% due 09/15/14 - A+ .................................. 200 201 Citigroup, Inc. - Notes (US) 5.5% due 08/09/06 - AA- ................................. 2,000 2,068 Citigroup, Inc. - Sub. Notes (US) 5.625% due 08/27/12 - A+ ................................ 1,260 1,342 GE Capital Commercial Mortgage Corp. -Ser. 2002-2 Cl. A3 (US) 5.349% due 08/11/36 - AAA ............................... 150 157 GE Capital Commercial Mortgage Corp. - Ser. 2001-3 Cl. A2 (US) 6.07% due 06/10/38 - AAA ................................ 250 273 GE Commercial Mortgage Corp. - 2003 C1 144A (a) (US) 5.948% due 01/10/38 - BBB- .............................. 3,000 3,048 General Electric Capital Corp. (US) 5.875% due 02/15/12 - AAA ............................... 2,950 3,192 Goldman Sachs Group, Inc. - Sr. Notes # (US) 4.125% due 01/15/08 - A+ ................................ 1,050 1,063 Goldman Sachs Group, Inc. - Notes (US) 5.0% due 10/01/14 - A+ .................................. 200 200 Goldman Sachs Group, Inc. - Sr. Notes (US) 5.25% due 04/01/13 - A+ ................................. 375 385 Goldman Sachs Group, Inc. # (US) 6.875% due 01/15/11 - A+ ................................ 3,405 3,841 Greater Connecticut Consumer Loan Trust - Notes Cl. A 144A (a) (US) 6.25% due 02/15/20 - AAA ................................ 304 315 Green Tree Financial Corp. - Ser. 1996-8 Cl. A6 (US) 7.6% due 10/15/27 - AAA ................................. 2,732 2,943 Hartford Financial Services Group, Inc. - Sr. Notes (US) 4.625% due 07/15/13 - A- ................................ 1,045 1,012 LaBranche & Co., Inc. - Sr. Notes (US) 9.5% due 05/15/09 - B ................................... 25 26 Morgan Stanley Capital, Inc. - Ser. 2003 Cl. A 144A (a) (US) 1.0% due 07/14/08 - AAA ................................. 97 97 Morgan Stanley Group, Inc. (US) 6.75% due 04/15/11 - A+ ................................. 2,880 3,230 Qwest Capital Funding - Notes # (US) 7.9% due 08/15/10 - B ................................... 45 45 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Diversified Financials - Continued Salomon Brothers Commercial & Mortgage Trust - Ser. 2000-C3 Pass Thru Certs Cl. A2 (US) 6.592% due 12/18/33 - AAA ............................... $ 120 $ 133 Salomon Brothers Commercial and Mortgage Trust - CTF 2001-C1 Cl. A3 (US) 6.428% due 12/18/35 - AAA ............................... 925 1,019 SLM Corp. (US) 5.0% due 04/15/15 - A ................................... 250 249 Washington Mutual, Inc. - Sr. Notes (US) 4.2% due 01/15/10 - A- .................................. 210 209 Washington Mutual, Inc. # (US) 5.625% due 01/15/07 - A- ................................ 3,050 3,176 Wells Fargo & Co. - Notes # (US) 3.5% due 04/04/08 - AA- ................................. 500 497 ------- 44,779 Diversified Telecommunication Services - 0.6% AT&T Corp. - Debs. (US) 8.35% due 01/15/25 - BB+ ................................ 100 103 Bellsouth Corp. - Notes (US) 4.2% due 09/15/09 - A ................................... 125 125 British Telecommunications plc - Notes (US) 8.875% due 12/15/30 - A- ................................ 40 53 Centennial Communications Corp. - Sr. Notes (US) 8.125% due 02/01/14 - CCC ............................... 10 10 Centennial Communications Corp. - Sr. Notes (US) 10.125% due 06/15/13 - CCC .............................. 40 45 Deutsche Telekom International (US) 8.5% due 06/15/10 - BBB+ ................................ 721 859 France Telecom SA - Notes (US) 9.25% due 03/01/11 - BBB+ ............................... 875 1,044 10.0% due 03/01/31 - BBB+ ............................... 1,150 1,559 National Cable plc - Sr. Notes 144A (a) # (US) 8.75% due 04/15/14 - B- ................................. 25 28 SBC Communications, Inc. - Notes (US) 4.125% due 09/15/09 - A ................................. 40 40 5.1% due 09/15/14 - A ................................... 120 121 SBC Communications, Inc. - Notes (US) 5.625% due 06/15/16 - A ................................. 50 52 Singapore Telecommunications - Notes 144A (a) (US) 6.375% due 12/01/11 - A+ ................................ 75 83 Sprint Capital Corp. - Notes (US) 6.125% due 11/15/08 - BBB- .............................. 1,323 1,419 Sprint Capital Corp. (US) 6.375% due 05/01/09 - BBB- .............................. $ 188 $ 204 6.875% due 11/15/28 - BBB- .............................. 188 206 Sprint Capital Corp. - Notes (US) 8.375% due 03/15/12 - BBB- .............................. 727 886 Sprint Capital Corp. - Notes (US) 8.75% due 03/15/32 - BBB- ............................... 740 986 Telecom Italia Capital - GTD Sr. Notes 144A (a) (US) 4.0% due 01/15/10 - BBB+ ................................ 150 147 Telecom Italia Capital Corp. - GTD Sr. Notes Ser. A (US) 4.0% due 11/15/08 - BBB+ ................................ 250 249 Verizon Global Funding Corp. - Notes (US) 6.75% due 12/01/05 - A+ ................................. 2,169 2,239 Verizon Global Funding Corp. - Global Notes # (US) 7.375% due 09/01/12 - A+ ................................ 927 1,091 Verizon New York, Inc. - Debs. Ser. A # (US) 6.875% due 04/01/12 - A+ ................................ 1,133 1,272 ------- 12,821 Electric Utilities - 0.9% American Electric Power , Inc. - Sr. Notes Ser. D (US) 5.25% due 06/01/15 - BBB ................................ 1,395 1,409 Empresa Nacional De Electricid - Notes (US) 8.35% due 08/01/13 - BBB- ............................... 1,650 1,912 8.625% due 08/01/15 - BBB- .............................. 1,885 2,257 Enersis SA - Notes (US) 7.375% due 01/15/14 - BB+ ............................... 1,325 1,448 FirstEnergy Corp. - Notes Ser. B (US) 6.45% due 11/15/11 - BB+ ................................ 1,054 1,145 FirstEnergy Corp. - Notes Ser. C (US) 7.375% due 11/15/31 - BB+ ............................... 843 963 Progress Energy, Inc. - Sr. Notes (US) 6.75% due 03/01/06 - BBB- ............................... 1,560 1,619 Progress Energy, Inc. - Sr. Notes # (US) 7.0% due 10/30/31 - BBB- ................................ 693 767 Public Service Co. New Mexico - Sr. Unsec. Notes (US) 4.4% due 09/15/08 - BBB ................................. 1,453 1,465 TXU Australia Holdings, Ltd. - GTD Sr. Notes 144A (a) (US) 6.15% due 11/15/13 - A- ................................. 1,750 1,890 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electric Utilities - Continued TXU Energy Co. LLC - Sr. Notes 144A (a) (US) 2.38% due 01/17/06 - BBB ................................ $ 110 $ 110 TXU Energy Co. LLC - Sr. Notes (US) 7.0% due 03/15/13 - BBB ................................. 1,399 1,563 Wisconsin Power & Light Co. - Debs. (US) 6.25% due 07/31/34 - BBB+ ............................... 1,785 1,905 ------- 18,453 Electric/Gas - 0.7% AES Corp. (US) 9.375% due 09/15/10 - B- ................................ 25 29 Dominion Resources, Inc. - Notes (US) 5.7% due 09/17/12 - BBB+ ................................ 200 212 Duke Energy Co. - Bonds (US) 3.75% due 03/05/08 - BBB+ ............................... 665 664 Edison Mission Energy - Sr. Notes # (US) 9.875% due 04/15/11 - B ................................. 150 177 Empresa Nacional De Electricid - Notes (US) 8.5% due 04/01/09 - BBB- ................................ 280 319 Kansas City Power & Light Co. - Sr. Notes Ser. A (US) 6.0% due 03/15/07 - BBB ................................. 1,440 1,505 Oncor Electric Delivery Co. - Sr. Sec. Notes (US) 6.375% due 01/15/15 - BBB ............................... 1,695 1,868 Oncor Electric Delivery Co. - Sr. Sec. Notes (US) 7.0% due 05/01/32 - BBB ................................. 125 144 Pacific Gas & Electric Co. - Bonds (US) 4.2% due 03/01/11 - BBB ................................. 250 247 4.8% due 03/01/14 - BBB ................................. 170 169 Pacific Gas & Electric Co. (US) 6.05% due 03/01/34 - BBB ................................ 1,850 1,921 PSEG Power LLC - Sr. Notes (US) 5.0% due 04/01/14 - BBB ................................. 275 273 6.875% due 04/15/06 - BBB ............................... 1,760 1,835 8.625% due 04/15/31 - BBB ............................... 50 66 Sempra Energy - Notes (US) 4.75% due 05/15/09 - BBB+ ............................... 1,100 1,121 Southern California Edison Co. - Ser. 2004B (US) 6.0% due 01/15/34 - BBB ................................. 1,040 1,105 SP Power Assets, Ltd. - 144A (a) (US) 5.0% due 10/22/13 - AA- ................................. 150 152 TXU Corp. - Sr. Notes Ser. R 144A (a) (US) 6.55% due 11/15/34 - BBB- ............................... 1,700 1,684 United Energy Distribution, Ltd. - Sr. Notes 144A (a) (US) 4.7% due 04/15/11 - AAA .............................. $ 90 $ 91 ------- 13,582 Electronic Equipment & Instruments - 0.0% Jabil Circuit, Inc. - Sr. Notes # (US) 5.875% due 07/15/10 - BB+ ............................... 210 221 Solectron Corp. - Sr. Notes # (US) 9.625% due 02/15/09 - B+ ................................ 45 49 Stoneridge, Inc. - Sr. Notes (US) 11.5% due 05/01/12 - B+ ................................. 50 58 Viasystems, Inc. - Sr. Sub. Notes (US) 10.5% due 01/15/11 - CCC+ ............................... 40 40 ------- 368 Energy Equipment & Services - 0.1% Enbridge Energy Partners LP - Notes (US) 4.75% due 06/01/13 - BBB ................................ 1,710 1,677 Luscar Coal, Ltd. - Sr. Notes (US) 9.75% due 10/15/11 - BB ................................. 25 28 ------- 1,705 Finance - 1.7% ACE INA Holding, Inc. - GTD. Sr. Notes (US) 5.875% due 06/15/14 - BBB+ .............................. 2,210 2,264 Ahold Finance USA - Gtd. Notes (US) 8.25% due 07/15/10 - BB- ................................ 50 57 Arch Capital Group, Ltd. - Sr. Notes (US) 7.35% due 05/01/34 - BBB- ............................... 1,870 1,994 BCP Caylux Holdings Lux SCA - Sr. Sub. Notes 144A (a) (US) 9.625% due 06/15/14 - B- ................................ 40 45 Cadbury Schweppes U.S. Finance - Sr. Notes 144A (a) (US) 5.125% due 10/01/13 - BBB ............................... 100 102 California Infras & Ecomomic - Ser. 1997-1 CTF Cl. A6 (US) 6.38% due 09/25/08 - AAA ................................ 286 295 California Infrastructure Development - Ser. 1997-1 CTF Cl. A7 (US) 6.42% due 09/25/08 - AAA ................................ 272 280 CNOOC Finance 2003, Ltd. - GTD Notes 144A (a) (US) 5.5% due 05/21/33 - BBB+ ................................ 1,345 1,245 Colonial Realty, Ltd. Partnership - Sr. Notes (US) 6.25% due 06/15/14 - BBB- ............................... 1,380 1,451 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued Concentra Operating Corp. - Sr. Sub. Notes 144A (a) (US) 9.125% due 06/01/12 - B- ................................ $ 25 $ 28 Cullen Frost Captial Trust II - Ser. A (US) 2.86% due 03/01/34 - BBB- ............................... 110 113 Deutsche Telekom International Finance (US) 8.75% due 06/15/30 - BBB+ ............................... 1,046 1,381 Deutsche Telekom International Finance BV - Notes (US) 9.25% due 06/01/32 - BBB+ ............................... 100 142 Devon Financing Corp. United L C - Notes (US) 6.875% due 09/30/11 - BBB ............................... 90 102 Duke Capital LLC. - Sr. Notes (US) 6.75% due 02/15/32 - BBB- ............................... 1,394 1,517 ERAC USA Finance Co. - GTD Notes 144A (a) (US) 6.7% due 06/01/34 - BBB+ ................................ 735 798 ERP Operating, Ltd. - Sr. Notes (US) 4.75% due 06/15/09 - BBB+ ............................... 190 194 Fund American Cos, Inc. - GTD Sr. Notes (US) 5.875% due 05/15/13 - BBB- .............................. 1,670 1,700 General Electric Capital Corp. (US) 6.0% due 06/15/12 - AAA ................................. 70 76 Household Financial Corp. - Global Notes # (US) 4.625% due 01/15/08 - A ................................. 1,432 1,466 HVB Funding Trust III - CTF 144A (a) (US) 9.0% due 10/22/31 - BBB ................................. 80 106 International Lease Finance Corp. (US) 1.0% due 01/15/10 - AA- ................................. 1,615 1,614 International Lease Finance Corp. - Notes (US) 3.5% due 04/01/09 - AA- ................................. 270 263 International Lease Finance Corp. (US) 4.55% due 10/15/09 - AA- ................................ 100 101 International Lease Finance Corp. - Sr. Notes # (US) 4.75% due 07/01/09 - AA- ................................ 515 526 International Lease Finance Corp. - Notes (US) 5.875% due 05/01/13 - AA- ............................... 1,317 1,397 Lehman Brothers Holdings, Inc. (US) 3.6% due 03/13/09 - A ................................... 250 246 Mangrove Bay Trust - 144A (a) (US) 6.102% due 07/15/33 - BBB+ .............................. $ 100 $ 99 MBNA Capital - Ser. B (US) 1.963% due 02/01/27 - BB+ ............................... 325 310 Mizuho Financial Group Cayman, Ltd. - Sub. Notes 144A (a) (US) 5.79% due 04/15/14 - BBB+ ............................... 755 793 Monumental Global Funding - Sr. Sec. Notes Ser. A 144A (a) (US) 5.2% due 01/30/07 - AA .................................. 250 259 Monumental Global Funding II - Notes 144A (a) (US) 1.29% due 05/19/06 - AA ................................. 630 629 National Rural Utilities Cooperative Finance - Bonds # (US) 3.875% due 02/15/08 - A+ ................................ 1,698 1,705 NiSource Finance Corp. - Sr. Notes # (US) 6.15% due 03/01/13 - BBB ................................ 912 989 NiSource Finance Corp. (US) 7.875% due 11/15/10 - BBB ............................... 1,530 1,799 Odyssey Re Holdings Corp. - Sr. Notes (US) 7.65% due 11/01/13 - BBB- ............................... 4,000 4,412 PCCW Hkt Capital, Ltd. (US) 8.0% due 11/15/11 - BBB ................................. 80 93 Pemex Finance, Ltd. - Notes (US) 7.33% due 05/15/12 - AAA ................................ 130 148 Pharma Services Intermediate Holding Corp. - Sr. Disc. Notes 144A (a) (US) 11.5% due 04/01/14 - B .................................. 75 53 RBS Capital Trust (US) 4.709% due 12/29/49 - A .................................. 80 78 Reliastar Financial Corp. - Notes (US) 6.5% due 11/15/08 - A+ .................................. 160 173 RH Donnelly Finance Corp. - Sr. Sub. Notes (US) 10.875% due 12/15/12 - B+ ............................. 25 30 SB Treasury Co. - 144A (a) (US) 1.0% due 12/29/49 - BBB- ................................ 100 115 Tate & Lyle International Finance plc - Notes 144A (a) (US) 5.0% due 11/15/14 - BBB ................................. 1,035 1,025 Twin Reefs Pass Through Trust - Notes 144A (a) (US) 3.37% due 12/10/49 - NA ................................. 500 502 UFJ Finance Aruba - GTD Notes (US) 6.75% due 07/15/13 - BBB ................................ 100 111 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Finance - Continued Vanderbilt Acquisition Loan Trust - Sr. Sub. Notes Cl. A3 (US) 5.7% due 09/07/23 - AAA ................................. $ 250 $ 257 WestField Cap Corp. , Ltd. - Sr. Notes 144A (a) (US) 4.375% due 11/15/10 - A ................................. 140 138 WPP Finance UK - Notes 144A (a) (US) 5.875% due 06/15/14 - BBB+ .............................. 1,825 1,899 ------- 35,120 Food & Drug Retailing - 0.0% Rite Aid Corp. - Debs. # (US) 6.875% due 08/15/13 - B- ................................ 15 14 Winn Dixie Stores, Inc. - Sr. Notes # (US) 8.875% due 04/01/08 - CCC+ .............................. 50 47 ------- 61 Food Products - 0.3% Burns Philip Capital Property, Ltd. - Sr. Sub. Notes (US) 10.75% due 02/15/11 - B- ................................ 35 39 Gold Kist, Inc. - Sr. Notes (US) 10.25% due 03/15/14 - B ................................. 33 39 Kellogg Co. - Notes Ser. B (US) 6.6% due 04/01/11 - BBB+ ................................ 200 224 Kraft Foods, Inc. - Notes (US) 5.25% due 06/01/07 - BBB+ ............................... 3,747 3,881 Nabisco, Inc. - Debs. (US) 7.55% due 06/15/15 - A- ................................. 500 602 Smithfield Foods, Inc. - Sr. Notes # (US) 7.0% due 08/01/11 - BB .................................. 1,135 1,209 ------- 5,994 Foreign Government - 0.1% Republic of Chile - Notes (US) 1.5% due 01/28/08 - A ................................... 1,800 1,811 United Mexican States (US) 7.5% due 01/14/12 - BBB- ................................ 60 68 8.375% due 01/14/11 - BBB- .............................. 40 47 United Mexican States (LU) 9.875% due 02/01/10 - BBB- .............................. 95 117 United Mexican States - Bonds (US) 11.375% due 09/15/16 - BBB- ............................. 50 74 ------- 2,117 Gas Utilities - 0.2% Kinder Morgan Energy Partners - Sr. Notes (US) 7.3% due 08/15/33 - BBB+ ................................ 1,480 1,714 Michigan Consolidated Gas Co. - Sr. Notes (US) 5.7% due 03/15/33 - BBB ............................... 1,480 1,479 Williams Cos, Inc. - Notes (US) 8.125% due 03/15/12 - B+ ................................ $ 15 $ 18 ------- 3,211 Health Care Equipment & Supplies - 0.0% Cardinal Health, Inc. - Notes (US) 6.75% due 02/15/11 - BBB ................................ 60 66 Hospira, Inc. - Notes (US) 5.9% due 06/15/14 - BBB ................................. 110 116 ------- 182 Health Care Providers & Services - 0.1% Anthem, Inc. - Notes (US) 3.5% due 09/01/07 - BBB+ ................................ 1,760 1,750 Tenet Healthcare Corp. - Sr. Notes 144A (a) (US) 9.875% due 07/01/14 - B- ................................ 35 38 ------- 1,788 Home Equity Loan - 1.2% Centex Home Equity Loan Trust - Ser. 2004-D Cl. AF4 (US) 1.0% due 06/25/32 - AAA ................................. 160 160 Centex Home Equity Loan Trust - CTF Cl. A5 (US) 6.83% due 07/25/32 - NA ................................. 2,635 2,729 Chase Mortgage Funding - Ser. 2003-2 Cl. IA 3 (US) 2.864% due 03/25/07 - AAA ............................... 100 100 Chase Mortgage Funding Ser. 2003- 1 CTF Cl. IA-3 (US) 3.14% due 07/25/23 - AAA ................................ 66 66 Countrywide Home Loan Corp. (US) 5.5% due 08/01/06 - A ................................... 2,821 2,909 Residential Asset Mortgage Products, Inc. - Cl. AI2 (US) 3.38% due 03/25/29 - AAA ................................ 3,624 3,621 Residential Asset Mortgage Products, Inc. - Ser. 2004-SL2 Cl. AI (US) 6.5% due 10/25/16 - AAA ................................. 5,018 5,155 Residential Funding and Mortgage Securities - Notes Cl. A7 (US) 6.9% due 01/25/33 - AAA ................................. 9,000 9,521 ------- 24,261 Hotels Restaurants & Leisure - 0.3% AMC Entertainment, Inc. - Sr. Sub. Notes (US) 9.875% due 02/01/12 - CCC+ .............................. 25 27 Boyd Gaming Corp. - Sr. Notes(US) 9.25% due 08/01/09 - BB- ................................ 50 54 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Hotels Restaurants & Leisure - Continued Buffets, Inc. - Sr. Sub. Notes (US) 11.25% due 07/15/10 - CCC+ .............................. $ 25 $ 27 Carmike Cinemas, Inc. - Sr. Sub. Notes (US) 7.5% due 02/15/14 - CCC+ ................................ 50 51 Circus & Eldorado Circus - Notes # (US) 10.125% due 03/01/12 - B+ ............................... 50 54 Harrah's Operating, Inc. - Sr. Notes (US) 5.5% due 07/01/10 - BBB- ................................ 100 103 Hilton Hotels Corp. - Notes (US) 7.625% due 12/01/12 - BBB- .............................. 40 47 8.25% due 02/15/11 - BBB- ............................... 120 142 Hilton Hotels Trust - Ser. 2000 Cl. B 144A (a) (US) 1.62% due 10/03/10 - A .................................. 95 96 Host Marriott LP - Sr. Notes Ser. J (US) 7.125% due 11/01/13 - B+ ................................ 20 22 Mandalay Resort Group - Sr. Notes # (US) 6.375% due 12/15/11 - BB+ ............................... 1,000 1,047 MGM Mirage, Inc. - Ser. B (US) 6.0% due 10/01/09 - BB+ ................................. 1,820 1,875 Mohegan Tribal Gaming Authority - Sr. Sub. Notes (US) 6.375% due 07/15/09 - B+ ................................ 60 62 Royal Caribbean Cruises, Ltd. (US) 8.75% due 02/02/11 - BB+ ................................ 50 59 Six Flags, Inc. - Sr. Notes # (US) 8.875% due 02/01/10 - CCC ............................... 65 66 Starwood Hotels & Resorts Worldwide, Inc. - Sr. Notes (US) 7.875% due 05/01/12 - BB+ ............................... 2,300 2,628 ------- 6,360 Household Durables - 0.1% Centex Corp. - Sr. Notes # (US) 4.75% due 01/15/08 - BBB ................................ 40 41 Mohawk Industries, Inc. - Notes (US) 6.5% due 04/15/07 - BBB+ ................................ 1,580 1,678 WCI Communities, Inc. - Sr. Sub. Notes # (US) 9.125% due 05/01/12 - B+ ................................ 80 89 ------- 1,808 Industrial Conglomerates - 0.2% General Electric Co. - Notes (US) 5.0% due 02/01/13 - AAA ................................. 1,790 1,836 Tyco International Group SA - Notes (US) 6.0% due 11/15/13 - BBB ................................. 600 654 Tyco International Group SA - Sr. Notes (US) 6.375% due 10/15/11 - BBB ............................... $1,530 $ 1,689 ------- 4,179 Insurance - 0.8% Aetna Inc. - Sr. Notes (US) 7.375% due 03/01/06 - BBB+ .............................. 100 104 Allstate Corp. - Sr. Notes (US) 5.35% due 06/01/33 - A+ ................................. 1,350 1,280 AON Capital # (US) 8.205% due 01/01/27 - BBB- .............................. 920 971 Assurant, Inc. - Sr. Notes (US) 5.625% due 02/15/14 - BBB+ .............................. 150 155 6.75% due 02/15/34 - BBB+ ............................... 1,150 1,246 CNA Financial Corp. - Notes (US) 5.85% due 12/15/14 - BBB- ............................... 1,590 1,587 Endurance Specialty Holdings, Ltd. - Sr. Notes (US) 7.0% due 07/15/34 - BBB ................................. 1,325 1,364 Marsh & McLennan Cos., Inc. - Sr. Notes (US) 5.375% due 03/15/07 - BBB+ .............................. 2,080 2,122 5.375% due 07/15/14 - # BBB ............................. 800 782 Metlife, Inc. - Debs. (US) 3.911% due 05/15/05 - A ................................. 190 191 Nationwide Mutual Insurance Co. - Notes 144A (a) (US) 7.875% due 04/01/33 - A- ................................ 30 36 North Front Pass Through Trust - 144A (a) (US) 5.81% due 12/15/24 - NA ................................. 250 254 Oil Casualty Insurance, Ltd. - Debs. 144A (a) (US) 8.0% due 09/15/34 - BBB ................................. 2,050 2,067 Prudential Financial , Inc. # (US) 4.75% due 04/01/14 - A- ................................. 195 191 Prudential Insurance Co. - Sr. Notes 144A (a) (US) 6.375% due 07/23/06 - AA- ............................... 350 368 W.R. Berkley Corp. - Sr. Notes (US) 6.15% due 08/15/19 - BBB+ ............................... 1,750 1,759 Wellpoint, Inc. - Notes 144A (a) (US) 3.75% due 12/14/07 - BBB+ ............................... 100 100 5.0% due 12/15/14 - BBB+ ................................ 1,030 1,027 XL Capital, Ltd. - Sr. Notes (US) 5.25% due 09/15/14 - A .................................. 860 862 ------- 16,466 Machinery - 0.1% Caterpillar, Inc. - Sr. Debs. (US) 7.25% due 09/15/09 - A .................................. 1,050 1,188 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Machinery - Continued Terex Corp. - Sr. Sub. Notes (US) 9.25% due 07/15/11 - B .................................. $ 50 $ 56 ------- 1,244 Marine - 0.0% Overseas Shipholding Group, Inc. - Notes (US) 8.25% due 03/15/13 - BB+ ................................ 50 56 Media - 0.6% Canwest Media, Inc. - Sr. Sub. Notes (US) 10.625% due 05/15/11 - B- ............................... 25 28 Charter Communication Operating LLC - Sr. Notes 144A (a) (US) 8.0% due 04/30/12 - B- .................................. 60 63 Cinemark, Inc. - Sr. Disc. Notes (US) 1.0% due 03/15/14 - B- .................................. 25 19 Clear Channel Communications, Inc. - Notes # (US) 5.5% due 09/15/14 - BBB- ................................ 150 151 Clear Channel Communications, Inc. (US) 7.65% due 09/15/10 - BBB- ............................... 125 142 Comcast Corp. - Notes # (US) 7.05% due 03/15/33 - BBB ................................ 1,446 1,655 Cox Communications, Inc. - Notes 144A (a) (US) 4.625% due 01/15/10 - BBB- .............................. 250 249 Cox Communications, Inc. - Notes (US) 4.625% due 06/01/13 - BBB- .............................. 770 737 Cox Communications, Inc. - Notes 144A (a) (US) 5.45% due 12/15/14 - BBB- ............................... 400 400 Dex Media, Inc. - Disc. Notes (US) 1.0% due 11/15/13 - B ................................... 50 39 Fisher Communications, Inc. - Sr. Notes 144A (a) (US) 8.625% due 09/15/14 - B- ................................ 75 81 Interpublic Group Cos., Inc. - Notes # (US) 6.25% due 11/15/14 - BB+ ................................ 1,700 1,719 Liberty Media Corp. - Sr. Notes (US) 2.64% due 09/17/06 - BBB- ............................... 500 506 3.5% due 09/25/06 - BBB- ................................ 20 20 Liberty Media Corp. - Sr. Debs # (US) 8.25% due 02/01/30 - BBB- ............................... 1,215 1,382 News America, Inc. - Sr. Notes (US) 6.75% due 01/09/38 - BBB- ............................... $ 30 $ 34 NextMedia Operating, Inc. - Sr. Sub. Notes (US) 10.75% due 07/01/11 - B- ................................ 50 56 Telenet Group Holding NV - Sr. Disc. Notes 144A (a) (US) 1.0% due 06/15/14 - CCC+ ................................ 50 38 Time Warner, Inc. (US) 6.15% due 05/01/07 - BBB+ ............................... 1,904 2,014 7.625% due 04/15/31 - BBB+ .............................. 130 157 Time Warner, Inc. - Debs. (US) 7.7% due 05/01/32 - BBB+ ................................ 1,815 2,220 Time Warner, Inc. - Notes (US) 8.18% due 08/15/07 - BBB+ ............................... 400 444 Viacom, Inc. (US) 7.875% due 07/30/30 - A- ................................ 1,054 1,354 Young Broadcasting, Inc. - Sr. Sub. Notes # (US) 10.0% due 03/01/11 - CCC+ ............................... 50 53 ------- 13,561 Metals & Mining - 0.1% Alcan Aluminum, Ltd. - Notes (US) 5.2% due 01/15/14 - A- .................................. 50 51 Codelco, Inc. - Notes 144A (a) (US) 5.5% due 10/15/13 - A ................................... 1,054 1,097 Freeport McMoran Copper & Gold - Sr. Notes (US) 10.125% due 02/01/10 - B ................................ 20 23 Ispat Inland ULC - Sr. Sec. Notes (US) 9.75% due 04/01/14 - BBB ................................ 32 40 ------- 1,211 Multi-Utilities - 0.1% Centerpoint Energy Houston - Bonds Ser. K # (US) 6.95% due 03/15/33 - BBB ................................ 1,000 1,172 Multiline Retail - 0.1% May Department Stores Co. - Sr. Notes (US) 6.7% due 07/15/34 - BBB ................................. 1,075 1,131 Saks, Inc. (US) 7.5% due 12/01/10 - BB .................................. 50 53 ------- 1,184 Oil & Gas - 0.8% Amerada Hess Corp. - Notes (US) 7.3% due 08/15/31 - BBB- ................................ 1,230 1,372 Chesapeake Energy Corp. - Sr. Notes (US) 7.0% due 08/15/14 - BB- ................................. 900 959 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Oil & Gas -- Continued Devon Energy Corp. - Sr. Debs. (US) 7.95% due 04/15/32 - BBB ................................ $1,480 $ 1,891 Duke Capital LLC. - Sr. Notes # (US) 7.5% due 10/01/09 - BBB- ................................ 70 79 Dynegy, Inc. - Sr. Sec. Notes 144A (a)(US) 10.125% due 07/15/13 - B- ............................... 70 80 Enterprise Products Operating LP - Sr. Notes (US) 6.875% due 03/01/33 - BB+ ............................... 1,252 1,331 LG Caltex Oil Corp. - Notes 144A (a)(US) 5.5% due 08/25/14 - BBB ................................. 1,167 1,200 Marathon Oil Corp. - Notes (US) 6.8% due 03/15/32 - BBB+ ................................ 1,494 1,675 Newfield Exploration Co. - Sr. Sub. Notes (US) 8.375% due 08/15/12 - BB- ............................... 50 56 Northern Border Pipeline Co. - Sr. Notes (US) 6.25% due 05/01/07 - A- ................................. 1,480 1,563 Peco Energy Transport Trust - Ser. 1999A Cl. A7 (US) 6.13% due 03/01/09 - AAA ................................ 315 337 Pemex Project Funding Master Trust - Sr. Notes 144A (a) (US) 2.82% due 06/15/10 - BBB- ............................... 200 205 Pemex Project Funding Master Trust - Notes (US) 6.125% due 08/15/08 - BBB- .............................. 1,500 1,590 Premcor Refining Group, Inc. - Sr. Notes (US) 7.5% due 06/15/15 - BB- ................................. 45 49 Premcor Refining Group, Inc. - Sr. Sub. Notes # (US) 7.75% due 02/01/12 - B .................................. 25 27 Teppco Partners - Sr. Notes (US) 6.125% due 02/01/13 - BBB ............................... 1,308 1,394 Texas Gas Transmission LLC - Notes (US) 4.6% due 06/01/15 - BBB+ ................................ 1,860 1,776 Union Oil Co. of California (US) 7.5% due 02/15/29 - BBB+ ................................ 80 96 XTO Energy, Inc. - Sr. Notes 144A (a)(US) 5.0% due 01/31/15 - BBB- ................................ 1,050 1,043 ------- 16,723 Other Asset Backed - 1.4% Argent Securities, Inc. - Ser. 2004 W1 M3 (US) 1.0% due 02/25/34 - A- .................................. $3,000 $ 3,029 Bear Stearns Asset Backed Securities - Ser. 2003 AC4 Cl. A (US) 5.0% due 09/25/33 - AAA ................................. 3,071 3,079 Bear Stearns Asset Backed Securities - Ser. 2004-AC5 Cl. A1 (US) 5.25% due 10/25/34 - AAA ................................ 2,519 2,546 CWABS, Inc. - Ser. 2004 12 Cl. 2 AV2 (US) 2.408% due 04/25/35 - AAA ............................... 250 250 CWABS, Inc. Ser. 2003-5 Cl. AF 2 (US) 3.042% due 04/25/25 - AAA ............................... 3,570 3,565 CWABS, Inc. - Ser. 2004-10 Cl. AF3 (US) 3.842% due 02/01/05 - AAA ............................... 3,710 3,667 Drive Time Auto Owner Trust - Notes Ser 2004-A Cl. A3 144A (a)(US) 1.0% due 08/15/08 - NA .................................. 150 148 Equity One ABS, Inc. - Ser. 2004- 2 Cl. AV2 (US) 1.55% due 07/25/34 - AAA ................................ 2,141 2,136 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 (US) 3.531% due 12/25/33 - AAA ............................... 1,990 1,987 Equity One ABS, Inc. - Ser. 2004 - 1 Cl. M2 (US) 5.115% due 04/25/34 - A ................................. 1,000 984 Equity One ABS, Inc. - Ser. 2004 - 1 Cl. M3 (US) 5.26% due 04/25/34 - A- ................................. 2,250 2,213 Indymac ABS, Inc. - Ser. 2004 B Cl. AII2 (US) 2.541% due 11/25/34 - AAA ............................... 125 125 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 (US) 1.0% due 03/25/35 - AA- ................................. 2,400 2,400 Morgan Stanley ABS Capital - Ser. 2004 OP1 Cl. A2B (US) 2.377% due 11/25/34 - AAA ............................... 250 250 New Century Home Loan Trust - Ser. 2004-A Cl. AII5 (US) 5.25% due 07/25/34 - AAA ................................ 230 232 Option One Loan Trust - Ser. 2004-1 CTF Cl. M 1 (US) 1.7% due 01/25/34 - AA+ ................................. 1,400 1,401 Structured Asset Investment Loan Trust - Ser 2004 8 Cl. A7 (US) 2.48% due 09/25/34 - NA ................................. 250 249 Structured Asset Investment Loan Trust - Ser. 2004 8 Cl. A13 (US) 2.481% due 09/25/34 - AAA ............................... 500 500 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Other Asset Backed - Continued Wells Fargo Home Equity - Cl. AI5 (US) 0.99% due 09/26/34 - AAA ................................ $ 250 $ 251 ------- 29,012 Other Mortgage - 0.4% LB UBS Commercial Mortgage Trust - Ser. 2003-C3 Cl. K 144A (a)(US) 5.18% due 02/17/37 - BBB- ............................... 1,363 1,323 LB UBS Commercial Mortgage Trust - Ser. 2003-C5 Cl. K 144A (a)(US) 5.25% due 04/15/37 - BBB- ............................... 1,000 971 LB-UBS Commercial Mortgage Trust - Ser. 2000-C4 Cl. A2 (US) 7.37% due 06/15/10 - AAA ................................ 5,318 6,076 ------- 8,370 Paper & Forest Products - 0.2% Abitibi-Consolidated, Inc. - Notes # (US) 8.55% due 08/01/10 - BB- ................................ 30 33 Ainsworth Lumber Co., Ltd. - Sr. Notes (US) 6.75% due 03/15/14 - B+ ................................. 45 44 Georgia Pacific Corp. - Sr. Notes (US) 8.875% due 02/01/10 - BB+ ............................... 10 12 International Paper Co. - Notes (US) 4.0% due 04/01/10 - BBB ................................. 150 147 6.75% due 09/01/11 - BBB ................................ 1,410 1,581 Norske Skogindustrier - Notes 144A (a)(US) 7.625% due 10/15/11 - BBB- .............................. 245 280 Temple Inland, Inc. - Notes (US) 7.875% due 05/01/12 - BBB ............................... 40 47 Weyerhaueser Co. - Debs (US) 7.375% due 03/15/32 - BBB ............................... 2,014 2,388 ------- 4,532 Pharmaceuticals - 0.0% Schering Plough Corp. - Sr. Notes (US) 5.3% due 12/01/13 - A- .................................. 255 267 Wyeth - Notes (US) 4.375% due 03/01/08 - A ................................. 145 147 ------- 414 Real Estate Development - 0.1% Developers Diversified Realty Co. - Notes (US) 4.625% due 08/01/10 - BBB ............................... 125 124 Rouse Co. - Notes (US) 5.375% due 11/26/13 - BB+ ............................... $1,135 $ 1,089 ------- 1,213 Real Estate Investment Trust - 0.3% Boston Properties, Ltd. Partnership - Sr. Notes (US) 6.25% due 01/15/13 - BBB ................................ 1,763 1,913 Crescent Real Estate Equities - Notes (US) 1.0% due 09/15/07 - B ................................... 20 22 Duke Realty Limited Partnership - Notes (US) 2.781% due 12/22/06 - BBB+ .............................. 1,035 1,034 Health Care Property Investments, Inc. - Sr. Notes # (US) 6.45% due 06/25/12 - BBB+ ............................... 973 1,065 Health Care Reit, Inc. - Notes (US) 6.0% due 11/15/13 - BBB- ................................ 785 813 Hospitality Properties Trust - Sr. Notes # (US) 6.75% due 02/15/13 - BBB- ............................... 100 110 IStar Financial, Inc. - Sr. Notes (US) 4.875% due 01/15/09 - BBB- .............................. 1,610 1,634 Price Reit, Inc. (US) 7.5% due 11/05/06 - A- .................................. 125 134 Simon Property Group LP - Notes (US) 5.45% due 03/15/13 - BBB ................................ 100 103 ------- 6,828 Real Estate Operations - 0.0% EOP Operating, Ltd. - Notes (US) 7.5% due 04/19/29 - BBB+ ................................ 50 58 Road & Rail - 0.1% CSX Corp. - Notes (US) 1.0% due 08/03/06 - BBB ................................. 2,140 2,141 Union Pacific Resources Group, Inc. - Ser. 2002-1 (US) 6.061% due 01/17/23 - A ................................. 50 54 ------- 2,195 Semiconductor Equipment & Products - 0.0% Amkor Technologies, Inc. - Sr. Notes (US) 7.75% due 05/15/13 - B .................................. 25 23 Specialty Retail - 0.1% Blockbuster, Inc. - Sr. Sub. Notes 144A (a)(US) 9.0% due 09/01/12 - B+ .................................. 25 25 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ----- ------ (000's) (000's) PUBLICLY-TRADED BONDS - Continued Specialty Retail - Continued Hughes Supply, Inc. - Sr. Notes 144A (a) (US) 5.5% due 10/15/14 - BBB - ............................... $ 1,700 $ 1,679 ------- 1,704 Telephone - 0.0% Cincinatti Bell, Inc. - Sr. Notes # (US) 7.25% due 07/15/13 - B - ................................ 25 26 Qwest Services Corp. - Sr. Sub. Sec. Notes 144A (a) (US) 13.5% due 12/15/10 - B .................................. 75 90 Royal KPNNV - Notes (US) 8.375% due 10/01/30 - A - ............................... 40 52 ------- 168 Textiles & Apparel - 0.0% Payless Shoesource, Inc. - Sr. Sub. Notes # (US) 8.25% due 08/01/13 - B .................................. 75 76 Tobacco - 0.0% Altria Group, Inc. - Notes (US) 7.0% due 11/04/13 - BBB ................................. 700 758 Badger Tobacco (US) 6.125% due 06/01/27 - BBB ............................... 170 169 ------- 927 U.S. Government Agencies - 12.3% Federal Home Loan Bank - Notes (US) 2.5% due 12/15/05 - AAA ................................. 1,375 1,369 2.625% due 07/15/08 - AAA ............................... 370 359 Federal Home Loan Bank - Sr. Notes (US) 5.8% due 09/02/08 - AAA ................................. 1,000 1,071 Federal Home Loan Mortgage Corp. - Notes (US) 1.875% due 02/15/06 - AAA ............................... 500 494 6.625% due 09/15/09 - AAA ............................... 800 895 Federal Home Loan Mortgage Corp. (US) 5.0% due 1/25/2034 - AAA (b) ............................ 8,000 7,942 Federal Home Loan Mortgage Corp. - Bonds (US) 6.0% due 08/01/16 - AAA ................................. 229 240 6.0% due 08/01/17 - AAA ................................. 266 278 6.5% due 03/01/17 - AAA ................................. 133 140 6.5% due 01/15/33 - AAA (b) ............................. 5,000 5,245 5.5% due 01/01/34 - AAA ................................. 928 944 Federal Home Loan Mortgage Corp. - Debs. (US) 5.875% due 03/21/11 - AAA ............................... 400 432 Federal National Mortgage Assoc. - Bonds (US) 7.5% due 01/25/28 - AAA ................................. $ 91 $ 97 1.0% due 09/01/33 - AAA ................................. 578 576 3.875% due 07/01/33 - AAA ............................... 118 116 4.125% due 04/15/14 - AAA ............................... 2,400 2,326 4.5% due 01/25/18 - AAA (b) ............................. 21,540 21,466 4.5% due 10/01/18 - AAA ................................. 4,353 4,349 5.0% due 12/25/17 - AAA (b) ............................. 13,700 13,914 5.0% due 05/01/18 - AAA ................................. 321 327 5.0% due 10/01/18 - AAA ................................. 870 885 5.0% due 01/25/33 - AAA (b) ............................. 12,100 12,002 5.0% due 03/01/34 - AAA ................................. 6,503 6,465 5.0% due 03/01/34 - AAA ................................. 4,517 4,491 5.5% due 07/01/17 - AAA ................................. 234 242 5.5% due 12/25/17 - AAA (b) ............................. 15,000 15,497 5.5% due 12/25/32 - AAA (b) ............................. 20,500 20,807 5.5% due 06/01/33 - AAA ................................. 2,013 2,045 5.5% due 08/01/33 - AAA ................................. 5,154 5,237 5.5% due 11/01/33 - AAA ................................. 7,653 7,776 5.5% due 12/01/33 - AAA ................................. 1,036 1,052 5.5% due 02/01/34 - AAA ................................. 5,839 5,931 5.5% due 02/01/34 - AAA ................................. 1,239 1,259 6.0% due 07/01/16 - AAA ................................. 171 179 6.0% due 03/01/17 - AAA ................................. 2,027 2,128 6.0% due 01/25/19 - AAA (b) ............................. 11,500 12,046 6.0% due 01/25/32 - AAA (b) ............................. 32,357 33,449 6.0% due 01/01/33 - AAA ................................. 2,756 2,853 6.0% due 03/01/33 - AAA ................................. 2,586 2,678 6.5% due 01/25/17 - AAA (b) ............................. 7,244 7,676 6.5% due 01/25/32 - AAA (b) ............................. 11,543 12,102 6.5% due 04/01/32 - AAA ................................. 763 801 6.5% due 04/01/34 - AAA ................................. 600 629 7.0% due 09/01/16 - AAA ................................. 196 208 7.0% due 11/01/30 - AAA ................................. 52 55 7.0% due 09/01/31 - AAA ................................. 88 93 7.0% due 12/01/31 - AAA ................................. 254 269 7.0% due 04/01/32 - AAA ................................. 47 50 7.0% due 1/25/34 - AAA (b) .............................. 6,080 6,441 7.5% due 11/01/30 - AAA ................................. 42 45 7.5% due 06/01/31 - AAA ................................. 197 211 Federal National Mortgage Assoc. - Notes (US) 2.5% due 06/15/08 - # AAA ............................... 3,000 2,894 4.25% due 07/15/07 - AAA ................................ 7,000 7,147 4.375% due 03/15/13 - AAA ............................... 4,250 4,238 6.0% due 12/15/05 - AAA ................................. 555 571 6.0% due 05/15/08 - AAA ................................. 775 834 6.625% due 11/15/10 - AAA ............................... 2,700 3,051 Federal National Mortgage Assoc. - Bonds Cl. 2 (US) 5.5% due 11/01/33 - AAA ................................. 7,027 1,521 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- ----- ------ (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued Federal National Mortgage Assoc. - Debs. (US) 6.625% due 11/15/30 - AAA ............................. $ 3,462 $ 4,126 Federal National Mortgage Assoc. - Bonds Ser. 2001-50 Cl. BA (US) 7.0% due 10/25/41 - AAA ............................... 104 110 Government National Mortgage Assoc. - Bonds (US) 5.0% due 01/15/33 - AAA (b) ........................... 1,075 1,075 5.5% due 01/15/34 - AAA ............................... 948 969 6.0% due 06/15/33 - AAA ............................... 1,779 1,846 8.0% due 11/15/30 - AAA ............................... 131 142 -------- 256,706 U.S. Government - 2.1% U.S. Treasury - Notes (US) 1.125% due 06/30/05 - AAA ............................. 4,000 3,973 1.625% due 02/28/06 - # AAA ........................... 11,772 11,613 3.0% due 02/15/09 - # AAA ............................ 2,751 2,700 3.375% due 10/15/09 - # AAA ........................... 780 772 3.5% due 12/15/09 - # AAA ............................ 835 831 3.625% due 07/15/09 - # AAA ........................... 3,321 3,331 3.875% due 02/15/13 - AAA ............................. 1,020 1,006 4.25% due 11/15/14 - # AAA ............................ 2,730 2,737 5.0% due 02/15/11 - AAA ............................... 2,000 2,128 5.75% due 08/15/10 - AAA .............................. 1,250 1,376 U.S. Treasury - Bonds Inflation Index (US) 3.875% due 04/15/29 - AAA ............................. 313 430 U.S. Treasury - Bonds (US) 5.25% due 02/15/29 - AAA .............................. 3,445 3,614 5.375% due 02/15/31 - # AAA ........................... 2,045 2,211 6.5% due 11/15/26 - AAA ............................... 512 622 7.875% due 02/15/21 - AAA ............................. 1,700 2,297 8.875% due 08/15/17 - AAA ............................. 2,535 3,592 9.25% due 02/15/16 - AAA .............................. 250 357 -------- 43,590 Whole Loan CMOs - 1.4% Banc America Commercial Mortgage, Inc. -Ser. 2001-3 Cl. A1 (US) 4.89% due 04/11/37 - AAA .............................. 248 254 Banc America Commercial Mortgage, Inc. - CTF 144A (a)(US) 5.276% due 03/11/41 - BBB ............................. 2,000 2,003 Banc America Commercial Mortgage, Inc. ADR - Ser. 2004-1 Cl. F 144A (a)(US) 5.279% due 11/10/39 - BBB+ ............................ 1,350 1,344 Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. G 144A (a)(US) 5.377% due 11/10/39 - BBB ............................. $ 1,350 $ 1,344 Bear Stearns ARM Trust - CTF Cl. II A2 (US) 4.25% due 04/25/33 - AAA .............................. 52 52 Bear Stearns ARM Trust - Ser. 2004-3 Cl. IIA (US) 4.344% due 07/25/34 - AAA ............................. 715 713 Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2004 Cl. X1 (US) * (c) 1.0% due 11/11/41 - NA ................................ 92,331 1,545 Bear Stearns ARM Trust - CTF Cl. I1A3 (US) (c) 5.08% due 12/25/34 - AAA .............................. 240 244 CWALT, Inc. - Ser. 2004 J7 Cl. 1A2 (US) 4.673% due 08/25/34 - AAA ............................. 2,120 2,121 CWMBS, Inc. - Ser. 2004-7 Cl. 2A1 (US) 1.0% due 04/25/34 - AAA ............................... 457 449 CWMBS, Inc. -Ser. 2004-12 CHL Cl. 12A1 (US) 4.933% due 08/25/34 - AAA ............................. 1,248 1,266 Greenwich Capital Commercial Funding Corp. - Ser. 2002-C1 Cl. A2 (US) 4.112% due 01/11/17 - AAA ............................. 504 505 GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C (US) 1.58% due 05/25/34 - AAA .............................. 3,000 3,006 GS Mortgage Securities Corp. II - Ser. 2004-GG2 Cl. XC 144A (a)(US) 1.0% due 08/01/38 - AAA ............................... 238,892 2,619 JP Morgan Chase Commercial Mortgage Securities - Ser. 2004 CIBC10 Cl. A2 (US) 3.89% due 11/12/39 - AAA .............................. 375 374 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004-A4 Cl. A1 (US) 4.302% due 08/25/34 - AAA ............................. 240 237 Merrill Lynch Mortgage Investments, Inc. - Ser. 2004 A1 Cl. 2A1 (US) 4.67% due 02/25/34 - AAA .............................. 386 385 Merrill Lynch Mortgage Trust - Ser 2004 Cl. XC (US) * (c) 0.059% due 09/12/41 - AAA ............................. 68,281 1,287 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MANAGED FUND Par Market Name of Issuer Value Value -------------- --------- ----------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Whole Loan CMOs - Continued Residential Asset Mortgage Products - Ser. 2004 RZ3 Cl. A I4 (US) 4.572% due 05/25/33 - AAA ......................... $ 150 $ 149 Residential Asset Mortgage Products - Ser. 2004-RS9 Cl. AI 4 (US) 4.767% due 10/25/32 - AAA ......................... 250 251 Specialty Underwriting - Ser. 2004 BC4 Cl. A 2BB (US) 2.37% due 10/25/35 - NA ........................... 250 250 Structured Asset Securities Corp. - Ser. 2004 19XS Cl. A2 (US) 4.37% due 10/25/34 - AAA .......................... 2,700 2,682 Structured Asset Securities Corp. - Ser. 2004-16XS Cl. A2 (US) 4.91% due 08/25/34 - AAA .......................... 2,375 2,384 Structured Asset Securities Corp. - Ser. 2004-6XS Cl. M1 (US) 4.92% due 03/25/34 - AA+ .......................... 2,500 2,471 Structured Assets Securities Corp. 144A (a)(US) 8.517% due 07/15/27 - NA .......................... 59 62 WAMU Mortgage - CTF Cl. A1 (US) 4.39% due 06/25/33 - AAA .......................... 390 391 WAMU Mortgage - Ser. 2004 AR11 Cl. A (US) 4.73% due 10/25/34 - AAA .......................... 724 722 Washington Mutual Mortgage Securities Corp. - Cl. A6 (US) 4.56% due 03/25/33 - AAA .......................... 32 32 ---------- 29,142 Wireless Telecommunications Services - 0.1% American Tower Corp. - Sr. Notes # (US) 7.5% due 05/01/12 - CCC ........................... 70 74 AT&T Wireless, Inc. - Sr. Notes (US) 8.75% due 03/01/31 - A ............................ 767 1,034 Dobson Communications Corp. - Sr. Notes (US) 10.875% due 07/01/10 - CCC ........................ 50 39 Rogers Wireless, Inc. - Sr. Sec. Notes (US) 9.625% due 05/01/11 - BB .......................... 40 47 Triton PCS, Inc. - Sr. Sub. Notes # (US) 8.75% due 11/15/11 - CCC 35 28 Western Wireless Corp. - Sr. Notes (US) 9.25% due 07/15/13 - CCC .......................... $ 70 $ 76 ---------- 1,298 ---------- TOTAL PUBLICLY TRADED BONDS- (Cost $683,290) 33.5% 696,304 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 4.5% State Street Navigator Securities Lending Portfolio 92,803 92,803 SHORT-TERM INVESTMENTS - 8.7% Investment in joint trading account (US) 2.29% due 01/03/05 (Cost $180,277) ................................ 180,277 180,277 -------- ---------- TOTAL INVESTMENTS- (Cost $2,109,506) 112.3% 2,334,076 Payables, less cash and receivables- (12.3)% (254,848) -------- ---------- NET ASSETS- 100.0% $2,079,228 ======== ========== * Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principle or interest or has filed for bankruptcy. # At December 31, 2004 all or portion of this security was out on loan. (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 December 31, 2004, securities aggregated $49,945 or 2.4% of net assets of the Portfolio. (b) To Be Announced. (c) At December 31, 2004 this security was fair valued. (d) Less than 1%. ** Bond ratings are not audited ADR-American Depository Receipts See notes to financial statements. SUMMARY OF LONG-TERM SECURITIES BY COUNTRY Market % of Country Value Long-Term Abbreviation (000s) Investments ------------ ---------- ----------- United States ........................ US $2,060,879 100.0% Luxembourg (d) ....................... LU 117 0.0% ---------- ----- $2,060,996 100.0% ========== ===== NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $384 1.76% $-- Securities lending: The Fund has entered into an agreement with SSBT to lend its securities to certain qualified brokers who pay the Fund's negotiated lender fees. This loan is collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. Cash collateral is invested in a short-term instrument. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. At December 31, 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 - -------------------------- ------------------- $90,783 $92,803 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $2,000, $76,689 and $23,685 which expire in 2008, 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $92. Realized gains and losses from security transactions are determined on the basis of identified cost. 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such as that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparts to perform under the contract. 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% NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 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 in expenses of $522. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC, an affiliate of John Hancock, which under John Hancock's supervision, is responsible for a portion of the day-to-day investment management of the Fund. John Hancock has also entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, which under John Hancock's supervision, is also responsible for a portion of the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - ---------- -------------------- $4,755,888 $4,846,561 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $2,114,473 $247,840 $(28,236) $219,603 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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $102,374 $219,603 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 - ---- ------------------ ---------------------- ----------------- 2004 $38,760 $-- $ -- 2003 63,275 -- 8,852 Included in the Fund's 2004 distributions from ordinary income is $1,365 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Managed Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Managed Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1994 - -------------------------------------------------------------------------------- Mid Cap Growth Fund (FORMERLY SMALL / MID CAP GROWTH FUND) Wellington Management Company, LLP Frank J. Boggan - -------------------------------------------------------------------------------- .. 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 driven primarily by stock selection. .. On May 1, 2004, the Fund's name changed to reflect its primary focus on primarily mid cap companies. Wellington continues to manage the Fund. Fund Commentary Performance: For 2004, the Mid Cap Growth Fund returned +11.67%, underperforming the +14.53% return of its benchmark, a splice of the Russell 2500 Growth Index (January to April) and the Russell Midcap Growth Index (from May going forward). Environment: In the face of much higher oil prices, uncertainty surrounding the U.S. presidential elections and continued insurgency in Iraq, the economy continued to exhibit solid growth. We used the stock market's mid-year volatility to upgrade both the quality and growth potential of the companies in which we invest. For the full year, the largest single driver of the Fund's underperformance versus the blended benchmark was security selection in Information Technology among Internet software & services holdings. Security selection was detrimental in the first four months of the year and positive from May to December. Outlook: We believe that 2005 will be a strong environment for our kind of investing. It is typical in an economic recovery to see the market reward survivors early on, followed by a cyclical growth focus thereafter. At this point in the cycle, we believe investors will reward the Fund's consistent growth approach in 2005. For example, Consumer Discretionary holdings continue to represent one of the largest weights in the portfolio. We continue to find high quality, consistent growth companies in unique spaces within specialty retail. [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (Fund Inception Date) Small/Mid Cap Small/Mid Cap Growth Fund Growth Benchmark(1) ------------- ------------------- Dec-94 $10,000 $10,000 Jan-95 9,879 10,120 Feb-95 10,226 10,658 Mar-95 10,738 11,082 Apr-95 11,008 11,175 May-95 11,026 11,450 Jun-95 11,587 11,970 Jul-95 12,495 12,723 Aug-95 12,736 12,862 Sep-95 12,693 13,149 Oct-95 12,293 12,816 Nov-95 13,087 13,389 Dec-95 13,596 13,396 Jan-96 14,072 13,633 Feb-96 14,531 14,148 Mar-96 14,856 14,260 Apr-96 15,922 14,949 May-96 16,364 15,254 Jun-96 16,147 14,793 Jul-96 14,534 13,645 Aug-96 15,398 14,383 Sep-96 16,320 15,297 Oct-96 16,832 15,118 Nov-96 17,342 16,008 Dec-96 17,721 15,739 Jan-97 17,746 16,435 Feb-97 16,730 16,073 Mar-97 15,737 15,165 Apr-97 15,280 15,537 May-97 16,396 16,929 Jun-97 16,621 17,398 Jul-97 17,928 19,063 Aug-97 17,588 18,876 Sep-97 18,919 19,831 Oct-97 18,518 18,837 Nov-97 18,087 19,035 Dec-97 18,344 19,285 Jan-98 18,019 18,937 Feb-98 19,571 20,718 Mar-98 20,542 21,586 Apr-98 20,485 21,879 May-98 19,554 20,980 Jun-98 20,291 21,574 Jul-98 19,176 20,650 Aug-98 15,154 16,708 Sep-98 15,932 17,971 Oct-98 16,793 19,294 Nov-98 17,518 20,594 Dec-98 19,373 22,728 Jan-99 19,516 23,410 Feb-99 18,067 22,265 Mar-99 19,263 23,505 Apr-99 20,337 24,577 May-99 20,505 24,830 Jun-99 21,375 26,586 Jul-99 20,869 26,043 Aug-99 19,255 25,481 Sep-99 18,638 25,664 Oct-99 18,739 26,914 Nov-99 18,927 30,093 Dec-99 20,370 35,768 Jan-00 19,655 35,568 Feb-00 20,178 44,691 Mar-00 21,814 41,183 Apr-00 21,220 37,172 May-00 20,807 33,863 Jun-00 22,113 38,340 Jul-00 21,943 35,196 Aug-00 23,846 39,782 Sep-00 23,258 37,208 Oct-00 23,050 34,909 Nov-00 20,957 28,255 Dec-00 22,254 30,007 Jan-01 23,211 31,952 Feb-01 21,625 27,022 Mar-01 19,847 24,033 Apr-01 21,902 27,696 May-01 22,250 28,499 Jun-01 22,645 29,146 Jul-01 22,127 26,998 Aug-01 21,414 25,202 Sep-01 18,624 21,256 Oct-01 20,219 23,351 Nov-01 21,887 25,369 Dec-01 22,883 26,762 Jan-02 22,348 25,619 Feb-02 21,454 24,036 Mar-02 23,065 25,971 Apr-02 22,413 25,108 May-02 21,960 23,843 Jun-02 20,670 21,652 Jul-02 18,200 18,963 Aug-02 18,148 18,959 Sep-02 16,480 17,526 Oct-02 17,664 18,533 Nov-02 19,583 20,257 Dec-02 18,049 18,977 Jan-03 17,544 18,563 Feb-03 17,197 18,130 Mar-03 17,186 18,370 Apr-03 18,660 19,972 May-03 20,957 22,089 Jun-03 21,401 22,544 Jul-03 22,856 24,045 Aug-03 24,126 25,334 Sep-03 23,546 24,789 Oct-03 25,754 26,827 Nov-03 26,559 27,734 Dec-03 26,508 27,764 Jan-04 27,536 28,922 Feb-04 27,908 29,191 Mar-04 27,443 29,293 Apr-04 26,217 28,051 May-04 26,707 28,713 Jun-04 27,247 29,169 Jul-04 25,323 27,238 Aug-04 25,030 26,903 Sep-04 26,269 27,907 Oct-04 26,487 28,853 Nov-04 28,330 30,344 Dec-04 29,602 31,797 Value on 12/31/04: - ------------------ $29,602 Small/Mid Cap Growth Fund $31,797 Small/Mid Cap Growth Benchmark(1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Chesapeake Energy Corp. 2.9% Michaels Stores, Inc. 2.4% Petco Animal Supplies, Inc. 2.4% Fisher Scientific International, Inc. 2.3% Pactiv Corp. 2.3% Arthur J. Gallagher & Co. 2.2% Columbia Sportswear Co. 2.1% ITT Educational Services, Inc. 2.1% O'Reilly Automotive, Inc. 2.0% Standard Pacific Corp. 2.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Mid Cap Mid Cap Growth Growth Fund Fund Benchmark/1/ ------- ------------ 1 Year 11.67% 14.53% 3 Years 8.96% 5.92% 5 Years 7.76% -2.33% 10 Years 11.46% 12.26% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Consumer Discretionary 23.9% Health Care 20.9% Information Technology 19.1% Industrials 15.5% Financials 8.7% Energy 6.5% Materials 3.1% Consumer Staples 1.7% Telecommunication Services 0.6% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Mid Cap Growth Fund benchmark represents 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. Inception: May 1, 1994 - -------------------------------------------------------------------------------- Mid Cap Growth Fund (FORMERLY SMALL / MID CAP GROWTH FUND) Wellington Management Company, LLP Frank J. Boggan - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Mid Cap Growth Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,086.50 Expense paid per $1,000* $ 5.56 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.81 Expense paid per $1,000* $ 5.38 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Mid Cap Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $44,689 of securities loaned (Note B)) ..................................... $200,926 Net unrealized appreciation of investments ......................... 34,451 Short-term investments at value .................................... 47,676 -------- Total investments ............................................ 283,053 Receivable for: Investments sold ................................................ 1,886 Dividends ....................................................... 82 -------- Total assets ....................................................... 285,021 -------- LIABILITIES Payables for: Investments purchased ........................................... 2,101 Fund shares purchased ........................................... 437 Collateral for securities on loan ............................... 45,837 Accrued operating expenses ...................................... 66 -------- Total liabilities .................................................. 48,441 -------- Net assets ......................................................... $236,580 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 15,471 -------- Net asset value per share .......................................... $ 15.29 ======== Composition of net assets: Capital paid-in ................................................. $203,498 Accumulated net realized loss on investments .................... (1,369) Net unrealized appreciation of investments ...................... 34,451 -------- Net assets ......................................................... $236,580 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Mid Cap Growth Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 36 Dividends ........................................................ 704 Securities lending ............................................... 48 ------- Total investment income ............................................. 788 ------- EXPENSES Investment advisory fee .......................................... 2,058 Auditors fees .................................................... 28 Custodian fees ................................................... 101 Legal fees ....................................................... 35 Printing & mailing fees .......................................... 18 Trustees' fees ................................................... 6 Other fees ....................................................... 10 ------- Total expenses ...................................................... 2,256 Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (61) ------- Net expenses ........................................................ 2,195 ------- Net investment loss ................................................. (1,407) ------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................. 25,242 Change in unrealized appreciation on investments ................. 688 ------- Net realized and unrealized gain .................................... 25,930 ------- Net increase in net assets resulting from operations ....................................................... $24,523 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Mid Cap Growth Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ....................................... $ (1,407) $ (694) Net realized gain ......................................... 25,242 16,619 Change in net unrealized appreciation ..................... 688 52,166 -------- -------- Net increase in net assets resulting from operations ... 24,523 68,091 Distributions to shareholders from: Realized gains ............................................ (21,476) (14,419) -------- -------- Decrease in net assets resulting from distributions .... (21,476) (14,419) From fund share transactions: Proceeds from shares sold ................................. 57,643 77,826 Distributions reinvested .................................. 21,476 14,419 Payment for shares redeemed ............................... (68,608) (63,853) -------- -------- Increase in net assets from fund share transactions .... 10,511 28,392 -------- -------- NET INCREASE IN NET ASSETS ................................... 13,558 82,064 NET ASSETS Beginning of Period ....................................... 223,022 140,958 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ..................... $236,580 $223,022 ======== ======== Analysis of fund share transactions: Sold ...................................................... 3,761 5,839 Reinvested ................................................ 1,418 970 Redeemed .................................................. (4,507) (4,848) -------- -------- Net increase in fund shares outstanding ...................... 672 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 Year Ended December 31, ---------------------------------------------------------------- 2004 2003 2002(e) 2001 2000(e) -------- -------- -------- -------- -------- Net Assets Value at Beginning of Period ...................... $ 15.07 $ 10.98 $ 14.09 $ 13.70 $ 14.03 Income from Investment Operations: Net Investment Loss ....................................... (0.08) (0.02) (0.09) (0.06) (0.02) Net Realized and Unrealized Gain (Loss) on Investment(a) .. 1.82 5.15 (2.88) 0.45 1.27 -------- -------- -------- -------- -------- Total From Investment Operations .......................... 1.74 5.13 (2.97) 0.39 1.25 Less Distributions: Distribution from Net Realized Gains on Investments ....... (1.52) (1.04) (1.42) Distribution from Capital Paid-in ......................... (0.14) (0.16) -------- -------- -------- -------- -------- Total Distributions ....................................... (1.52) (1.04) (0.14) (1.58) -------- -------- -------- -------- -------- Net Assets Value at End of Period ............................ $ 15.29 $ 15.07 $ 10.98 $ 14.09 $ 13.70 ======== ======== ======== ======== ======== Total Investment Return(b) ................................... 11.67% 46.87% (21.13)% 2.83% 9.25% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .......... 1.05%(d) 1.06%(d) 1.07%(c) 0.91%(c) 0.85% Ratio of Net Investment Loss to Average Net Assets ........ (0.66)% (0.40)% (0.72)% (0.40)% (0.20)% Portfolio Turnover Rate .................................. 108.72% 124.21% 130.01% 113.73% 103.19% Net Assets End of Period (000s Omitted) ...................... $236,580 $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) Certain amounts in 2002 and 2000 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MID CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.6% Engineered Support Systems, Inc. # ...................... 63,800 $ 3,778 Precision Castparts Corp. ............................... 34,800 2,286 ------- 6,064 Beverages - 0.4% Constellation Brands, Inc. - Cl. A * .................... 21,400 995 Biotechnology - 6.2% Abgenix, Inc. # * ....................................... 42,700 441 Celgene Corp. # * ....................................... 120,000 3,184 Cephalon, Inc. # * ...................................... 41,200 2,096 Charles River Laboratories * ............................ 45,800 2,107 CV Therapeutics, Inc. # * ............................... 50,000 1,150 Exelixis, Inc. # * ...................................... 86,000 817 Human Genome Sciences, Inc. * ........................... 81,000 974 Incyte Pharmacuticals, Inc. # * ......................... 80,000 799 Millennium Pharmaceuticals, Inc. * ...................... 88,000 1,067 Myriad Genetics, Inc. # * ............................... 38,000 855 Vertex Pharmaceuticals, Inc. # * ........................ 100,000 1,057 ------- 14,547 Commercial Services & Supplies - 6.8% Career Education Corp. * ................................ 94,900 3,796 DST Systems, Inc. * ..................................... 41,600 2,168 ITT Educational Services, Inc. # * ...................... 102,600 4,879 Resources Connection, Inc. # * .......................... 46,600 2,531 Waste Connections, Inc. * ............................... 79,250 2,714 ------- 16,088 Communications Equipment - 3.9% 3Com Corp. * ............................................ 90,000 375 Avaya, Inc. * ........................................... 78,000 1,342 Brocade Communications Systems, Inc. * .................. 110,000 840 Emulex Corp. # * ........................................ 80,000 1,347 Foundry Networks, Inc. * ................................ 80,000 1,053 Polycom, Inc. * ......................................... 111,900 2,610 Research in Motion, Ltd. * .............................. 3,500 288 Sonus Networks, Inc. # * ................................ 130,000 745 Utstarcom, Inc. # * ..................................... 29,700 658 ------- 9,258 Computers & Peripherals - 1.4% PalmOne, Inc. # * ....................................... 22,000 694 SanDisk Corp. * ......................................... 108,400 2,707 ------- 3,401 Construction & Engineering - 0.4% D.R. Horton, Inc. ....................................... 20,800 838 Containers & Packaging - 2.3% Pactiv Corp. * .......................................... 210,900 5,334 Diversified Financials - 5.0% Ameritrade Holding Corp. * .............................. 12,400 176 E*TRADE Group, Inc. * ................................... 296,900 4,439 Federated Investments, Inc. - Cl. B ..................... 140,800 $ 4,281 Legg Mason, Inc. ........................................ 41,350 3,029 ------- 11,925 Electronic Equipment & Instruments - 2.3% Benchmark Electronics, Inc. * ........................... 80,949 2,760 Symbol Technologies, Inc. ............................... 85,800 1,484 Waters Corp. * .......................................... 25,400 1,189 ------- 5,433 Energy Equipment & Services - 1.7% Ensco International, Inc. ............................... 99,600 3,161 Hanover Compressor Co. # * .............................. 65,000 919 ------- 4,080 Food & Drug Retailing - 0.3% Rite Aid Corp. * ........................................ 165,900 607 Food Products - 1.0% Hain Celestial Group, Inc. * ............................ 110,600 2,286 Health Care Equipment & Supplies - 6.3% Cooper Cos, Inc. # ...................................... 43,400 3,064 Diagnostic Products Corp. ............................... 76,900 4,233 Edwards Lifesciences Corp. # * .......................... 56,600 2,335 Fisher Scientific International, Inc. * ................. 85,600 5,340 ------- 14,972 Health Care Providers & Services - 6.4% Coventry Health Care, Inc. * ............................ 78,700 4,178 Healthnet, Inc. * ....................................... 74,100 2,139 Odyssey Healthcare, Inc. # * ............................ 168,600 2,307 PacifiCare Health Systems, Inc. * ....................... 53,400 3,018 Triad Hospitals, Inc. * ................................. 95,600 3,557 ------- 15,199 Hotels Restaurants & Leisure - 2.8% CBRL Group, Inc. ........................................ 81,000 3,390 Harrah's Entertainment, Inc. ............................ 47,900 3,204 ------- 6,594 Household Durables - 3.2% Standard Pacific Corp. .................................. 73,200 4,695 Yankee Candle, Inc. * ................................... 88,600 2,940 ------- 7,635 Insurance - 3.6% Ambac Financial Group, Inc. ............................. 42,800 3,515 Arthur J. Gallagher & Co. ............................... 157,100 5,106 ------- 8,621 Internet & Catalog Retail - 0.7% 1-800 Flowers.com., Inc. - Cl. A * ...................... 115,000 967 Overstock.com, Inc. # * ................................. 10,000 690 ------- 1,657 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MID CAP GROWTH FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Internet Software & Services - 2.3% Ask Jeeves, Inc. # * ................................... 124,500 $ 3,331 Cognizant Technology Solutions Corp. * ................. 49,900 2,112 -------- 5,443 Machinery - 2.2% Graco, Inc. ............................................ 68,600 2,562 Oshkosh Truck Corp. .................................... 31,900 2,181 Parker-Hannifin Corp. .................................. 7,600 576 -------- 5,319 Metals & Mining - 0.9% Freeport-McMoran Copper & Gold, Inc. - Cl. B # ......... 54,200 2,072 Oil & Gas - 4.7% Chesapeake Energy Corp. # .............................. 416,000 6,864 Plains Exploration & Production Co. * .................. 115,300 2,998 XTO Energy, Inc. ....................................... 37,600 1,330 -------- 11,192 Pharmaceuticals - 1.9% Biovail Corp. # * ...................................... 179,000 2,959 King Pharmaceuticals, Inc. * ........................... 127,700 1,583 -------- 4,542 Road & Rail - 1.7% Yellow Roadway Corp. # * ............................... 74,000 4,123 Semiconductor Equipment & Products - 7.9% Brooks Automation, Inc. * .............................. 67,000 1,154 Cabot Microelectronics Corp. # * ....................... 59,800 2,395 Fairchild Semiconductor Corp. - Cl. A * ................ 127,800 2,078 FormFactor, Inc. # * ................................... 24,000 651 Integrated Device Technology, Inc. * ................... 80,000 925 International Rectifier Corp. * ........................ 43,400 1,934 Lam Research Corp. * ................................... 82,900 2,396 MPS Group, Inc. * ...................................... 69,500 852 QLogic Corp. * ......................................... 26,700 981 SIRF Technology Holdings, Inc. # * ..................... 25,000 318 Skyworks Solutions, Inc. # * ........................... 76,000 717 Varian Semiconductor Equipment Associates, Inc. # * .... 113,600 4,186 -------- 18,587 Software - 1.2% Ascential Software Corp. * ............................. 49,000 799 Cadence Design Systems, Inc. * ......................... 50,400 696 Dendrite International, Inc. * ......................... 43,100 836 Tibco Software, Inc. * ................................. 35,000 467 -------- 2,798 Specialty Retail - 12.7% CDW Corp. .............................................. 57,400 3,808 Chicos Fas, Inc. * ..................................... 60,200 2,741 Christopher & Banks Corp. # ............................ 30,400 561 Michaels Stores, Inc. .................................. 191,700 5,745 O'Reilly Automotive, Inc. # * .......................... 107,300 $ 4,834 Pacific Sunwear of California, Inc. * .................. 203,400 4,528 Petco Animal Supplies, Inc. * .......................... 144,100 5,689 Urban Outfitters, Inc. * ............................... 45,900 2,038 -------- 29,944 Textiles & Apparel - 4.4% Coach, Inc. * .......................................... 39,500 2,228 Columbia Sportswear Co. # * ............................ 83,600 4,983 Liz Claiborne, Inc. .................................... 75,300 3,179 -------- 10,390 Trading Companies & Distributors - 1.8% Fastenal Co. ........................................... 67,300 4,143 Wireless Telecommunications Services - 0.5% Nextel Partners, Inc. - Cl. A * ........................ 66,000 1,290 -------- TOTAL COMMON STOCK- (Cost $200,926) 99.5% 235,377 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 19.3% State Street Navigator Securities Lending Portfolio .. $45,837 45,837 SHORT-TERM INVESTMENTS - 0.8% Investment in joint trading account 2.29% due 01/03/05 (Cost $1,839) .................. 1,839 1,839 ------- --------- TOTAL INVESTMENTS- (Cost $248,602) 119.6% 283,053 Payables, less cash and receivables- (19.6)% (46,473) ------- --------- NET ASSETS- 100.0% $236,580 ======= ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $9,269 1.51% $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 December 31, 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 - -------------------------- ------------------- $44,689 $45,837 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, 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, 2004, through December 31, 2004, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividend and Interest: 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. 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. For the year ended December 31, 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 in expenses of $61. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, LLP, which under John Hancock's 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $232,200 $243,927 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $251,389 $34,995 $(3,331) $31,664 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $477 $940 $-- $31,664 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital - ---- ------------------ ---------------------- ----------------- 2004 $ 9,422 $12,054 $-- 2003 10,380 4,039 -- 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, was distributed to shareholders as ordinary income distributions. NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Mid Cap Growth Fund (formerly Small/Mid Cap Growth Fund) (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Mid Cap Growth Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1998 - -------------------------------------------------------------------------------- Mid Cap Value B Fund (FORMERLY SMALL/MID CAP CORE(SM) FUND) T. Rowe Price Associates, Inc. David J. Wallack - -------------------------------------------------------------------------------- .. 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 driven primarily by stock selection. .. On May 1, 2004, the Fund's name, investment strategy and sub-adviser were changed. T. Rowe Price took over as manager of the Fund. Fund Commentary Performance: For the year ending December 31, 2004, the Mid Cap Value B Fund returned +18.74%, underperforming the +23.60% return of its benchmark, a splice of the Russell 2500 Index (January through April) and the Russell Mid Cap Value Index (May through December). From the date of manager inception, May 1, 2004 to year end, the Mid Cap Value B Fund returned +17.33%, underperforming the +22.61% return of the Russell Mid Cap Value Index./2/ Environment: U.S. equity prices registered strong gains from May to December, largely due to a fourth-quarter rally. Mid-cap stocks outperformed their small- and large-cap counterparts during the eight-month period. Within the mid-cap segment, value stocks outpaced growth stocks by a wide margin. The year ended on a positive note as consumer confidence recovered. The weakness in recent months was most likely related to uncertainty about employment prospects, spiking oil prices and uneasiness surrounding the election -- concerns that moderated during the year's final weeks. The Fund posted strong absolute results, but trailed the Russell Midcap Value Index. Detractors from relative performance included holdings in the Consumer Discretionary and Financials sectors. In contrast, the portfolio's Energy and Materials exposures benefited relative results. While the Fund's overweight in the Consumer Discretionary sector was favorable, disappointing stock selection more than offset this benefit. Newspapers generally suffered due to a lagging recovery and increased competition from Internet and satellite radio. In Financials, stock selection detracted from relative performance, as did an underweight in the group, which outperformed the Index. On the positive side, the portfolio's Energy and Materials holdings outperformed the benchmark. Outlook: Mid-cap valuations are now at a premium relative to large caps. The key to the mid-cap outperformance cycle over large caps is continued relative earnings strength. Mid-cap growth stocks slightly outperformed their value counterparts during the fourth quarter, but value maintains a significant five-year advantage. We continue to find good risk/reward candidates among mid caps, but they are somewhat harder to come by than in previous years. Inception: May 1, 1998 - -------------------------------------------------------------------------------- Mid Cap Value B Fund (FORMERLY SMALL/MID CAP CORE(SM) FUND) T. Rowe Price Associates, Inc. David J. Wallack - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 5/1/98 (Fund Inception Date) Small/Mid Cap Russell Core(SM) Fund 2500(TM) Index ------------- -------------- 05/1/1998 $10,000 $10,000 06/30/1998 9,577 9,536 07/31/1998 9,721 9,547 08/31/1998 9,040 8,892 09/30/1998 7,377 7,215 10/30/1998 7,776 7,727 11/30/1998 7,960 8,149 12/31/1998 8,422 8,553 01/29/1999 9,019 9,071 02/26/1999 8,940 9,056 03/31/1999 8,305 8,461 04/30/1999 8,438 8,642 05/28/1999 9,172 9,415 06/30/1999 9,251 9,561 07/30/1999 9,810 10,058 08/31/1999 9,686 9,860 09/30/1999 9,347 9,552 10/29/1999 9,224 9,409 11/30/1999 9,430 9,615 12/31/1999 9,887 10,159 01/31/2000 10,871 11,261 02/29/2000 10,456 11,002 03/31/2000 11,807 12,591 04/28/2000 11,700 12,398 05/31/2000 11,257 11,731 06/30/2000 10,720 11,168 07/31/2000 11,414 11,902 08/31/2000 11,267 11,598 09/29/2000 12,208 12,597 10/31/2000 11,766 12,187 11/30/2000 11,467 11,853 12/29/2000 10,396 10,810 01/31/2001 11,375 11,741 02/28/2001 11,642 12,127 03/30/2001 10,940 11,346 04/30/2001 10,296 10,723 05/31/2001 11,153 11,670 06/30/2001 11,433 12,022 07/31/2001 11,546 12,192 08/31/2001 11,242 11,756 09/28/2001 10,945 11,370 10/31/2001 9,572 9,899 11/30/2001 9,992 10,411 12/31/2001 10,814 11,253 01/31/2002 11,435 11,884 02/28/2002 11,423 11,737 03/30/2002 11,363 11,531 04/30/2002 12,211 12,328 05/31/2002 12,368 12,297 06/30/2002 11,981 11,937 07/31/2002 11,397 11,265 08/31/2002 9,984 9,921 09/28/2002 10,116 9,951 10/31/2002 9,327 9,163 11/30/2002 9,532 9,461 12/31/2002 10,097 10,234 01/31/2003 9,698 9,771 02/28/2003 9,440 9,511 03/30/2003 9,166 9,283 04/30/2003 9,203 9,371 05/31/2003 9,969 10,206 06/30/2003 10,953 11,209 07/31/2003 11,169 11,423 08/31/2003 11,739 12,038 09/28/2003 12,181 12,595 10/31/2003 12,136 12,424 11/30/2003 13,153 13,405 12/31/2003 13,784 13,909 01/31/2004 14,077 14,217 02/28/2004 14,897 14,736 03/30/2004 15,031 14,964 04/30/2004 15,058 15,054 05/31/2004 14,246 14,331 06/30/2004 14,437 14,698 07/31/2004 14,905 15,223 08/31/2004 14,371 14,810 09/28/2004 14,442 15,049 10/31/2004 14,914 15,487 11/30/2004 15,204 15,845 12/31/2004 16,123 16,916 16,715 17,571 Value on 12/31/04: - ------------------ $16,715 Small/Mid Cap Core (SM) Fund $17,571 Russell 2500(TM) Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Diamond Offshore Drilling, Inc. 2.8% Mattel, Inc. 1.8% St. Paul Cos., Inc. 1.7% Marsh & McLennan Cos., Inc. 1.7% NiSource, Inc. 1.6% Teco Energy, Inc. 1.6% Campbell Soup Co. 1.5% Healthsouth Corp. 1.5% Lincare Holdings, Inc. 1.4% Novellus Systems, Inc. 1.4% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Mid Cap Mid Cap Value B Value B Fund Fund Benchmark/1/ ------------ ----------------- 1 Year 18.74% 23.60% 3 Years 13.49% 13.92% 5 Years 8.99% 9.31% Since Inception (5/1/98) 8.00% 8.82% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 24.4% Consumer Discretionary 17.9% Industrials 13.3% Health Care 9.9% Utilities 8.2% Information Technology 7.9% Materials 7.0% Energy 5.9% Telecommunication Services 2.8% Consumer Staples 2.7% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Mid Cap Value B Fund benchmark represents the Russell 2500 Index, May 1998 to April 2004 and then the Russell Mid Cap Value Index, May 2004 to present. /2/ Returns are not annualized. Inception: May 1, 1998 - -------------------------------------------------------------------------------- Mid Cap Value B Fund (FORMERLY SMALL/MID CAP CORE(SM) FUND) T. Rowe Price Associates, Inc. David J. Wallack - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Mid Cap Value B Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,121.50 Expense paid per $1,000* $ 6.07 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.41 Expense paid per $1,000* $ 5.78 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted) ASSETS Long term investments at cost (including $23,680 of securities loaned (Note B)) ...................................... $151,154 Net unrealized appreciation on investments .......................... 19,851 Short-term investments at value ..................................... 31,858 -------- Total investments ............................................. 202,863 Receivables for: Investments sold ................................................. 295 Fund shares sold ................................................. 56 Dividends ........................................................ 139 -------- Total assets ........................................................ 203,353 -------- LIABILITIES Payables for: Investments purchased ............................................ 118 Collateral for securities on loan ................................ 24,325 Foreign dividend tax withholding ................................. 2 Accrued operating expenses ....................................... 13 -------- Total liabilities ................................................... 24,458 -------- Net assets .......................................................... $178,895 ======== Share outstanding, $0.01 Par Value (unlimited shares authorized) .... 15,325 -------- Net asset value per share ........................................... $ 11.67 ======== Composition of net assets: Capital paid-in .................................................. $157,352 Accumulated net realized gain on investments, futures and foreign currency transactions ......................................... 1,692 Net unrealized appreciation of investments ....................... 19,851 -------- Net assets .......................................................... $178,895 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 63 Dividends (net foreign withholding tax of $6) ................. 1,793 Securities lending ............................................ 52 ------- Total investment income ............................................. 1,908 ------- EXPENSES Investment advisory fee ....................................... 1,211 Auditors fees ................................................. 12 Custodian fees ................................................ 81 Legal fees .................................................... 16 Printing & mailing fees ....................................... 82 Trustees' fees ................................................ 3 Other fees .................................................... 5 ------- Total expenses ...................................................... 1,410 Less expenses reimbursed ...................................... (83) Less custodian expense reduction offset by commission recapture arrangement (Note C) .................. (3) ------- Net expenses ........................................................ 1,324 ------- Net investment income ............................................... 584 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 19,778 Financial futures contracts ................................... (17) Foreign currency transactions ................................. 1 Change in unrealized appreciation/(depreciation) on: Investments ................................................... 2,971 Financial futures contracts ................................... (46) ------- Net realized and unrealized gain .................................... 22,687 ------- Net increase in net assets resulting from operations ................ $23,271 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Mid Cap Value B Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income $ 584 $ 298 Net realized gain ............................................. 19,762 7,777 Change in net unrealized appreciation ......................... 2,925 18,500 -------- -------- Net increase in net assets resulting from operations ....... 23,271 26,575 Distributions to shareholders from: Net investment income ......................................... (543) (2,831) Realized gains ................................................ (17,846) (3,957) Capital paid-in ............................................... (1,293) -------- -------- Decrease in net assets resulting from distributions ........ (18,389) (8,081) From fund share transactions: Proceeds from shares sold ..................................... 77,790 57,643 Shares issued in reorganization ............................... 35,029 Distributions reinvested ...................................... 18,389 8,081 Payment for shares redeemed ................................... (51,097) (38,459) -------- -------- Increase in net assets from fund share transactions ........ 80,111 27,265 -------- -------- NET INCREASE IN NET ASSETS ....................................... 84,993 45,759 NET ASSETS Beginning of Period ........................................... 93,902 48,143 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ................................ $178,895 $ 93,902 ======== ======== Analysis of fund share transactions: Sold .......................................................... 6,692 5,991 Issued in reorganization ...................................... 2,966 Reinvested .................................................... 1,590 744 Redeemed ...................................................... (4,478) (3,991) -------- -------- Net increase in fund shares outstanding .......................... 6,770 2,744 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Mid Cap Value B Fund --------------------------------------------------------------- Year Ended December 31, --------------------------------------------------------------- 2004(e) 2003(i) 2002(i) 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 ..................................... 0.06 0.04 0.04 0.05 0.05 Net Realized and Unrealized Gain (Loss) on Investment(a) .. 1.97 3.69 (1.54) 0.39 -------- ------- ------- ------- ------- Total From Investment Operations .......................... 2.03 3.73 (1.50) 0.05 0.44 Less Distributions: Distribution from Net Investment Income ................... (0.04) (0.37) (0.04) (0.05) (0.05) Distribution from Net Realized Gains on Investments ....... (1.30) (0.50) (0.32) Distribution from Excess of Net Investment Income/Gains ... (0.05) Distribution from Capital Paid-in ......................... (0.16) (h) (0.02) -------- ------- ------- ------- ------- Total Distributions ....................................... (1.34) (1.03) (0.04) (0.05) (0.44) -------- ------- ------- ------- ------- Net Assets Value at End of Period ............................ $ 11.67 $ 10.98 $ 8.28 $ 9.82 $ 9.82 ======== ======= ======= ======= ======= Total Investment Return(b) ................................... 18.74% 45.15% (15.19)% 0.53% 4.63% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .......... 1.15%(c)(d) 1.15%(c) 0.96%(c) 0.90%(c) 0.90%(c) Ratio of Net Investment Income to Average Net Assets ...... 0.50% 0.45% 0.50% 0.52% 0.56% Portfolio Turnover Rate ................................... 196.48%(f) 125.00% 125.11% 96.88% 94.78% Net Assets End of Period (000s Omitted) ...................... $178,895 $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 1.22%, 1.19%, 1.12%, 1.15%, and 1.23%, for the years ended December 31, 2004, 2003, 2002, 2001, and 2000, respectively. (d) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. (e) The Fund entered into a new sub-advisory agreement with T. Rowe Price Associates, Inc., during the period shown. (f) Excludes merger activity. (h) Less than $0.01. (i) Certain amounts in 2003 and 2002 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 1.5% Raytheon Co. ............................................ 40,400 $ 1,569 Rockwell Collins, Inc. .................................. 29,700 1,171 ------- 2,740 Airlines - 1.1% Southwest Airlines Co. .................................. 121,200 1,973 Banks - 5.9% Citizens Banking Corp. # ................................ 7,100 244 Commerce Bancshares, Inc. ............................... 16,272 817 First Horizon National Corp. ............................ 17,300 746 Huntington Bancshares, Inc. ............................. 58,300 1,445 Northern Trust Corp. .................................... 39,400 1,914 PNC Bank Corp. .......................................... 37,300 2,142 Regions Financial Corp. ................................. 31,500 1,121 Synovus Financial Corp. ................................. 73,300 2,095 ------- 10,524 Biotechnology - 3.0% Chiron Corp. * .......................................... 61,100 2,036 Human Genome Sciences, Inc. # * ......................... 49,000 589 MedImmune, Inc. * ....................................... 85,200 2,310 Vertex Pharmaceuticals, Inc. # * ........................ 44,300 468 ------- 5,403 Chemicals - 2.2% Great Lakes Chemical Corp. .............................. 43,100 1,228 Mosaic Co. * ............................................ 33,000 538 NALCO Holding Co. * ..................................... 113,000 2,206 ------- 3,972 Commercial Services & Supplies - 5.9% Allied Waste Industries, Inc. * ......................... 112,500 1,044 Ceridian Corp. * ........................................ 13,500 247 Equifax, Inc. ........................................... 61,600 1,731 Herman Miller, Inc. # ................................... 30,800 851 Manpower, Inc. .......................................... 47,600 2,299 MoneyGram International, Inc. ........................... 78,000 1,649 ServiceMaster Co. ....................................... 43,500 600 The Bisys Group, Inc. * ................................. 97,000 1,596 Weight Watchers International , Inc. # * ................ 13,600 558 ------- 10,575 Communications Equipment - 0.1% Tellabs, Inc. * ......................................... 20,500 176 Diversified Financials - 3.7% Ameritrade Holding Corp. * .............................. 63,000 896 Charles Schwab Corp. .................................... 192,300 2,300 Federated Investments, Inc. - Cl. B ..................... 35,100 1,067 Janus Capgroup, Inc. .................................... 97,300 1,635 LaBranche & Co., Inc. # * ............................... 71,200 638 ------- 6,536 Diversified Telecommunication Services - 1.6% AT&T Corp. .............................................. 20,200 385 Qwest Communications International, Inc. * .............. 388,820 $ 1,726 Telus Corp. ............................................. 25,100 726 ------- 2,837 Electric Utilities - 4.8% CMS Energy Corp. * ...................................... 119,500 1,249 El Paso Electric Co. * .................................. 39,300 745 Firstenergy Corp. ....................................... 24,000 948 NRG Energy, Inc. # * ................................... 52,900 1,907 Pinnacle West Capital Corp. ............................. 15,700 697 Teco Energy, Inc. # ..................................... 177,200 2,718 Xcel Energy, Inc. ....................................... 19,500 355 ------- 8,619 Electric/Gas - 0.9% Duke Energy Co. ......................................... 62,300 1,578 Electrical Equipment - 1.2% Molex, Inc. - Cl. A ..................................... 77,600 2,068 Electronic Equipment & Instruments - 1.5% AVX Corp. # ............................................. 111,600 1,406 Jabil Circuit, Inc. * ................................... 48,000 1,228 ------- 2,634 Energy Equipment & Services - 5.0% Cooper Cameron Corp. * .................................. 18,700 1,006 Diamond Offshore Drilling, Inc. # ....................... 121,300 4,858 Grant Prideco, Inc. * ................................... 80,000 1,604 Hanover Compressor Co. # * .............................. 77,500 1,095 Petroleum Geo Services ASA - ADR # * .................... 6,700 416 ------- 8,979 Finance - 2.8% Dow Jones & Co., Inc. ................................... 49,900 2,149 Marsh & McLennan Cos., Inc. ............................. 86,500 2,846 ------- 4,995 Food & Drug Retailing - 1.0% Agrium, Inc. ............................................ 13,100 221 Outback Steakhouse, Inc. ................................ 36,000 1,648 ------- 1,869 Food Products - 2.5% Archer Daniels Midland Co. .............................. 11,600 259 Campbell Soup Co. ....................................... 88,300 2,639 H.J. Heinz Co. .......................................... 39,200 1,529 ------- 4,427 Gas Utilities - 0.2% NorthWestern Corp. * .................................... 10,900 305 Health Care Providers & Services - 6.0% Accredo Health, Inc. * .................................. 7,100 197 Amerisource Bergen Corp. ................................ 36,000 2,112 Community Health Systems, Inc. * ........................ 8,000 223 Healthsouth Corp. # * ................................... 416,500 2,616 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Health Care Providers & Services - Continued Lincare Holdings, Inc. * ................................ 55,100 $ 2,350 McKesson HBOC, Inc. ..................................... 31,800 1,000 Tenet Healthcare Corp. * ................................ 199,900 2,195 ------- 10,693 Household Durables - 1.0% Newell Rubbermaid, Inc. ................................. 77,200 1,867 Insurance - 10.1% Aon Corp. ............................................... 70,300 1,677 Axis Capital Holdings, Ltd. ............................. 68,200 1,866 Genworth Financial, Inc. - Cl. A ........................ 70,000 1,890 Jefferson-Pilot Corp. ................................... 27,100 1,408 Loews Corp. ............................................. 9,300 654 Ohio Casualty Corp. # * ................................. 49,700 1,154 Protective Life Corp. ................................... 16,300 696 Radian Group, Inc. ...................................... 24,800 1,320 Safeco Corp. # .......................................... 23,300 1,217 St. Paul Cos., Inc. ..................................... 79,217 2,937 UnumProvident Corp. # ................................... 95,200 1,708 XL Capital, Ltd. - Cl. A ................................ 19,600 1,522 ------- 18,049 Internet Software & Services - 0.6% IAC / InterActive Corp. * ............................... 30,400 840 McAfee, Inc. * .......................................... 8,400 243 ------- 1,083 IT Consulting & Services - 1.2% BearingPoint, Inc. # * .................................. 266,200 2,138 Leisure Equipment & Products - 1.7% Mattel, Inc. ............................................ 157,200 3,064 Media - 9.2% Cablevision Systems Corp. - Cl. A * ..................... 77,900 1,940 Cox Radio, Inc. - Cl. A * ............................... 32,900 542 Entercom Communications Corp. * ......................... 55,900 2,006 Hearst-Argyle Television, Inc. .......................... 13,700 361 Meredith Corp. .......................................... 27,600 1,496 New York Times Co. - Cl. A .............................. 47,300 1,930 Pearson plc - ADR # ..................................... 137,200 1,668 Reuters Group plc - ADR # ............................... 27,600 1,185 Scholastic Corp. # * .................................... 47,300 1,748 Tribune Co. ............................................. 40,500 1,707 Univision Communications, Inc. - Cl. A * ................ 32,200 943 Washington Post Co. - Cl. B ............................. 948 932 ------- 16,458 Metals & Mining - 0.8% Meridian Gold, Inc. # * ................................. 72,000 1,366 Multi-Utilities - 1.9% Dynegy, Inc. - Cl. A # * ................................ 153,100 707 NiSource, Inc. .......................................... 121,700 2,773 ------- 3,480 Multiline Retail - 2.3% Big Lots, Inc. * ........................................ 38,700 $ 469 Dillard's, Inc. - Cl. A ................................. 55,000 1,478 Family Dollar Stores, Inc. .............................. 58,400 1,824 Saks, Inc. .............................................. 29,000 421 ------- 4,192 Oil & Gas - 0.5% Murphy Oil Corp. ........................................ 11,300 909 Paper & Forest Products - 3.7% Abitibi-Consolidated, Inc. # ............................ 105,200 728 Bowater, Inc. ........................................... 48,600 2,137 Domtar, Inc. ............................................ 148,500 1,792 MeadWestvaco Corp. ...................................... 46,000 1,559 Potlatch Corp. # ........................................ 9,000 455 ------- 6,671 Pharmaceuticals - 0.5% Barr Laboratories, Inc. * ............................... 6,500 296 Valeant Pharmaceuticals International # ................. 20,200 532 ------- 828 Real Estate Investment Trust - 0.9% Apartment Investment & Management Co .................... 30,000 1,156 Equity Office Properties Trust .......................... 18,500 539 ------- 1,695 Road & Rail - 3.0% CSX Corp. ............................................... 55,200 2,212 Laidlaw International, Inc. * ........................... 63,900 1,368 Union Pacific Corp. ..................................... 26,500 1,782 ------- 5,362 Semiconductor Equipment & Products - 1.6% KLA-Tencor Corp. * ...................................... 10,300 480 Novellus Systems, Inc. .................................. 83,100 2,317 ------- 2,797 Software - 2.6% BMC Software, Inc. * .................................... 92,400 1,719 Intuit, Inc. * .......................................... 27,700 1,219 Synopsys, Inc. * ........................................ 88,200 1,730 ------- 4,668 Specialty Retail - 1.9% AnnTaylor Stores Corp. * ................................ 62,700 1,350 Gap, Inc. ............................................... 93,000 1,964 ------- 3,314 Textiles & Apparel - 0.0% Unifi, Inc. # * ........................................ 14,800 57 Wireless Telecommunications Services - 1.1% Crown Castle International Corp. * ...................... 6,000 100 Telephone and Data Systems, Inc. ........................ 20,000 1,539 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MID CAP VALUE B FUND Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK - Continued Wireless Telecommunications Services - Continued United States Cellular Corp. * ...................... 5,600 $ 250 -------- 1,889 -------- TOTAL COMMON STOCK- (Cost $150,940) 95.5% 170,790 PREFERRED STOCK Oil & Gas - 0.1% NRG Energy, Inc. - 144A (a) (b) ..................... 200 204 -------- TOTAL PREFERRED STOCK- (Cost $204) 0.1% 204 Par Value ------- (000's) PUBLICLY-TRADED BONDS- Electric Utilities - 0.0% Xcel Energy, Inc. - Sr. Notes 144A (a) 7.5% due 11/21/07 - BBB- ......................... $ 7,000 11 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $10) 0.0% 11 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 13.6% State Street Navigator Securities Lending Portfolio ........................................ 24,325 24,325 SHORT-TERM INVESTMENTS - 4.2% Investment in joint trading account 2.29% due 01/03/05 (Cost $7,533) ................................. 7,533 7,533 ------- -------- TOTAL INVESTMENTS- (Cost $183,012) 113.4% 202,863 Payables, less cash and Receivables- (13.4)% (23,968) ------- -------- NET ASSETS- 100.0% $178,895 ======= ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. (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 December 31, 2004, securities aggregated $215 or 0.1% of net assets of the Portfolio. (b) At December 31, 2004 this security was fair valued. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Mid Cap Value B (formerly John Hancock Small/Mid Cap CORE), (the "Fund" or "VST Mid Cap Value B") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense - --------------------------- ---------------- ---------------- $3,679 1.49% $1 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 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 - -------------------------- ------------------- $23,680 $24,325 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $6. 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 December 31, 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. 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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $83 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 in expenses of $3. As of May 3, 2004, John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price Associates, Inc., which under John Hancock's 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $274,442 $220,644 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $183,656 $20,588 $(1,381) $19,207 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $1,814 $523 $-- $19,207 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 - ---- ------------------ ---------------------- ----------------- 2004 $11,906 $6,483 $ -- 2003 6,192 596 1,293 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued 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, was distributed to shareholders as ordinary income distributions. NOTE E--COMBINATION On October 15, 2004, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund - ------------------- ----------------- VST Mid Cap Value B VST Mid Cap Value 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 a tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Appreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 2,966 $35,029 $1,953 $119,985 $155,014
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on October 15, 2004 on the following matter:
For Against Abstain --- ------- ------- To approve, as to the Mid Cap Value B Fund, a proposal to combine with the Mid Cap 91% 6% 3% Value Fund of John Hancock Variable Series Trust I. Shareholders in the Mid Cap Value Fund would receive Mid Cap Value B Fund shares having the same value as their prior Mid Cap Value Fund shares.
Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Mid Cap Value B (formerly, Small/Mid Cap CORE Fund) (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Mid Cap Value B Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: March 29, 1986 - -------------------------------------------------------------------------------- Money Market Fund Wellington Management Company, LLP John C. Keogh - -------------------------------------------------------------------------------- .. 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. Fund Commentary Performance: For the year 2004, the Money Market Fund returned +1.09%. Environment: The U.S. economy gained momentum over the course of 2004 and showed significant acceleration during the latter half of the year. Data released during the fourth quarter show the economy expanded at a rate of 4% during the third quarter, faster than previously estimated, suggesting a strong finish to 2004. In light of the improving economic data, Federal Reserve policy makers began a tightening campaign in June, which led to five increases, bringing the Fed funds rate to 2.25%. Policy makers reiterated their plan to continue raising rates at a "measured" pace. Performance reflects the overall low level of interest rates and the portfolio's emphasis on commercial paper and U.S. Treasury and Agency securities. Outlook: As the economy continues to expand and the risk of rising prices grows in 2005, we believe the Fed will remain on a path of steady tightening. A weaker dollar and higher oil prices will force the Fed to remain diligent in its effort to ward off inflation. [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/93 (10-Year Period) Money Market Fund ----------------- 12/31/1994 $10,000 01/31/1995 10,047 02/28/1995 10,092 03/31/1995 10,141 04/30/1995 10,186 05/31/1995 10,239 06/30/1995 10,287 07/31/1995 10,336 08/31/1995 10,385 09/30/1995 10,431 10/31/1995 10,481 11/30/1995 10,529 12/31/1995 10,574 01/31/1996 10,623 02/29/1996 10,667 03/31/1996 10,710 04/30/1996 10,757 05/31/1996 10,804 06/30/1996 10,846 07/31/1996 10,897 08/31/1996 10,944 09/30/1996 10,992 10/31/1996 11,041 11/30/1996 11,082 12/31/1996 11,138 01/31/1997 11,187 02/28/1997 11,232 03/31/1997 11,281 04/30/1997 11,330 05/31/1997 11,380 06/30/1997 11,431 07/31/1997 11,484 08/31/1997 11,532 09/30/1997 11,587 10/31/1997 11,640 11/30/1997 11,688 12/31/1997 11,746 01/31/1998 11,802 02/28/1998 11,850 03/31/1998 11,903 04/30/1998 11,955 05/31/1998 12,010 06/30/1998 12,063 07/31/1998 12,121 08/31/1998 12,172 09/30/1998 12,226 10/31/1998 12,282 11/30/1998 12,332 12/31/1998 12,385 01/31/1999 12,437 02/28/1999 12,482 03/31/1999 12,532 04/30/1999 12,583 05/31/1999 12,629 06/30/1999 12,678 07/31/1999 12,732 08/31/1999 12,783 09/30/1999 12,837 10/31/1999 12,893 11/30/1999 12,950 12/31/1999 13,010 01/31/2000 13,072 02/29/2000 13,130 03/31/2000 13,197 04/30/2000 13,256 05/31/2000 13,324 06/30/2000 13,398 07/31/2000 13,466 08/31/2000 13,540 09/30/2000 13,613 10/31/2000 13,683 11/30/2000 13,755 12/31/2000 13,830 01/31/2001 13,902 02/28/2001 13,963 03/31/2001 14,026 04/30/2001 14,080 05/31/2001 14,132 06/30/2001 14,179 07/31/2001 14,220 08/31/2001 14,264 09/30/2001 14,296 10/31/2001 14,327 11/30/2001 14,353 12/31/2001 14,374 01/31/2002 14,394 02/28/2002 14,412 03/31/2002 14,431 04/30/2002 14,450 05/31/2002 14,469 06/30/2002 14,486 07/31/2002 14,504 08/31/2002 14,523 09/30/2002 14,539 10/31/2002 14,557 11/30/2002 14,573 12/31/2002 14,587 01/31/2003 14,602 02/28/2003 14,614 03/31/2003 14,626 04/30/2003 14,638 05/31/2003 14,651 06/30/2003 14,662 07/31/2003 14,673 08/31/2003 14,684 09/30/2003 14,694 10/31/2003 14,705 11/31/2003 14,715 12/31/2003 14,726 01/31/2004 14,737 02/28/2004 14,746 03/31/2004 14,756 04/30/2004 14,767 05/31/2004 14,776 06/30/2004 14,787 07/31/2004 14,799 08/31/2004 14,813 09/30/2004 14,828 10/31/2004 14,846 11/31/2004 14,863 12/31/2004 14,886 Value on 12/31/04 - ----------------- $14,886 Money Market Fund - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Federal Home Loan Mortgage Corp. 8.9% Federal National Mortgage Assoc. 7.5% Federal Home Loan Bank 4.6% Travelers Insurance Co. 3.2% Metlife, Inc. 3.2% Fortune Brands, Inc. 2.9% Permanent Financing plc 2.7% General Electric 2.6% Morgan Stanley Dean Witter 2.5% Barclays Bank plc 2.5% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Money Market Fund/1/ ------------ 1 Year 1.09% 3 Years 1.17% 5 Years 2.73% 10 Years 4.06% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Commercial Paper 59.84% Government Agency 21.00% Variable Rate Securities 19.16% - -------------------------------------------------------------------------------- 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. * Total returns are for the period ended December 31, 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. /1/ Returns reflect extra-ordinary capital contribution of $284,471 in October 2000. Inception: March 29, 1986 - -------------------------------------------------------------------------------- Money Market Fund Wellington Management Company, LLP John C. Keogh - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Money Market Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,006.70 Expense paid per $1,000* $ 1.74 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,023.41 Expense paid per $1,000* $ 1.75 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Money Market Fund (000's Omitted) ASSETS Short-term investments at value .................................... $471,995 Receivable for: Interest ........................................................ 614 -------- Total assets ....................................................... 472,609 -------- LIABILITIES Fund shares purchased ........................................... 174 Accrued operating expenses ...................................... 335 Other payables .................................................. 29 -------- Total liabilities .................................................. 538 -------- Net assets ......................................................... $472,071 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 472,071 -------- Net asset value per share .......................................... $ 1.00 ======== Composition of net assets: Capital paid-in ................................................. $472,071 Accumulated net realized loss on investments .................... (82) Undistributed net investment income ............................. 82 -------- Net assets ......................................................... $472,071 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Money Market Fund (000's Omitted) INVESTMENT INCOME Interest ........................................................ $ 8,605 EXPENSES Investment advisory fee ......................................... 1,553 Auditors fees ................................................... 88 Custodian fees .................................................. 157 Fidelity Bond fees .............................................. 2 Legal fees ...................................................... 116 Printing & mailing fees ......................................... 117 Trustees' fees .................................................. 19 Other fees ...................................................... 19 -------- Total expenses ..................................................... 2,071 -------- Net investment income .............................................. $ 6,534 ======== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Money Market Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 ------------ ------------ INCREASE IN NET ASSETS From operations Net investment income ......................................... $ 6,534 $ 7,879 Distributions to shareholders from: Net investment income ......................................... (6,534) (7,879) --------- --------- Decrease in net assets resulting from distributions ........ (6,534) (7,879) From fund share transactions: Proceeds from shares sold ..................................... 360,686 754,784 Distributions reinvested ...................................... 6,534 7,879 Payment for shares redeemed ................................... (576,782) (999,146) --------- --------- Decrease in net assets from fund share transactions ........ (209,562) (236,483) --------- --------- NET DECREASE IN NET ASSETS ....................................... (209,562) (236,483) NET ASSETS Beginning of Period ........................................... 681,633 918,116 --------- --------- End of Period (including undistributed net investment income of $82 and $82, respectively) .............................. $ 472,071 $ 681,633 ========= ========= Analysis of fund share transactions: Sold .......................................................... 360,686 754,784 Reinvested .................................................... 6,534 7,879 Redeemed ...................................................... (576,782) (999,146) --------- --------- Net decrease in fund shares outstanding .......................... (209,562) (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 ---------------------------------------------------- Year Ended December 31, ---------------------------------------------------- 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 ..................................... 0.01 0.01 0.01 0.04 0.06 -------- -------- -------- -------- -------- Total From Investment Operations .......................... 0.01 0.01 0.01 0.04 0.06 Less Distributions: Distribution from Net Investment Income ................... (0.01) (0.01) (0.01) (0.04) (0.06) -------- -------- -------- -------- -------- Total Distributions ....................................... (0.01) (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) ................................... 1.09% 0.95% 1.48% 3.93% 6.29%(a) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets .......... 0.33% 0.31% 0.32% 0.32% 0.29% Ratio of Net Investment Income to Average Net Assets....... 1.05% 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) ...................... $472,071 $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. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MONEY MARKET FUND ** Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Banks- 0.9% Chase Manhattan Bank USA 1.05% due 05/11/05 - NA ................................ $ 4,475 $ 4,475 Finance- 1.5% General Electric Capital Corp. 1.14% due 03/10/17 - AAA ............................... 7,000 7,000 Insurance- 1.7% Monumental Life Insurance - Notes 1.21% due 11/01/03 - NA ................................ 3,000 3,000 Principle Life Global Funding 2.03% due 03/18/05 - AA ................................ 5,000 5,001 -------- 8,001 Other Asset Backed- 1.1% GE Commercial Equipment Financing LLC - Notes 2004 A Cl. A1 144A (a) 2.59% due 12/22/05 - NA ................................ 2,000 2,000 GE Commercial Equipment Financing LLC - Ser. 2004-1 Cl. A1 Fortis Bank 2.051% due 11/20/05 - A-1+ ............................. 3,277 3,277 -------- 5,277 U.S. Government Agencies- 21.0% Federal Home Loan Bank - Notes 1.5% due 03/01/05 - AAA ................................ 6,000 6,000 1.625% due 04/15/05 - AAA .............................. 5,000 5,005 1.66% due 05/16/05 - AAA ............................... 2,800 2,800 Federal Home Loan Bank - Disc. Notes 2.05% due 01/21/05 - AAA ............................... 7,800 7,791 Federal Home Loan Mortgage Corp. - Disc. Notes 2.04% due 01/24/05 - AAA ............................... 8,378 8,367 2.1% due 02/01/05 - AAA ................................ 25,819 25,771 2.245% due 01/11/05 - AAA .............................. 8,000 7,995 Federal National Mortgage Assoc. - Disc. Notes 2.05% due 01/20/05 - AAA ............................... 9,600 9,590 Federal National Mortgage Assoc. - Notes 1.375% due 02/11/05 - AAA .............................. 10,000 9,990 1.375% due 02/14/05 - AAA .............................. 5,500 5,500 1.61% due 05/13/05 - AAA ............................... 1,300 1,300 1.75% due 05/23/05 - AAA ............................... 9,000 9,000 -------- 99,109 Whole Loan CMOs- 4.9% AIRE Valley Mortgages - Notes Ser. 1 Cl. A 144A (a) 1.91% due 09/20/05 - NA ................................ 4,700 4,700 Holmes Financing plc - Notes Ser. 1 Cl. A 1.045% due 04/15/05 - A-1+ ............................. 5,500 5,500 Permanent Financing plc - Notes Ser 1 Cl. A 1.04% due 03/10/05 - A-1+ .............................. 8,500 8,500 Permanent Financing plc - Notes Ser.1 Cl. A 1.34% due 06/10/05 - NA ................................ $ 4,300 $ 4,300 -------- 23,000 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $146,862) 31.1% 146,862 COMMERCIAL PAPER Banks - 16.2% Abbey National NA LLC 2.26% due 02/23/05 ..................................... 10,250 10,216 Barclays Bank plc 2.348% due 03/24/05 .................................... 11,700 11,699 Credit Suisse First Boston 2.35% due 01/20/05 ..................................... 10,000 10,000 Danske Corp. 2.31% due 01/14/05 ..................................... 10,000 9,992 Fortis Bank 2.1% due 01/10/05 ...................................... 5,000 5,000 Svenska Handelsbanken AB 2.13% due 01/13/05 ..................................... 11,500 11,500 Westdeutche Lands 1.32% due 01/27/05 ..................................... 9,973 9,973 Wilmington Trust Co. 2.07% due 01/05/05 ..................................... 8,000 8,000 -------- 76,380 Beverages - 4.8% Fortune Brands, Inc. 2.08% due 01/10/05 ..................................... 5,374 5,371 2.25% due 02/01/05 ..................................... 8,461 8,445 PepsiCo., Inc. 2.26% due 01/20/05 ..................................... 8,864 8,853 -------- 22,669 Commercial Services & Supplies - 2.1% Yale University 2.3% due 02/04/05 ...................................... 10,000 9,978 Diversified Financials - 2.5% Morgan Stanley Dean Witter 2.23% due 01/24/05 ..................................... 12,000 11,983 Finance - 32.2% APRECO, Inc. 2.4% due 03/15/05 ...................................... 7,000 6,966 BP Amoco Capital, plc 2.25% due 01/05/05 ..................................... 2,226 2,225 Bradford & Bingley Building Society 2.025% due 01/07/05 .................................... 8,000 8,000 CBA Delaware Finance, Inc. 2.38% due 03/02/05 ..................................... 1,794 1,787 Chariot Funding LLC 2.34% due 01/21/05 ..................................... 7,142 7,133 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- MONEY MARKET FUND Par Market Name of Issuer Value Value -------------- ------- -------- (000's) (000's) COMMERCIAL PAPER - Continued Finance - Continued Diageo Capital plc 2.32% due 02/01/05 ..................................... $ 5,120 $ 5,110 Edison Asset 1.98% due 01/12/05 ..................................... 6,200 6,196 Eureka Securitization 2.26% due 01/24/05 ..................................... 9,500 9,486 Falcon Asset Securitization 2.28% due 01/18/05 ..................................... 8,000 7,991 Jupiter Section 2.25% due 01/12/05 ..................................... 8,000 7,995 Montana Blanc Capital Corp. 2.33% due 01/13/05 ..................................... 10,284 10,276 Nationwide Building Society 2.08% due 01/19/05 ..................................... 5,550 5,544 Nestle Capital Corp. 2.26% due 01/18/05 ..................................... 9,186 9,176 Old Line Funding Corp. 2.25% due 01/10/05 ..................................... 5,019 5,016 2.33% due 01/19/05 ..................................... 4,952 4,946 Preferred Receivables Funding 2.27% due 01/14/05 ..................................... 8,390 8,383 Sheffield Receivables Corp. 2.25% due 01/19/05 ..................................... 9,500 9,489 Societe Generale North America 2.23% due 02/18/05 ..................................... 2,000 1,995 UBS Finance Delaware LLC 2.01% due 01/25/05 ..................................... 1,658 1,657 2.24% due 02/03/05 ..................................... 8,537 8,519 Variable Funding Capital Corp. 2.2% due 01/19/05 ...................................... 1,746 1,744 2.32% due 01/07/05 ..................................... 5,203 5,201 Windmill Funding Corp. 2.29% due 02/16/05 ..................................... 8,114 8,090 Yorktown Capital LLC 2.28% due 01/07/05 ..................................... 9,183 9,180 -------- 152,105 Foreign Governmental - 1.9% Government of Quebec 2.28% due 01/18/05 ..................................... 9,000 8,990 Insurance - 6.4% Metlife, Inc. 2.24% due 02/01/05 ..................................... 15,000 15,000 Travelers Insurance Co. 2.48% due 02/24/05 ..................................... 15,000 15,000 -------- 30,000 Personal Products - 0.8% Kimberly Clark Worldwide, Inc. 2.13% due 01/03/05 ..................................... 3,542 3,542 Pharmaceuticals - 2.0% Merck & Co., Inc. 2.28% due 01/24/05 $ 9,500 $ 9,486 ------- -------- TOTAL COMMERCIAL PAPER- (Cost $325,133) 68.9% 325,133 ------- -------- TOTAL INVESTMENTS- (Cost $471,995) 100.0% 471,995 Cash and Receivables, less payables- 0.0% 76 ------- -------- NET ASSETS- 100.0% $472,071 ======= ======== (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 December 31, 2004, securities aggregated $6,700 or 1.4% of net assets of the Portfolio. ** Bond ratings are unaudited. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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. 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. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint trading account: Pursuant to an exemptive order issued by the Securities and Exchange Commission, the order permits the Fund to pool daily uninvested cash balances into a joint account for the purpose of investing the cash balances in short-term repurchase agreements, commercial paper and other short-term investments which in no event will have a maturity in excess of 7 days. Joint account holdings as of December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Name of Issuer Market Value - -------------- ------------ Mortgage Int Network, 2.33%, due 01/03/05 $ 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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, 2004, 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. Dividend and Interest: Interest income is recorded on the accrual basis. 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 0.25% 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. For the year ended December 31, 2004, there were no reimbursements paid to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company, LLP, which under John Hancock's 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, 2004, was $471,995, which is the same as its tax cost. Distribution of Income and Gains: Distributions of net investment income are declared and distributed 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, 2004, 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 - ---- ------------------ ---------------------- ----------------- 2004 $6,534 $-- $-- 2003 7,879 -- -- NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Money Market Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Money Market Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Overseas Equity B Fund (FORMERLY INTERNATIONAL OPPORTUNITIES FUND) Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- .. 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. .. On May 1, 2004, the Fund's name, investment strategy and sub-adviser were changed. The Fund now invests primarily in foreign large and mid sized equities with modest emerging markets exposure. Capital Guardian Trust Company took over management of the Fund. Fund Commentary Performance: For the year ending December 31, 2004, the Overseas Equity B Fund returned +11.02%, underperforming the +20.04% return of its benchmark, a splice of the MSCI AC World ex U.S. Index (January through April) and the MSCI EAFE Index (May through December). From the date of manager inception, May 1, 2004 to year end, the Overseas Equity B Fund returned +10.96%, underperforming the +18.17% return of the MSCI EAFE Index/2/. Environment: Portfolio results were affected by stock selection in Information Technology, Financials, Health Care and Consumer Staples. Within these sectors, the pharmaceuticals industry accounted for both the top absolute detractor and the top absolute contributor during the period highlighting the importance of stock selection. The Trust benefited from an overweight and stock selection in Telecommunication Services, as well as from stock selection in the Materials sector. Outlook: We believe the global economy is settling into a sustainable pace of growth and that energy costs will be less of a factor. In Japan, we still expect a long-term recovery despite some near-term weakness and we believe we own stocks that could benefit. In Europe, while we are concerned about domestic demand and the strong euro, we find some structural improvements related to business costs, value across markets, and potential restructuring and industrial consolidation. We believe the portfolio will benefit from a number of holdings whose earnings have substantially improved although their stock prices have yet to do so. We also believe the portfolio is well positioned, with a focus on attractively valued companies where we anticipate either an improvement in profitability, growth where the market does not expect it, or rising cash flows being returned to shareholders through higher dividends and share repurchases. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Overseas Equity B Fund (FORMERLY INTERNATIONAL OPPORTUNITIES FUND) Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 4/30/96 (Fund Inception Date) International Opportunities MCSI All Country World Fund Free Ex. US Index ------------- ---------------------- Apr-1996 10,000 10,000 May-1996 10,024 9,850 Jun-1996 10,129 9,900 Jul-1996 9,820 9,572 Aug-1996 9,971 9,628 Sep-1996 10,191 9,867 Oct-1996 10,150 9,768 Nov-1996 10,609 10,145 Dec-1996 10,672 10,027 Jan-1997 10,544 9,843 Feb-1997 10,672 10,023 Mar-1997 10,659 10,002 Apr-1997 10,701 10,086 May-1997 11,332 10,709 Jun-1997 11,796 11,301 Jul-1997 12,113 11,529 Aug-1997 10,992 10,622 Sep-1997 11,719 11,196 Oct-1997 10,863 10,243 Nov-1997 10,859 10,115 Dec-1997 10,880 10,232 Jan-1998 11,254 10,538 Feb-1998 11,932 11,240 Mar-1998 12,345 11,629 Apr-1998 12,435 11,713 May-1998 12,390 11,501 Jun-1998 12,416 11,457 Jul-1998 12,560 11,566 Aug-1998 10,980 9,935 Sep-1998 10,715 9,726 Oct-1998 11,680 10,744 Nov-1998 12,199 11,321 Dec-1998 12,611 11,712 Jan-1999 12,484 11,699 Feb-1999 12,268 11,437 Mar-1999 12,769 11,989 Apr-1999 13,241 12,588 May-1999 12,623 11,997 Jun-1999 13,112 12,549 Jul-1999 13,358 12,844 Aug-1999 13,495 12,888 Sep-1999 13,581 12,976 Oct-1999 14,038 13,459 Nov-1999 15,021 13,997 Dec-1999 16,900 15,333 Jan-2000 15,833 14,500 Feb-2000 16,711 14,891 Mar-2000 16,885 15,451 Apr-2000 15,946 14,589 May-2000 15,446 14,216 Jun-2000 16,250 14,821 Jul-2000 15,693 14,236 Aug-2000 16,033 14,412 Sep-2000 15,020 13,612 Oct-2000 14,413 13,180 Nov-2000 13,655 12,588 Dec-2000 14,136 13,018 Jan-2001 14,305 13,214 Feb-2001 13,024 12,167 Mar-2001 12,015 11,307 Apr-2001 12,974 12,076 May-2001 12,412 11,742 Jun-2001 11,876 11,292 Jul-2001 11,594 11,041 Aug-2001 11,303 10,767 Sep-2001 10,116 9,625 Oct-2001 10,444 9,894 Nov-2001 10,925 10,346 Dec-2001 11,177 10,480 Jan-2002 10,698 10,031 Feb-2002 10,793 10,104 Mar-2002 11,351 10,652 Apr-2002 11,270 10,721 May-2002 11,300 10,838 Jun-2002 10,772 10,370 Jul-2002 9,595 9,359 Aug-2002 9,534 9,360 Sep-2002 8,395 8,368 Oct-2002 8,984 8,816 Nov-2002 9,470 9,240 Dec-2002 9,140 8,942 Jan-2003 8,707 8,628 Feb-2003 8,470 8,453 Mar-2003 8,250 8,289 Apr-2003 9,099 9,088 May-2003 9,610 9,667 Jun-2003 9,800 9,935 Jul-2003 10,003 10,199 Aug-2003 10,262 10,503 Sep-2003 10,496 10,797 Oct-2003 11,045 11,496 Nov-2003 11,268 11,747 Dec-2003 12,098 12,643 Jan-2004 12,253 12,847 Feb-2004 12,603 13,173 Mar-2004 12,596 13,255 Apr-2004 12,103 12,843 May-2004 12,007 12,898 Jun-2004 12,103 13,186 Jul-2004 11,701 12,760 Aug-2004 11,783 12,818 Sep-2004 11,925 13,155 Oct-2004 12,301 13,605 Nov-2004 12,940 14,538 Dec-2004 13,430 15,176 Value on 12/31/04: - ------------------ $13,430 International Opportunities Fund $15,176 MSCI All Country World Free Ex. US Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Vodafone AirTouch plc 3.8% Sanofi-Synthelabo SA 3.3% Mitsubishi Corp. 2.4% Novartis AG 2.2% Royal Dutch Petroleum Co. 2.1% BNP Paribas 2.0% Banco Bilbao Vizcaya SA 1.9% AstraZeneca Group plc 1.9% Koninklijke 1.9% Sumitomo 1.7% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Overseas Overseas Equity B Fund Equity B Fund Benchmark/1/ ------------- ---------------------- 1 Year 11.02% 20.04% 3 Years 6.31% 13.14% 5 Years -4.49% -0.20% Since Inception (5/1/96) 3.46% 4.93% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Diversification By Region and Country/3/ % of Assets - ---------------------------------------- ----------- Europe (excluding U.K.) 44.3% Japan 23.4% United Kingdom (U.K.) 17.6% Pacific Basin (excluding Japan) 6.6% United States 3.5% Other 3.1% Emerging Markets 1.5% Diversification By Region/4/ % of Assets - ---------------------------- ----------- Developed Markets 98.5% Emerging Markets 1.5% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Overseas Equity B Fund benchmark represents the MSCI All Country World Ex US Index from May 1996 to April 2004 and now the MSCI EAFE Index from May 2004 to present. /2/ Returns are not annualized. /3/ Calculations based upon country in which security is traded (listed). /4/ Calculations based upon country in which security is domiciled. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Overseas Equity B Fund (FORMERLY INTERNATIONAL OPPORTUNITIES FUND) Capital Guardian Trust Company Management Team - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As an Overseas Equity B Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,109.70 Expense paid per $1,000* $ 8.94 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,016.67 Expense paid per $1,000* $ 8.54 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted) ASSETS Long term investments at cost (including $57,277 of securities loaned (Note B)) ................................................ $199,896 Net unrealized appreciation on investments ......................... 33,814 Short-term investments at value .................................... 66,528 -------- Total investments ............................................ 300,238 Foreign currency at value (cost $4,898) ............................ 5,106 Receivable for: Dividends ....................................................... 203 Foreign dividend tax withholding reclaim ........................ 20 Interest ........................................................ 4 Other receivable ................................................ 34 -------- Total assets ....................................................... 305,605 -------- LIABILITIES Payables for: Investment purchased ............................................ 33 Fund shares purchased ........................................... 76 Collateral for securities on loan ............................... 60,216 Foreign dividend tax withholding ................................ 19 Accrued operating expenses ...................................... 335 Unrealized depreciation in forward currency contracts ........... 101 Other payables .................................................. 114 -------- Total liabilities .................................................. 60,894 -------- Net assets ......................................................... $244,711 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 22,510 -------- Net asset value per share .......................................... $ 10.87 ======== Composition of net assets: Capital paid-in ................................................. $242,443 Accumulated net realized loss on investments and foreign currency transactions ........................................ (31,578) Distributions in excess of net investment income ................ (82) Net unrealized appreciation of: Investments ..................................................... 33,814 Translation of assets and liabilities in foreign currencies ..... 114 -------- Net assets ......................................................... $244,711 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 59 Dividends (net of foreign withholding tax of $312) ............ 2,411 Securities lending ............................................ 67 ------- Total investment income ............................................. 2,537 ------- EXPENSES Investment advisory fee ....................................... 1,590 Auditors fees ................................................. 16 Custodian fees ................................................ 318 Legal fees .................................................... 21 Printing & mailing fees ....................................... 391 Trustees' fees ................................................ 4 Other fees .................................................... 14 ------- Total expenses ...................................................... 2,354 Less expenses reimbursed ...................................... (158) Less custodian expense reduction offset by commission recapture arrangement (Note C) ............................. (10) ------- Net expenses ........................................................ 2,186 ------- Net investment income ............................................... 351 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments ................................................... 16,793 Foreign currency transactions ................................. (408) Realized That tax ............................................. (442) Change in unrealized appreciation on: Investments ................................................... 6,019 Translation of assets and liabilities in foreign currencies ................................................. 281 ------- Net realized and unrealized gain .................................... 22,243 ------- Net increase in net assets resulting from operations ................ $22,594 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Overseas Equity B Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................ $ 351 $ 959 Net realized gain (loss) ......................................... 15,943 (5,089) Change in net unrealized appreciation ............................ 6,300 35,456 -------- --------- Net increase in net assets resulting from operations .......... 22,594 31,326 Distributions to shareholders from: Net investment income ............................................ (767) (1,514) Capital paid-in .................................................. (42) -------- --------- Decrease in net assets resulting from distributions ........... (767) (1,556) From fund share transactions: Proceeds from shares sold ........................................ 24,688 131,885 Shares issued in reorganization .................................. 112,876 Distributions reinvested ......................................... 767 1,556 Payment for shares redeemed ...................................... (41,412) (124,524) -------- --------- Increase in net assets from fund share transactions ........... 96,919 8,917 -------- --------- NET INCREASE IN NET ASSETS .......................................... 118,746 38,687 NET ASSETS Beginning of Period .............................................. 125,965 87,278 -------- --------- End of Period (including distributions in excess of net investment income of $(82) and $0, respectively) .............. $244,711 $ 125,965 ======== ========= Analysis of fund share transactions: Sold ............................................................. 2,442 16,865 Issued in reorganization ......................................... 11,336 Reinvested ....................................................... 78 188 Redeemed ......................................................... (4,133) (15,816) -------- --------- Net increase in fund shares outstanding ............................. 9,723 1,237 ======== =========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Overseas Equity B Fund ----------------------------------------------------------------- Year Ended December 31, ----------------------------------------------------------------- 2004(g) 2003(i) 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 .................................. 0.07 0.08 0.07 0.06 0.07 Net Realized and Unrealized Gain (Loss) on Investment(a) ....................................... 1.01 2.34 (1.75) (2.53) (2.57) -------- -------- ------- ------- -------- Total From Investment Operations ....................... 1.08 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 ...................... (h) (0.03) (0.09) -------- -------- ------- ------- -------- Total Distributions .................................... (0.06) (0.13) (0.06) (0.08) (0.82) -------- -------- ------- ------- -------- Net Assets Value at End of Period ......................... $ 10.87 $ 9.85 $ 7.56 $ 9.30 $ 11.85 ======== ======== ======= ======= ======== Total Investment Return(b) ................................ 11.02% 32.36% (18.22)% (20.93)% (16.36)%(d) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ....... 1.53%(e)(f) 1.23%(e) 1.24%(e) 1.00%(e) 0.93%(e) Ratio of Net Investment Income to Average Net Assets ... 0.24% 0.95% 0.69% 0.64% 0.47% Portfolio Turnover Rate ................................ 103.13%(d) 40.85% 78.14%(d) 33.31% 37.92%(d) Net Assets End of Period (000s Omitted) ................... $244,711 $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 1.64%, 1.44%, 1.55%, 1.16%, and 1.09%, for the years ended December 31, 2004, 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 Capital Guardian Trust Co., during the period shown. (h) Amount less than $0.01. (i) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND ** Market Name of Issuer Shares Value -------------- ------- -------- (000's) COMMON STOCK Australia - 3.5% Amcor, Ltd. (BE) ........................................ 104,100 $ 597 Australia & New Zealand Banking Group, Ltd. (JP) ........ 33,777 543 Brambles Industries, Ltd. # (BO) ........................ 87,746 476 Broken Hill Proprietary Co., Ltd. (BF) .................. 46,042 551 Foster's Brewing Group, Ltd. (JG) ....................... 109,600 495 Insurance Australia Group (JR) .......................... 152,100 763 News Corp. - Cl. A * (JA) ............................... 35,498 659 Promina Group (JR) ...................................... 186,600 786 QBE Insurance Group, Ltd. (JR) .......................... 81,949 981 Rinker Group (BD) ....................................... 104,274 866 Wesfarmers (BL) ......................................... 18,300 568 WMC Resources, Ltd. (BF) ................................ 76,504 431 Woolworth's, Ltd. (JF) .................................. 75,900 889 -------- 8,605 Austria - 0.1% Telecom Austria (J1) .................................... 11,295 213 Belgium - 0.2% UCB SA # (JO) ........................................... 10,900 552 Canada - 2.3% Abitibi Consolidated, Inc. * (BG) ....................... 45,400 312 Alcan Aluminum, Ltd. # * (BF) ........................... 43,702 2,136 Cameco Corp. # * (BF) ................................... 17,100 596 Great West Lifeco, Inc. # * (JR) ........................ 29,200 648 Inco, Ltd. # * (BF) .................................... 3,700 135 Potash Corp. of Saskatchewan, Inc. * (BC) ............... 10,300 854 Telus Corp. * (J1) ...................................... 19,000 572 Telus Corp. * (J1) ...................................... 5,500 159 Thomson Corp. * (JA) .................................... 4,800 169 -------- 5,581 Denmark - 0.7% Novo Nordisk AS (JO) .................................... 17,680 962 Tele Danmark AS (J1) .................................... 16,200 683 -------- 1,645 Finland - 0.4% Nokia Oyj (JW) .......................................... 64,804 1,019 France - 10.9% Accor SA # (BZ) ......................................... 22,400 977 Air Liquide # (BC) ...................................... 10,150 1,869 BNP Paribas # (JP) ...................................... 63,502 4,582 Bouygues SA # (J2) ...................................... 73,000 3,360 Essilor International # (JL) ............................ 7,000 546 Groupe Danone # (JH) .................................... 19,500 1,794 L'Oreal SA #(JK) ........................................ 13,664 1,033 Michelin # (BU) ......................................... 8,400 537 Renault # (BV) .......................................... 7,600 633 Sanofi-Aventis # (JO) ................................... 97,742 7,780 Schneider SA # (BK) ..................................... 17,565 1,217 Societe Generale - Cl. A # (JP) ......................... 9,222 $ 929 STMicroelectronics # (J0) ............................... 40,556 788 Vivendi Universal SA # * (JA) ........................... 18,713 595 -------- 26,640 Germany - 5.8% Allianz AG # (JR) ....................................... 14,328 1,893 Bayerische Motoren Werke AG (BV) ........................ 13,900 625 Bayerische Vereinsbank AG * (JP) ........................ 58,498 1,323 DaimlerChrysler AG (BV) ................................. 58,900 2,811 Deutsche Bank AG # (JP) ................................. 11,981 1,059 Deutsche Boerse AG (JQ) ................................. 17,970 1,077 E. On AG (J3) ........................................... 12,445 1,130 Infineon Technologies AG # * (J0) ....................... 63,000 681 Muenchener Rueckversicherungs-Gesellschaft AG (JR) ...... 7,100 869 Sanofi-Aventis (JO) ..................................... 833 66 SAP AG (JV) ............................................. 2,080 370 Siemens AG # (BK) ....................................... 19,852 1,676 Volkswagen AG (BV) ...................................... 13,500 610 -------- 14,190 Hong Kong - 1.8% Bank of East Asia, Ltd. # (JP) .......................... 153,800 478 Esprit Holdings, Ltd. (JE) .............................. 115,900 701 Hang Lung Properties # (JS) ............................. 489,000 755 Hang Seng Bank, Ltd. (JP) ............................... 43,600 606 Li & Fung, Ltd. (JB) .................................... 798,000 1,345 Swire Pacific, Ltd. - Cl. A (JQ) ........................ 47,500 397 -------- 4,282 India - 0.0% Indialnfo, Ltd. * (JT) (a) .............................. 10,639 0 Italy - 0.8% ENI # (BB) .............................................. 62,872 1,568 UniCredito Italiano SpA (JP) ............................ 86,003 492 -------- 2,060 Japan - 22.3% Advantest # (J0) ........................................ 8,200 702 Aeon Co., Ltd. (JD) ..................................... 107,200 1,784 Bridgestone Corp. # (BU) ................................ 7,000 139 Canon, Inc. # (JZ) ...................................... 15,400 829 Chubu Electric Power # (J3) ............................. 6,700 160 Daito Trust Construction Co., Ltd. # (BW) ............... 6,400 303 Daiwa House Industry Co., Ltd. (BW) ..................... 47,000 533 East Japan Railway Co. (BS) ............................. 100 555 Fanuc, Ltd. (BK) ........................................ 17,400 1,135 Furukawa Electric Co. # * (BK) .......................... 128,000 708 Hirose Electric Co., Ltd. (JY) .......................... 3,700 431 Hoya Corp. # (JY) ....................................... 4,300 484 Japan Airlines * (BQ) ................................... 117,000 338 SCHEDULE OF INVESTMENTS - Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market Name of Issuer Shares Value -------------- --------- ------- (000's) COMMON STOCK - Continued Japan - Continued Kansai Electric Power Co., Inc. (J3) .................. 60,400 $ 1,223 Konica Corp. # (BX) ................................... 90,500 1,198 Millea Holdings, Inc. # (JR) .......................... 149 2,205 Mitsubishi Corp. # (BN) ............................... 87,700 1,130 Mitsubishi Estate Co., Ltd. # (JS) .................... 228,000 2,663 Mitsubishi Tokyo Finance (JP) ......................... 191 1,934 Mitsui & Co., Ltd. # (BN) ............................. 53,000 474 Mitsui Fudosan Co., Ltd. # (JS) ....................... 39,000 473 Mitsui Sumitomo Insurance Co., Ltd. # (JR) ............ 158,100 1,370 Mizuho Financial GB (JP) .............................. 108 542 Murata Manufacturing Co., Ltd. (J0) ................... 6,600 368 NEC Corp. (JX) ........................................ 80,000 496 Nidec Corp. # (JY) .................................... 6,300 766 Nikko Cordial Corp. (JQ) .............................. 104,000 550 Nikon Corp. # (J0) .................................... 34,000 419 Nintendo Corp., Ltd. (BW) ............................. 7,200 902 Nippon Electric Glass # (JY) .......................... 7,000 179 Nippon Telegraph & Telephone Corp. (J1) ............... 167 748 Nissan Motor Acceptance Corp. # (BV) .................. 241,400 2,618 Nitto Denko Corp. (BK) ................................ 8,600 470 Omron Corp. (JY) ...................................... 22,000 524 Orix Corp. (JQ) ....................................... 13,100 1,775 Ricoh Co., Ltd. (JZ) .................................. 20,000 385 Rohm Co., Ltd. (JY) ................................... 4,300 444 Sankyo Co., Ltd. (JO) ................................. 63,100 1,422 Sekisui House, Ltd. # (BW) ............................ 119,000 1,383 Shimamura Co., Ltd. # (JE) ............................ 1,400 102 Shionogi & Co., Ltd. # (JO) ........................... 36,000 497 SMC Corp. # (BM) ...................................... 10,300 1,176 Softbank Corp. # (JT) ................................. 12,000 583 Sumitomo Chemical Co. # (BC) .......................... 197,000 963 Sumitomo Corp. (BN) ................................... 12,000 103 Sumitomo Forestry Co. (BW) ............................ 8,000 80 Sumitomo Mitsui GR # (JP) ............................. 413 2,995 Suzuki Motor Corp. (BV) ............................... 23,000 419 T&D Holdings, Inc. * (JR) ............................. 6,200 296 Takeda Pharmaceuticals Co. (JO) ....................... 20,900 1,050 TDK Corp. (JY) ........................................ 5,900 436 Tokyo Electron, Ltd. (J0) ............................. 21,300 1,308 Tokyo Gas Co. # (J4) .................................. 200,000 818 Tostem Corp. (BI) ..................................... 22,000 399 Toyota Motor Corp. (BV) ............................... 37,200 1,510 UFJ Holdings, Inc. * (JP) ............................. 544 3,288 Uni-Charm Corp. (JJ) .................................. 10,700 511 Yahoo Japan Corp. # * (JT) ............................ 25 120 Yamada Denki Co. # (JE) ............................... 13,900 594 Yamanouchi Pharmaceutical Co., Ltd. # (JO) ............ 14,200 552 Yamato Transport Co., Ltd. (BP) ....................... 81,000 1,198 Yasuda F & M Insurance (JR) ........................... 83,000 $ 843 ------- 54,603 Luxembourg - 0.2% Society Europeenne des Satellites (JA) ................ 40,900 529 Netherlands - 6.1% ABN Amro Holding NV (JP) .............................. 30,148 795 Aegon NV (JR) ......................................... 13,763 187 Elsevier NV (JA) ...................................... 16,900 230 Heineken Holdings (JG) ................................ 4,325 130 Heineken NV # (JG) .................................... 79,000 2,623 ING Groep NV (JQ) ..................................... 16,072 484 Koninklijke (Royal) Philips Electronics NV (BW) ....... 14,927 394 Koninklijke KPN NV (J1) .............................. 411,800 3,897 Royal Dutch Petroleum Co. (BB) ........................ 86,920 4,983 TNT Post Group NV (BP) ................................ 18,100 490 VNU NV # (JA) ......................................... 27,753 816 ------- 15,029 Norway - 1.0% Den Norske Bank (JP) .................................. 77,200 758 Norsk Hydro ASA (BB) .................................. 6,125 480 Norske Skogindustrier ASA - Cl. A # (BG) .............. 22,500 485 Statoil ASA (BB) ...................................... 48,100 751 ------- 2,474 Singapore - 1.0% Singapore Telecom (J1) ................................ 1,089,790 1,589 United Overseas Bank, Ltd. (JP) ....................... 63,072 533 Venture Manufacturing, Ltd. (JY) ...................... 44,000 429 ------- 2,551 South Africa - 0.1% Anglo American plc (BF) ............................... 12,300 291 South Korea - 1.2% Samsung Electronics (J0) .............................. 6,660 2,898 Spain - 4.2% Banco Bilbao Vizcaya SA # (JP) ........................ 251,700 4,447 Banco Santander Central Hispano SA # (JP) ............. 31,700 392 Iberdrola SA # (J3) ................................... 24,900 630 Inditex (JE) .......................................... 47,800 1,404 Repsol SA # (BB) ...................................... 18,800 488 Telefonica SA (J1) .................................... 147,962 2,776 ------- 10,137 Sweden - 1.2% AstraZeneca Group plc (JO) ............................ 36,000 1,303 ForeningsSparbanken AB (JP) ........................... 200 5 Scania AB - Ser. B (BM) ............................... 15,100 595 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Market Name of Issuer Shares Value -------------- ----------- -------- (000's) COMMON STOCK - Continued Sweden - Continued Telefonaktiebolaget LM Ericsson AB * (JW) ........ 351,000 $ 1,116 -------- 3,019 Switzerland - 10.6% Adecco SA (BO) ................................... 10,282 516 Credit Suisse Group (JP) ......................... 41,546 1,741 Holcim (BD) ...................................... 45,094 2,707 Nestle SA (JH) ................................... 14,062 3,666 Novartis AG (JO) ................................. 102,928 5,169 Richemont (JE) ................................... 81,055 2,689 Roche Holdings AG (JO) ........................... 4,533 520 Serono SA # (JN) ................................. 1,007 661 Swiss Reinsurance Co. (JR) ....................... 35,920 2,553 Swisscom AG (J1) ................................. 8,286 3,253 Syngenta AG (BC) ................................. 7,164 758 Synthes, Inc. (JL) ............................... 4,891 547 UBS AG (JP) ...................................... 13,577 1,135 -------- 25,915 United Kingdom - 16.9% Anglo American plc (BF) .......................... 12,900 305 ARM Holdings plc (J0) ............................ 239,600 507 AstraZeneca Group plc (JO) ....................... 78,658 2,847 Barclays (JP) .................................... 41,700 468 BG Group plc (BB) ................................ 178,500 1,211 BHP Billington plc (BF) .......................... 12,255 143 Centrica (J4) .................................... 198,810 900 Compass Group plc (BZ) ........................... 82,500 389 CRH (BD) ......................................... 45,800 1,220 Diageo plc (JG) .................................. 115,137 1,639 HBOS (JP) ........................................ 141,100 2,292 HSBC Holdings plc (JP) ........................... 96,700 1,628 Johnston Press (JA) .............................. 30,600 318 Lloyds TSB Group plc (JP) ........................ 66,200 600 National Grid Group (J3) ......................... 102,900 978 Pearson plc (JA) ................................. 128,600 1,549 Reckitt Benckiser (JJ) ........................... 19,400 585 Reed International plc (JA) ...................... 183,661 1,691 Rio Tinto plc (BF) ............................... 33,251 977 Royal Bank of Scotland Group (JP) ................ 98,102 3,293 Shell Transport & Trading Co. plc (BB) ........... 349,311 2,971 Smiths Group (BL) ................................ 36,700 578 Standard Chartered plc (JP) ...................... 50,200 931 Unilever plc (JH) ................................ 260,248 2,550 Vodafone AirTouch plc (J2) ....................... 3,307,782 8,951 Wolseley (BN) .................................... 34,600 645 Xstrata (BF) ..................................... 60,300 1,077 -------- 41,243 United States - 3.3% America Movil SA de CV - ADR Ser. L * (J2) ....... 20,700 1,084 AstraZeneca Group plc - ADR * (JO) ............... 5,000 $ 182 Companhia Vale do Rio Doce - ADR * (BF) .......... 15,507 374 Companhia Vale Do Rio Doce - ADR * (BF) .......... 11,400 331 Hon Hai Precision Industry Co., Ltd. - GDR * (JY) .......................................... 62,048 585 Inco, Ltd. * (BF) ................................ 28,800 1,059 lm Ericcson Telephone Co. - Cl. B ADR * (JW) ..... 13,400 422 Samsung Electronics * (J0) ....................... 2,250 493 Sap Aktiengesellschaft - ADR * (JV) .............. 2,700 119 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR * (J0) ........................ 148,133 1,258 Telefonica SA * (J1) ............................. 6,725 380 The Thomson Corp. * (JA) ......................... 46,200 1,630 Vodafone Group plc * (J2) ........................ 4,600 126 Yukos Corp. - ADR # * (BL) ....................... 17,983 54 -------- 8,097 -------- TOTAL COMMON STOCK- (Cost $197,948) 94.6% 231,573 Par Value ----------- (000's) PUBLICLY-TRADED BONDS Supra National - 0.6% SMFG Finance - Bonds (FB) 2.25% due 7/11/05 - NA..........................JPY $66,000,000 1,531 Switzerland - 0.3% Credit Suisse - Bonds (JP) 6.0% due 12/23/05 - NA..........................CHF 507,000 606 ------ TOTAL PUBLICLY-TRADED BONDS- (Cost $1,948) 0.9% 2,137 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 24.6% State Street Navigator Securities Lending Portfolio ................................ 60,216 60,216 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- OVERSEAS EQUITY B FUND Par Market Name of Issuer Value Value -------------- ------- --------- (000's) (000's) SHORT-TERM INVESTMENTS - 2.6% Investment in joint trading account 2.29% due 01/03/05 (Cost $6,312) $6,312 $ 6,312 ------ -------- TOTAL INVESTMENTS- (Cost $266,424) 122.7% 300,238 Payables, less cash and receivables- (22.7)% (55,527) ------ -------- NET ASSETS- 100.0% $244,711 ====== ======== * Non-income producing security. ** Bond ratings are not audited. (a) At December 31, 2004 this security was fair valued. # At December 31, 2004 all or portion of this security was out on loan. ADR-American Depsository Receipt GDR-Global Depository Receipt SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY % of Industry Market Long-Term Industry Abbreviation Value Investments -------- ------------ -------- ----------- (000s) Banks .................................. JP $ 38,395 16.4% Pharmaceuticals ........................ JO 22,902 9.8% Diversified Telecommunication Services ............................ J1 14,270 6.1% Wireless Telecommunications Services ... J2 13,521 5.8% Insurance .............................. JR 13,394 5.7% Oil & Gas .............................. BB 12,452 5.3% Semiconductor Equipment & Products ..... J0 9,422 4.0% Automobiles ............................ BV 9,226 4.0% Metals & Mining ........................ BF 8,406 3.6% Media .................................. JA 8,186 3.5% Food Products .......................... JH 8,010 3.4% Specialty Retail ....................... JE 5,490 2.4% Electrical Equipment ................... BK 5,206 2.2% Beverages .............................. JG 4,887 2.1% Construction Materials ................. BD 4,793 2.1% Chemicals .............................. BC 4,444 1.9% Diversified Financials ................. JQ 4,283 1.8% Electronic Equipment & Instruments ..... JY 4,278 1.8% Electric Utilities ..................... J3 4,121 1.8% Real Estate Operations ................. JS 3,891 1.7% Household Durables ..................... BW 3,595 1.5% Communications Equipment ............... JW 2,557 1.1% Trading Companies & Distributors ....... BN 2,352 1.0% Multiline Retail ....................... JD 1,784 0.8% Machinery .............................. BM 1,771 0.8% Gas Utilities .......................... J4 1,718 0.7% Air Freight & Couriers ................. BP 1,688 0.7% Finance ................................ FB 1,531 0.7% Hotels Restaurants & Leisure ........... BZ $ 1,366 0.6% Distributors ........................... JB 1,345 0.6% Office Electronics ..................... JZ 1,214 0.5% Industrial Conglomerates ............... BL 1,200 0.5% Leisure Equipment & Products ........... BX 1,198 0.5% Household Products ..................... JJ 1,096 0.5% Health Care Equipment & Supplies ....... JL 1,093 0.5% Personal Products ...................... JK 1,033 0.4% Commercial Services & Supplies ......... BO 992 0.4% Food & Drug Retailing .................. JF 889 0.4% Paper & Forest Products ................ BG 797 0.3% Internet Software & Services ........... JT 703 0.3% Auto Components ........................ BU 676 0.3% Biotechnology .......................... JN 661 0.3% Containers & Packaging ................. BE 597 0.3% Road & Rail BS 555 0.2% Computers & Peripherals ................ JX 496 0.2% Software ............................... JV 489 0.2% Building Products ...................... BI 399 0.2% Airlines ............................... BQ 338 0.1% -------- ----- $233,710 100.0% ======== ===== Key to Currency Abbreviations Japanese Yen ..................... JPY Swiss Franc ...................... CHF See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Overseas Equity B, (formerly John Hancock International Opportunities Fund), (the "Fund" or "VST Overseas Equity B") 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 twenty-three different funds as of December 31, 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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued 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 par- ticular 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- $362,053 ======== 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense - --------------------------- ---------------- ---------------- $1,843 1.79% $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 December 31, 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 - -------------------------- ------------------- $57,277 $60,216 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 December 31, 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Unrealized Principal Amount Appreciation/ Currency Sold Covered by Contract Expiration Month (Depreciation) - ------------- ------------------- ---------------- -------------- Swiss Franc 586 February 05 $ (18) Swiss Franc 2,410 March 05 1 Swiss Franc 595 April 05 1 Euro 737 June 05 (2) Japanese Yen 1,318 Janaury 05 (85) Japanese Yen 778 March 05 2 ----- $(101) ===== 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $172, $2,071, $2,540, $3,181, $9,394 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $312. Realized gains and losses from security transactions are determined on the basis of identified cost. 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 December 31, 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 $158 by John Hancock and JVLICO. On March 18, 2004, the Fund's Share- holders 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 in expenses of $10. As of April 30, 2004, John Hancock has entered into a Sub-Advisory Agreement with Capital Guardian Trust Company, which under John Hancock's 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. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $220,413 $140,753 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $268,787 $34,951 $(3,500) $31,451 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $29,215 $31,565 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 - ---- ------------------ ---------------------- ----------------- 2004 $ 767 $-- $-- 2003 1,514 -- 42 Included in the Fund's 2004 distributions from ordinary income is $767 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed to shareholders as ordinary income distributions. NOTE E--COMBINATION On October 15, 2004, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund -------------- ----------- VST Overseas Equity B VST Overseas Equity C VST Overseas Equity B VST Overseas Equity NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION--Continued These combinations provided for the transfer of substantially all of the assets and liabilities of the target funds to the acquiring fund in exchange solely for the fund shares of the acquiring fund. The acquisitions were accounted for as a tax-free exchanges as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Target Fund Acquiring Fund Net Assets Appreciation to Combination After Combination ----------- -------------- ----------- ------------ ---------------- -------------------- VST Overseas Equity C 5,835 $58,096 $1,157 $117,174 $175,270 VST Overseas Equity 5,501 $54,780 $6,490 $175,270 $230,050
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on March 18, 2004 on the following matter: For Against Abstain --- ------- ------- To approve, as to the Overseas Equity B Fund, an 89% 6% 5% amendment to the current investment management agreement between the Trust and John Hancock to eliminate John Hancock's obligation to reimburse this Fund for certain operating expenses. John Hancock Variable Series Trust I solicited a vote at a special meeting of Contract owners/Policyholders held on October 15, 2004 on the following matters: For Against Abstain --- ------- ------- To approve, as to the Overseas Equity B Fund, a 94% 1% 5% proposal to combine with the Overseas Equity C Fund of John Hancock Variable Series Trust I. Share- holders in the Overseas Equity C Fund would receive Overseas Equity B Fund shares having the same value as their prior Overseas Equity C Fund shares. To approve, as to the Overseas Equity B Fund, a 92% 5% 3% proposal to combine with the Overseas Equity Fund of John Hancock Variable Series Trust I. Sharehold- ers in the Overseas Equity Fund would receive Overseas Equity B Fund shares having the same value as their prior Overseas Equity Fund shares. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE F--OTHERS MATTERS (UNAUDITED)-Continued Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Overseas Equity B Fund (formerly, International Opportunities Fund) (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Overseas Equity B Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 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. .. RREEF 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 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. Fund Commentary Overall Performance: In 2004, the Real Estate Equity Fund returned +36.48% outperforming the +33.15% return of the Dow Jones Wilshire REIT Index. RREEF America LLC Environment: The Fund outperformed the Dow Jones Wilshire REIT Index this year due to positive sector and stock selection. From a stock selection perspective, individual holdings in apartment, retail, hotel and industrial sectors performed particularly well on a relative basis, while holdings within the office sector served as a drag on the portfolio. From a sector perspective, the mall, retail and hotel sectors outperformed the benchmark and the other property types during the year, while the office, industrial and storage sectors lagged. As such, relative sector performance for the Fund was helped by an overweight position in hotel and mall sectors and by an underweight position in the office sector. Outlook: Even as fundamentals are improving for real estate, we are cautious about returns in 2005. Although REITs continue to provide investors with attractive diversification benefits, we expect returns will fall below historical averages this year as the sector digests the performance of the past several years. That said accelerating earning growth and increased investor demand for real estate should provide support for current valuations. Van Kampen Environment: The outperformance was primarily the result of stock selection. Sector allocation was also favorable. From a bottom-up perspective, the portfolio benefited from stock selection in the apartment, office, hotel and mall sectors. From a top-down perspective, the most significant favorable contributors to outperformance were from the overweight to the mall and hotel sectors and underweight to the mixed industrial/office sector. Outlook: We maintain our core investment philosophy as a real estate value investor. This results in the ownership of stocks that provide the best valuation relative to their underlying real estate values. Our company-specific research leads us to preferences for sub-segments within each property sector. Current top-down preferences include an overweighting of companies that are focused in the ownership of upscale urban hotels, coastal apartments, higher-end malls and urban offices, and underweighting to owners of strip shopping centers and suburban offices. We remain optimistic for the prospects of a recovery in fundamentals for the apartment sector. This is tied to the continuation of an economic recovery and related job growth. We remain cautious on the prospects of a recovery in fundamentals for the office sector. This sector is similar to the apartment sector, as it requires a job recovery in order to generate better demand. However, there are several notable differences. Tenants are currently leasing excess office space, which will absorb part of the demand recovery. In addition, there are high costs required for attracting and retaining tenants. Finally, given the longer lease term, office owners will face a roll down in rents at lease expiration in most markets for the next several years. In retail, we continue to favor malls over the open-air shopping centers, which appear expensive versus underlying real estate values. Within both sub-sectors, we continue to favor owners of higher quality assets in major metropolitan areas. Inception: May 16, 1988 - -------------------------------------------------------------------------------- Real Estate Equity Fund RREEF America LLC K. Knudson/J. Robertson Van Kampen T. Bigman - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (10-Year Period) Real Estate Real Estate Equity Fund Equity Benchmark (1) ----------- -------------------- Dec-94 $10,000 $10,000 Jan-95 9,654 9,677 Feb-95 9,857 9,980 Mar-95 9,884 10,038 Apr-95 9,758 9,966 May-95 10,173 10,295 Jun-95 10,334 10,474 Jul-95 10,529 10,643 Aug-95 10,602 10,773 Sep-95 10,855 10,971 Oct-95 10,490 10,631 Nov-95 10,532 10,742 Dec-95 11,231 11,365 Jan-96 11,361 11,522 Feb-96 11,481 11,750 Mar-96 11,584 11,845 Apr-96 11,545 11,898 May-96 11,760 12,163 Jun-96 12,005 12,407 Jul-96 11,967 12,296 Aug-96 12,472 12,819 Sep-96 12,816 13,139 Oct-96 13,150 13,495 Nov-96 13,605 14,055 Dec-96 14,945 15,555 Jan-97 15,109 15,778 Feb-97 15,097 15,787 Mar-97 15,010 15,841 Apr-97 14,558 15,329 May-97 15,014 15,786 Jun-97 15,784 16,569 Jul-97 16,209 17,114 Aug-97 16,106 16,987 Sep-97 17,506 18,662 Oct-97 16,875 17,869 Nov-97 17,090 18,228 Dec-97 17,518 18,635 Jan-98 17,020 18,372 Feb-98 16,719 18,137 Mar-98 17,140 18,494 Apr-98 16,604 17,912 May-98 16,489 17,740 Jun-98 16,437 17,646 Jul-98 15,325 16,418 Aug-98 13,942 14,712 Sep-98 14,903 15,536 Oct-98 14,531 15,323 Nov-98 14,737 15,611 Dec-98 14,591 15,388 Jan-99 14,192 15,054 Feb-99 13,845 14,935 Mar-99 13,776 14,854 Apr-99 15,234 16,438 May-99 15,634 16,715 Jun-99 15,469 16,431 Jul-99 14,953 15,802 Aug-99 14,886 15,565 Sep-99 14,177 14,863 Oct-99 13,880 14,586 Nov-99 13,770 14,357 Dec-99 14,345 14,897 Jan-00 14,365 14,958 Feb-00 14,059 14,673 Mar-00 14,813 15,315 Apr-00 15,683 16,407 May-00 15,896 16,604 Jun-00 16,436 17,164 Jul-00 17,917 18,705 Aug-00 17,330 18,032 Sep-00 18,089 18,618 Oct-00 17,299 17,810 Nov-00 17,672 18,210 Dec-00 18,824 19,476 Jan-01 18,693 19,671 Feb-01 18,366 19,262 Mar-01 18,236 19,277 Apr-01 18,585 19,736 May-01 18,980 20,288 Jun-01 19,943 21,386 Jul-01 19,606 20,958 Aug-01 20,361 21,690 Sep-01 19,183 20,404 Oct-01 18,480 19,641 Nov-01 19,588 20,913 Dec-01 20,067 21,520 Jan-02 20,128 21,612 Feb-02 20,530 22,107 Mar-02 21,743 23,467 Apr-02 21,861 23,612 May-02 22,063 23,851 Jun-02 22,447 24,340 Jul-02 21,110 22,833 Aug-02 21,066 22,842 Sep-02 20,201 21,833 Oct-02 19,200 20,745 Nov-02 20,110 21,772 Dec-02 20,339 22,090 Jan-03 19,722 21,443 Feb-03 20,033 21,758 Mar-03 20,539 22,311 Apr-03 21,433 23,250 May-03 22,648 24,566 Jun-03 23,029 25,097 Jul-03 24,403 26,432 Aug-03 24,743 26,651 Sep-03 25,600 27,589 Oct-03 25,867 27,997 Nov-03 27,013 29,232 Dec-03 27,843 30,109 Jan-04 28,738 31,313 Feb-04 29,387 31,830 Mar-04 30,993 33,743 Apr-04 27,050 28,803 May-04 28,891 31,004 Jun-04 29,797 31,915 Jul-04 30,049 32,078 Aug-04 32,313 34,724 Sep-04 32,294 34,561 Oct-04 34,105 36,479 Nov-04 35,783 38,114 Dec-04 37,998 40,092 Value on 12/31/04: - ------------------ $40,092 Real Estate Equity Benchmark (1) $37,998 Real Estate Equity Fund - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Simon Property Group, Inc. 9.4% Avalonbay Communities, Inc. 5.6% Starwood Hotels & Resorts Worldwide, Inc. 5.4% Prologis Trust 4.8% Equity Residential Properties Trust 4.5% Brookfield Properties Corporation 4.4% Hilton Hotels Corp. 4.1% Archstone Communities Trust 3.6% Federal Realty Investment Trust 3.5% Mack-Cali Realty LP 3.2% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Real Estate Real Estate Equity Fund Equity Fund Benchmark/1/ ----------- ------------------------ 1 Year 36.48% 33.15% 3 Years 23.72% 23.05% 5 Years 21.51% 21.90% 10 Years 14.28% 14.90% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN INDUSTRY CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Real Estate Investment Trust 88.5% Real Estate Operations 8.4% Real Estate Development 3.1% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Real Estate Equity Fund 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. Inception: May 16, 1988 - -------------------------------------------------------------------------------- Real Estate Equity Fund RREEF America LLC K. Knudson/J. Robertson Van Kampen T. Bigman - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Real Estate Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,275.30 Expense paid per $1,000* $ 5.70 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.13 Expense paid per $1,000* $ 5.06 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $222,974 Net unrealized appreciation of investments .......................... 103,678 Short-term investments at value ..................................... 10,784 -------- Total investments ............................................. 337,436 Receivable for: Investments sold ................................................. 1,069 Dividends ........................................................ 1,631 -------- Total assets ........................................................ 340,136 -------- LIABILITIES Payables for: Investments purchased ............................................ 1,203 Fund shares purchased ............................................ 294 Accrued operating expenses ....................................... 111 Other liabilities ................................................ 1,436 -------- Total liabilities ................................................... 3,044 -------- Net assets .......................................................... $337,092 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ... 16,834 -------- Net asset value per share ........................................... $ 20.02 ======== Composition of net assets: Capital paid-in .................................................. $225,022 Accumulated net realized gain on investments ..................... 8,392 Net unrealized appreciation of investments ....................... 103,678 -------- Net assets .......................................................... $337,092 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 97 Dividends (net of foreign withholding tax of $35) ............. 12,925 ------- Total investment income ............................................. 13,022 ------- EXPENSES Investment advisory fee ....................................... 2,496 Auditors fees ................................................. 32 Custodian fees ................................................ 84 Fidelity Bond fees ............................................ 1 Legal fees .................................................... 40 Printing & mailing fees ....................................... 40 Trustees' fees ................................................ 7 Other fees .................................................... 8 ------- Total expenses ...................................................... 2,708 Less custodian expense reduction offset by commission recapture arrangement (Note C) .................. (8) ------- Net expenses ........................................................ 2,700 ------- Net investment income ............................................... 10,322 ------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................. 27,343 Change in unrealized appreciation on investments ................. 49,997 ------- Net realized and unrealized gain .................................... 77,340 ------- Net increase in net assets resulting from operations ................ $87,662 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Real Estate Equity Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE IN NET ASSETS From operations Net investment income ....................................................... $ 10,322 $ 9,610 Net realized gain ........................................................... 27,343 6,974 Change in net unrealized appreciation ....................................... 49,997 46,768 -------- -------- Net increase in net assets resulting from operations ..................... 87,662 63,352 Distributions to shareholders from: Net investment income ....................................................... (5,991) (6,533) Realized gains .............................................................. (24,812) (9,658) -------- -------- Decrease in net assets resulting from distributions ...................... (30,803) (16,191) From fund share transactions: Proceeds from shares sold ................................................... 58,111 52,162 Distributions reinvested .................................................... 30,803 16,191 Payment for shares redeemed ................................................. (45,605) (56,516) -------- -------- Increase in net assets from fund share transactions ...................... 43,309 11,837 -------- -------- NET INCREASE IN NET ASSETS ..................................................... 100,168 58,998 NET ASSETS Beginning of Period ......................................................... 236,924 177,926 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ............................................................ $337,092 $236,924 ======== ======== Analysis of fund share transactions: Sold ........................................................................ 3,263 3,726 Reinvested .................................................................. 1,591 1,077 Redeemed .................................................................... (2,629) (4,106) -------- -------- Net increase in fund shares outstanding ........................................ 2,225 697 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. 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:
Real Estate Equity Fund ----------------------------------------------------------- Year Ended December 31, ----------------------------------------------------------- 2004 2003 (d)(f) 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 ............................... 0.67 0.69 0.62 0.67 0.76 Net Realized and Unrealized Gain (Loss) on Investment(a) .................................... 5.11 3.90 (0.43) 0.21 2.73 -------- -------- -------- -------- -------- Total From Investment Operations .................... 5.78 4.59 0.19 0.88 3.49 Less Distributions: Distribution from Net Investment Income ............. (0.38) (0.47) (0.65) (0.58) (0.76) Distribution from Net Realized Gains on Investments ...................................... (1.60) (0.69) (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 ................................. (1.98) (1.16) (0.95) (1.00) (1.29) -------- -------- -------- -------- -------- Net Assets Value at End of Period ...................... $ 20.02 $ 16.22 $ 12.79 $ 13.55 $ 13.67 ======== ======== ======== ======== ======== Total Investment Return(b) ............................. 36.48% 36.89% 1.36% (6.61)% 31.29% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ........................................... 1.01%(e) 1.07% 1.07% 1.07% 0.76% Ratio of Net Investment Income to Average Net Assets ........................................... 3.86% 4.84% 4.60% 4.97% 5.99% Portfolio Turnover Rate ............................. 37.13% 38.11% 22.74% 29.07% 58.81% Net Assets End of Period (000s Omitted) ................ $337,092 $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) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- REAL ESTATE EQUITY FUND Market Name of Issuer Shares Value -------------- ------- --------- (000's) COMMON STOCK Real Estate Development - 3.0% Catellus Development Corp. ............................ 226,500 $ 6,931 The Macerich Co. ...................................... 51,810 3,253 -------- 10,184 Real Estate Investment Trust - 85.8% Acadia Realty Trust ................................... 45,130 736 American Campus Communities, Inc. ..................... 20,800 468 American Financial Realty Trust ....................... 336,000 5,437 AMLI Residential Properties Trust ..................... 34,325 1,098 Apartment Investment & Management Co. ................. 264,100 10,178 Archstone Communities Trust ........................... 305,910 11,716 Arden Realty Group, Inc. .............................. 268,500 10,128 Avalonbay Communities, Inc. ........................... 241,622 18,194 Biomed Realty Trust, Inc. ............................. 79,400 1,763 Boston Properties, Inc. ............................... 122,350 7,912 Brandywine Realty Trust ............................... 17,960 528 BRE Properties, Inc. .................................. 123,435 4,976 Correctional Properties Trust ......................... 14,300 413 Crescent Real Estate Equities, Inc. ................... 34,846 636 CRT Properties, Inc. .................................. 70,800 1,689 Equity Office Properties Trust ........................ 328,125 9,555 Equity Residential Properties Trust ................... 407,990 14,761 Essex Property Trust, Inc. ............................ 40,100 3,360 Federal Realty Investment Trust ....................... 220,500 11,389 Gables Residential Trust .............................. 5,600 200 General Growth Properties ............................. 107,190 3,876 Glenborough Realty Trust, Inc. ........................ 66,700 1,419 GMH Communities Trust * ............................... 81,100 1,144 Heritage Property Investment Trust, Inc. .............. 22,825 732 Highwoods Properties, Inc. ............................ 141,200 3,911 Hilton Hotels Corp. ................................... 590,800 13,435 Host Marriott Corp. ................................... 601,400 10,404 Inland Real Estate Corp. .............................. 116,900 1,865 Innkeepers USA Trust .................................. 22,600 321 Kimco Realty Corp. .................................... 10,555 612 Liberty Property Trust ................................ 110,000 4,752 Mack-Cali Realty LP ................................... 229,583 10,568 MeriStar Hospitality Corp. * .......................... 68,000 568 Mills Corp. ........................................... 95,300 6,076 OMEGA Healthcare Investors, Inc. ...................... 57,200 675 PAN Pacific Retail Properties, Inc. ................... 65,230 4,090 Pennsylvania Real Estate Investment ................... 123,683 5,294 Post Properties, Inc. ................................. 60,450 2,110 Prologis Trust ........................................ 360,490 15,620 PS Business Parks, Inc. ............................... 19,300 870 Public Storage, Inc. .................................. 106,600 5,943 Reckson Associates Realty Corp. ....................... 187,900 6,165 Regency Centers Corp. ................................. 167,555 9,283 Shurgard Storage Centers, Inc. ........................ 96,750 4,258 Simon Property Group, Inc. ............................ 471,480 30,491 SL Green Realty Corp. ................................. 22,650 1,371 Starwood Hotels & Resorts Worldwide, Inc. ............. 299,102 $ 17,468 Sunstone Hotel Investments, Inc. * .................... 15,050 313 Taubman Centers, Inc. ................................. 66,800 2,001 The St. Joe Co. ....................................... 13,000 835 Trizec Properties, Inc. ............................... 54,500 1,031 Ventas, Inc. .......................................... 3,100 85 Vornado Realty Trust .................................. 82,575 6,286 -------- 289,009 Real Estate Operations - 8.1% AMB Property Corp. .................................... 131,010 5,291 Brookfield Properties Corporation ..................... 382,100 14,291 Developers Diversified Realty Corp. ................... 18,200 808 Equity Lifestyle Properties, Inc. ..................... 55,400 1,981 Forest City Enterprises, Inc. ......................... 30,700 1,767 Great Wolf Resorts, Inc. * ............................ 13,200 295 La Quinta Corp. - CTF 1 Cl. B * ....................... 264,500 2,404 Lodgian, Inc. * ....................................... 24,100 296 Wyndham International, Inc. * ......................... 148,000 176 -------- 27,309 -------- TOTAL COMMON STOCK- (Cost $222,838) 96.9% 326,502 PREFERRED STOCK Real Estate Investment Trust - 0.0% Simon Property Group, Inc. ............................ 2,535 150 -------- TOTAL PREFERRED STOCK- (Cost $136) 0.0% 150 Par Value --------- (000's) SHORT-TERM INVESTMENTS - 3.2% Investment in joint trading account 2.29% due 01/03/05 (Cost $10,784) ..................................... $10,784 10,784 ------- --------- TOTAL INVESTMENTS- (Cost $233,758) 100.1% 337,436 Payables, less cash and receivables- (0.1)% (344) ------- -------- NET ASSETS- 100.0% $337,092 ======= ======== * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 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, 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, 2004, 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, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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 $35. 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 December 31, 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 December 31, 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 in expenses of $8. John Hancock has entered into Sub-Advisory Agreements with Morgan Stanley Investment Management, Inc., and RREEF America LLC, each of which under John Hancock's supervision, are responsible for a portion of the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $118,512 $97,792 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $231,753 $107,476 $(1,793) $105,683 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $6,387 $-- $105,683 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 - ---- ------------------ ---------------------- ----------------- 2004 $10,193 $20,610 $-- 2003 7,260 8,931 -- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Real Estate Equity Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Real Estate Equity Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1994 - -------------------------------------------------------------------------------- Short-Term Bond Fund Independence Investment LLC J. Shallcross/P. Farley - -------------------------------------------------------------------------------- .. 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. The Fund emphasizes higher quality U.S. investment grade sectors. Fund Commentary Performance: For the year 2004, the Short Term Bond Fund returned +1.42%, in line with the +1.43% return of the Lehman Aggregate 1-3 Index. Environment: The year 2004 became the bear bond market that wasn't. Although early signs reminiscent of 1994 emerged in April, the bond market remained resilient throughout the year. Paradoxically, long-term interest rates finished the year lower in an interest rate-tightening environment. The 10-Year Treasury ended the year virtually unchanged in yield, while short-term rates rose by nearly a full percentage point. Benign inflation and concerns of chronic fatigue in the labor market kept a lid on interest rates, while the Federal Reserve lifted short-term rates higher. Despite some volatile labor market numbers, other cyclical economic indicators reaffirmed the economy's growth. There were several economic hurdles, notably investor paranoia over slower growth expectations, higher energy prices, the falling U.S. dollar, concerns over higher interest rates, geopolitical issues and slower growth in Asia. However, most spread sectors performed well as underlying improving fundamentals and strong market technicals pushed spreads tighter. Corporate bonds were the best performer. The portfolio remained overweight in corporate credit, and benefited from having a high concentration in lower rated bonds. Larger weightings in media/cable, telecommunications, energy, utilities and consumer cyclicals added to performance. Asset Backed Securities and Commercial Mortgage Backed Securities had strong performance. We remained overweight and benefited from owning a higher concentration of home equity bonds. Outlook: The economy is poised for gradual growth, but there are lingering issues. The Fed is still in tightening mode. Oil prices remain high, but so far this has been moderately absorbed by consumers and some industries. The falling dollar remains a concern. Interest rates will probably trend higher. Corporate bonds should still benefit from improving fundamentals and positive technicals, but profit taking could lead to short-term spread widening. The mortgage market looks relatively expensive and unattractive. Inception: May 1, 1994 - -------------------------------------------------------------------------------- Short-Term Bond Fund Independence Investment LLC J. Shallcross/P. Farley - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 12/31/94 (Fund Inception Date) Short-Term Bond VST VST Short-Term Bond Benchmark (1) ------------------- --------------------------------- 10,000 10,000 Jan-95 10,138 10,155 Feb-95 10,290 10,327 Mar-95 10,333 10,383 Apr-95 10,428 10,490 May-95 10,658 10,735 Jun-95 10,733 10,798 Jul-95 10,744 10,825 Aug-95 10,809 10,900 Sep-95 10,856 10,961 Oct-95 10,959 11,068 Nov-95 11,061 11,187 Dec-95 11,150 11,285 Jan-96 11,235 11,387 Feb-96 11,146 11,305 Mar-96 11,106 11,271 Apr-96 11,087 11,260 May-96 11,087 11,266 Jun-96 11,174 11,361 Jul-96 11,200 11,401 Aug-96 11,223 11,428 Sep-96 11,355 11,551 Oct-96 11,489 11,709 Nov-96 11,569 11,820 Dec-96 11,552 11,790 Jan-97 11,604 11,843 Feb-97 11,623 11,862 Mar-97 11,593 11,834 Apr-97 11,689 11,946 May-97 11,766 12,032 Jun-97 11,855 12,125 Jul-97 12,018 12,301 Aug-97 11,994 12,283 Sep-97 12,098 12,396 Oct-97 12,201 12,509 Nov-97 12,207 12,536 Dec-97 12,293 12,630 Jan-98 12,423 12,776 Feb-98 12,419 12,774 Mar-98 12,462 12,822 Apr-98 12,517 12,882 May-98 12,580 12,957 Jun-98 12,637 13,023 Jul-98 12,695 13,083 Aug-98 12,830 13,205 Sep-98 12,964 13,387 Oct-98 12,956 13,418 Nov-98 12,976 13,454 Dec-98 13,008 13,508 Jan-99 13,037 13,583 Feb-99 12,992 13,536 Mar-99 13,062 13,643 Apr-99 13,111 13,701 May-99 13,079 13,685 Jun-99 13,121 13,727 Jul-99 13,148 13,756 Aug-99 13,181 13,787 Sep-99 13,283 13,887 Oct-99 13,319 13,937 Nov-99 13,368 13,978 Dec-99 13,393 13,997 Jan-00 13,391 14,004 Feb-00 13,486 14,105 Mar-00 13,554 14,174 Apr-00 13,585 14,185 May-00 13,634 14,235 Jun-00 13,795 14,396 Jul-00 13,882 14,504 Aug-00 13,985 14,626 Sep-00 14,105 14,756 Oct-00 14,136 14,800 Nov-00 14,283 14,929 Dec-00 14,462 15,105 Jan-01 14,661 15,338 Feb-01 14,777 15,460 Mar-01 14,884 15,587 Apr-01 14,930 15,642 May-01 15,016 15,750 Jun-01 15,073 15,814 Jul-01 15,262 16,028 Aug-01 15,362 16,145 Sep-01 15,568 16,351 Oct-01 15,710 16,515 Nov-01 15,650 16,470 Dec-01 15,632 16,477 Jan-02 15,674 16,533 Feb-02 15,742 16,591 Mar-02 15,632 16,496 Apr-02 15,742 16,661 May-02 15,870 16,750 Jun-02 15,991 16,882 Jul-02 16,159 17,049 Aug-02 16,251 17,138 Sep-02 16,399 17,270 Oct-02 16,385 17,306 Nov-02 16,364 17,302 Dec-02 16,519 17,479 Jan-03 16,563 17,510 Feb-03 16,658 17,596 Mar-03 16,692 17,619 Apr-03 16,764 17,679 May-03 16,842 17,721 Jun-03 16,867 17,760 Jul-03 16,802 17,648 Aug-03 16,787 17,655 Sep-03 16,928 17,843 Oct-03 16,874 17,778 Nov-03 16,884 17,784 Dec-03 16,975 17,898 Jan-04 17,031 17,958 Feb-04 17,110 18,059 Mar-04 17,164 18,111 Apr-04 17,031 17,937 May-04 16,989 17,912 Jun-04 17,000 17,916 Jul-04 17,060 17,993 Aug-04 17,166 18,133 Sep-04 17,180 18,126 Oct-04 17,225 18,189 Nov-04 17,176 18,108 Dec-04 17,218 18,153 Value on 12/31/04: - ------------------ $17,218 Short-Term Bond VST $18,153 VST Short-Term Bond Benchmark (1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- Federal National Mortgage Assoc. 13.2% Federal Home Loan Mortgage Corp. 9.1% U.S. Treasury 6.9% Structured ARM Loan Trust 2.4% JP Morgan Chase & Co. 2.2% Lehman Brothers Holdings, Inc. 2.0% Wells Fargo & Co. 2.1% General Motors 1.8% Citigroup, Inc. 1.7% Bear Stearns Cos, Inc. 1.7% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Short Term Short-Term Bond Fund Bond Fund Benchmark/1/ ---------- ------------ 1 Year 1.42% 1.43% 3 Years 3.27% 3.28% 5 Years 5.15% 5.34% 10 Years 5.58% 6.14% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 32.41% AAA 22.40% AA 5.52% A 10.88% BBB 23.87% BB 4.92% Weighted Average Yield 3.48% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Short-Term Bond Fund Benchmark represents the Merrill Lynch 1-5 Year Government Bond Index from May 1994 to April 1998, 65% Lehman Brothers 1-3 Year Credit Bond Index, 35% Lehman Brothers 1-3 Year Government Bond Index, May 1998 to April 2002 and now Lehman Brothers 1-3 Year Aggregate Bond Index from May 2002 to present. Inception: May 1, 1994 - -------------------------------------------------------------------------------- Short-term Bond Fund Independence Investment LLC J. Shallcross/P. Farley - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Short-Term Bond Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,012.80 Expense paid per $1,000* $ 3.50 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,021.66 Expense paid per $1,000* $ 3.51 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Short-Term Bond Fund (000's Omitted) ASSETS Long term investments at cost (including $22,893 of securities loaned (Note B)) ................................................ $244,296 Net unrealized depreciation of investments ......................... (763) Short-term investments at value .................................... 30,026 -------- Total investments ............................................ 273,559 Cash ............................................................... 3,213 Receivables for: Investments sold ................................................ 750 Interest ........................................................ 2,406 -------- Total assets ....................................................... 279,928 -------- LIABILITIES Payables for: Investments purchased ........................................... 3,213 Fund shares purchased ........................................... 40 Collateral for securities on loan ............................... 23,338 Accrued operating expenses ...................................... 84 -------- Total liabilities .................................................. 26,675 -------- Net assets ......................................................... $253,253 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) ..................................................... 25,508 -------- Net asset value per share .......................................... $ 9.93 ======== Composition of net assets: Capital paid-in ................................................. $254,357 Accumulated net realized loss on investments .................... (341) Net unrealized depreciation of investments ...................... (763) -------- Net assets ......................................................... $253,253 ======== INVESTMENT INCOME Interest ..................................................... $ 9,296 Securities lending ........................................... 34 -------- Total investment income ............................................ 9,330 ======== EXPENSES Investment advisory fee ...................................... 1,539 Auditors fees ................................................ 32 Custodian fees ............................................... 84 Fidelity Bond fees ........................................... 1 Legal fees ................................................... 43 Printing & mailing fees ...................................... 43 Trustees' fees ............................................... 8 Other fees ................................................... 8 -------- Total expenses ..................................................... 1,758 -------- Net investment income .............................................. 7,572 -------- REALIZED AND UNREALIZED LOSS Net realized loss on investments ................................ (375) Change in unrealized depreciation on investments ................ (3,592) -------- Net realized and unrealized loss ................................... (3,967) -------- Net increase in net assets resulting from operations ............... $ 3,605 ======== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Short-Term Bond Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 7,572 $ 9,392 Net realized loss ................................................... (375) (468) Change in net unrealized depreciation ............................... (3,592) (2,066) -------- -------- Net increase in net assets resulting from operations ............. 3,605 6,858 Distributions to shareholders from: Net investment income ............................................... (7,642) (8,761) Realized gains ...................................................... (54) Capital paid-in ..................................................... (1,232) (552) -------- -------- Decrease in net assets resulting from distributions .............. (8,874) (9,367) From fund share transactions: Proceeds from shares sold ........................................... 76,567 96,185 Distributions reinvested ............................................ 8,874 9,367 Payment for shares redeemed ......................................... (86,936) (84,143) -------- -------- Increase (decrease) in net assets from fund share transactions ... (1,495) 21,409 -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .................................. (6,764) 18,900 NET ASSETS Beginning of Period ................................................. 260,017 241,117 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ...................................... $253,253 $260,017 ======== ======== Analysis of fund share transactions: Sold ................................................................ 7,616 9,405 Reinvested .......................................................... 885 919 Redeemed ............................................................ (8,649) (8,235) -------- -------- Net increase (decrease) in fund shares outstanding ..................... (148) 2,089 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Short-Term Bond Fund ------------------------------------------------------ Year Ended December 31, ------------------------------------------------------ 2004 2003(e) 2002(e) 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 .............................. 0.30 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 ................... 0.15 0.27 0.56 0.78 0.75 Less Distributions: Distribution from Net Investment Income ............ (0.30) (0.35) (0.41) (0.53) (0.61) Distribution from Net Realized Gains on Investments ..................................... (d) Capital paid-in .................................... (0.05) (0.02) (0.03) -------- -------- -------- -------- ------- Total Distributions ................................ (0.35) (0.37) (0.44) (0.53) (0.61) -------- -------- -------- -------- ------- Net Assets Value at End of Period ..................... $ 9.93 $ 10.13 $ 10.23 $ 10.11 $ 9.86 ======== ======== ======== ======== ======= Total Investment Return(b) ............................ 1.42% 2.76% 5.67% 8.09% 7.98% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ... 0.69% 0.67% 0.68% 0.48% 0.36% Ratio of Net Investment Income to Average Net Assets ...................................... 2.96% 3.68% 4.29% 5.20%(c) 6.27% Portfolio Turnover Rate ............................ 38.61% 58.94% 97.00% 86.39% 52.68% Net Assets End of Period (000s Omitted) ............... $253,253 $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) Amount is less than $0.01. (e) Certain amounts in 2003 and 2002 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SHORT-TERM BOND FUND ** Par Market Value Value Name of Issuer (000's) (000's) -------------- ------- ------- PUBLICLY-TRADED BONDS Aerospace & Defense - 0.3% Raytheon Co. - Notes 6.75% due 08/15/07 - BBB- ............................ $ 643 $ 693 Auto Loan - 2.1% Ford Motor Credit Co. - Notes 6.875% due 02/01/06 - BBB- ........................... 1,000 1,030 General Motors Acceptance Corp. - Notes 6.125% due 09/15/06 - BBB- ........................... 3,265 3,347 6.75% due 01/15/06 - BBB- ............................ 1,000 1,026 ------- 5,403 Automobiles - 0.9% Daimler Chrysler - Notes 6.4% due 05/15/06 - BBB .............................. 1,500 1,560 Hertz Corp. - Notes 1.0% due 08/05/08 - BBB- ............................. 750 754 ------- 2,314 Banks - 4.8% Bank of America Corp. - Notes 4.75% due 10/15/06 - A+ .............................. 1,400 1,434 Bank One Corp. - Notes 6.875% due 08/01/06 - A+ ............................. 1,800 1,899 Bear Stearns Commercial Mortgage Securities, Inc. - Ser. 2004 Cl. A1 3.26% due 02/11/41 - AAA ............................. 2,834 2,775 Credit Suisse First Boston - Ser. 2003-C3 Cl. A1 2.218% due 05/15/38 - AAA ............................ 2,429 2,353 Credit Suisse First Boston Mortgage Securities Corp. - Cl. A1 3.801% due 06/15/06 - AAA ............................ 95 96 First Union Corp. - Notes 7.55% due 08/18/05 - A ............................... 2,500 2,571 Popular North America, Inc. 6.125% due 10/15/06 - BBB+ ........................... 855 891 ------- 12,019 Beverages - 0.4% Coca Cola Co. - Sr. Notes 4.0% due 06/01/05 - A+ ............................... 1,000 1,004 CMBS - 0.8% JP Morgan Chase & Co. Commercial Mortgage Securities - Ser. 2004 FL1 A1 144A (a) 1.71% due 04/16/19 - AAA ............................. 1,992 1,994 Diversified Financials - 10.0% Bear Stearns Cos, Inc. - Notes 3.0% due 03/30/06 - A ................................ 1,250 1,247 BP Capital Markets plc - Notes 4.0% due 04/29/05 - AA+ .............................. 1,000 1,004 Chase Commercial Mortgage Securities Corp. - Cl. A1 7.656% due 06/15/08 - AAA ............................ 1,179 1,214 Chase Manhattan Corp. 6.0% due 11/01/05 - A ................................ $2,000 $ 2,047 CIT Group, Inc. 1.48% due 05/18/07 - A ............................... 1,000 1,000 Citigroup, Inc. - Notes 6.75% due 12/01/05 - AA- ............................. 4,000 4,128 GE Capital Commercial Mortgage Corp. - CTF Cl. A1 5.033% due 12/10/35 - NA ............................. 621 634 GE Commercial Mortgage Corp. - Ser. 2004-C1 CTF Cl. A1 3.009% due 11/10/38 - AAA ............................ Goldman Sachs Group, Inc. - Notes 7.625% due 08/17/05 - A+ ............................. 1,000 1,030 Green Tree Financial Corp. - Ser. 1996-8 Cl. A6 7.6% due 10/15/27 - AAA .............................. 239 257 GS Mortgage Securities Corp. II - Ser. 2003-C1 Cl. A1 2.904% due 01/10/40 - AAA ............................ 1,706 1,678 Hartford Financial Services Group, Inc. - Sr. Notes 6.375% due 11/01/08 - A- ............................. 1,000 1,074 Lehman Brothers Holdings, Inc. - Notes 6.625% due 02/05/06 - A .............................. 2,600 2,693 Morgan Stanley Group, Inc. 6.1% due 04/15/06 - A+ ............................... 800 828 Nomura Asset Securities Corp. - Ser. 1998- D6 A1A 6.28% due 03/17/28 - AAA ............................. 1,416 1,467 Wells Fargo Mortgage Backed Securities - Ser. 2003-2 Cl. A6 5.25% due 02/25/18 - AAA ............................. 5,000 5,082 ------- 25,383 Diversified Telecommunication Services - 1.8% France Telecom SA - Notes 8.7% due 03/01/06 - BBB+ ............................. 2,000 2,100 Verizon Global Funding Corp. - Notes 6.75% due 12/01/05 - A+ .............................. 2,303 2,378 ------- 4,478 Electric Utilities - 1.5% Firstenergy Corp. - Notes Ser. A 5.5% due 11/15/06 - BB+ .............................. 2,200 2,271 Progress Energy, Inc. - Sr. Notes 6.75% due 03/01/06 - BBB- ............................ 700 727 TXU Energy Co. LLC - Sr. Notes 144A (a) 2.38% due 01/17/06 - BBB ............................. 750 752 ------- 3,750 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Electric/Gas - 2.8% Alabama Power Co. - Sr. Notes Ser. U 2.65% due 02/15/06 - A ............................... $1,000 $ 994 American Electric Power, Inc. - Sr. Notes Ser. A 6.125% due 05/15/06 - BBB ............................ 1,145 1,187 Citizens Utilities Co. Delaware - Debs. 7.6% due 06/01/06 - BB+ .............................. 1,250 1,322 Kansas City Power & Light Co. - Sr. Notes Ser. A 6.0% due 03/15/07 - BBB .............................. 1,000 1,045 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 - BBB ............................. 1,375 1,376 TXU Corp. - Sr. Notes 6.375% due 06/15/06 - BBB- ........................... 1,000 1,038 ------- 6,962 Finance - 6.4% Boeing Capital Corp. - Sr. Notes 5.65% due 05/15/06 - A ............................... 650 670 Bombadier Capital, Inc. - 144A (a) 6.125% due 06/29/06 - BB ............................. 1,000 1,000 Chase Funding Loan Acquisition Trust - CTF Cl. A2 1.275% due 04/25/31 - AAA ............................ 124 124 Deutsche Telekom International Finance 8.25% due 06/15/05 - BBB+ ............................ 1,300 1,330 General Electric Capital Corp. 5.0% due 02/15/07 - AAA .............................. 3,000 3,090 Household Financial Corp. 6.5% due 01/24/06 - A ................................ 2,000 2,068 Nisource Finance Corp. - Notes 7.625% due 11/15/05 - BBB ............................ 1,700 1,762 Pinnacle West Capital Corp. - Sr. Notes 6.4% due 04/01/06 - BBB- ............................. 1,700 1,750 PNC Funding Corp. - Sr. Notes 5.75% due 08/01/06 - A- .............................. 875 907 Sprint Capital Corp. - Note 7.9% due 03/15/05 - BBB- ............................. 2,000 2,022 Vornado Realty Trust - Sr. Notes 5.625% due 06/15/07 - BBB ............................ 1,485 1,542 ------- 16,265 Gas Utilities - 0.9% Keyspan Corp. - Notes 6.15% due 06/01/06 - A ............................... 1,150 1,197 Sempra Energy - Notes 1.0% due 05/21/08 - BBB+ ............................. 1,130 1,126 ------- 2,323 Health Care Providers & Services - 0.5% Anthem, Inc. - Notes 3.5% due 09/01/07 - BBB+ ............................. $1,225 $ 1,218 Home Equity Loan - 1.5% Centex Home Equity Loan Trust - Ser. 2003-B Cl. AF 2 1.838% due 06/25/20 - AAA ............................ 871 869 Residential Asset Mortgage Products, Inc. - Cl. AI2 3.38% due 03/25/29 - AAA ............................. 2,899 2,897 ------- 3,766 Hotels Restaurants & Leisure - 1.9% Harrah's Operating, Inc. - Sr. Notes 7.125% due 06/01/07 - BBB- ........................... 1,000 1,071 Hilton Hotels Corp. - Sr. Notes 7.95% due 04/15/07 - BBB- ............................ 1,000 1,088 Park Place Entertainment Corp. - Notes 8.5% due 11/15/06 - BB+ .............................. 1,500 1,620 Starwood Hotels & Resorts - Sr. Notes 7.375% due 05/01/07 - BB+ ............................ 1,000 1,068 ------- 4,847 Industrial Conglomerates - 0.6% Tyco International Group SA - Notes 5.8% due 08/01/06 - BBB .............................. 1,500 1,553 Insurance - 1.4% Aetna Inc. - Sr. Notes 7.375% due 03/01/06 - BBB+ ........................... 2,000 2,082 Marsh & McLennan Cos., Inc. - Sr. Notes # 5.375% due 03/15/07 - BBB+ ........................... 590 602 Wellpoint, Inc. - Notes 144A (a) 3.75% due 12/14/07 - BBB+ ............................ 895 894 ------- 3,578 Media - 3.8% British Sky Broadcasting Group - Gtd. Notes 7.3% due 10/15/06 - BBB- ............................. 1,000 1,062 Continental Cablevision - Sr. Notes 8.3% due 05/15/06 - BBB .............................. 615 653 Cox Communications, Inc. - Notes 144A (a) 3.04% due 12/14/07 - BBB- ............................ 1,000 1,000 Lenfest Communications, Inc. - Notes 8.375% due 11/01/05 - BBB ............................ 1,000 1,042 Liberty Media Corp. - Sr. Notes 2.64% due 09/17/06 - BBB- ............................ 1,500 1,518 The Walt Disney Co. - Sr. Notes 6.75% due 03/30/06 - BBB+ ............................ 1,100 1,146 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Media - Continued Time Warner, Inc. - Notes 5.625% due 05/01/05 - BBB+ ........................... $1,500 $ 1,514 Univision - Sr. Notes 2.875% due 10/15/06 - BBB- ........................... 1,700 1,678 ------- 9,613 Metals & Mining - 0.9% Falconbridge, Ltd. 7.375% due 09/01/05 - BBB- ........................... 1,125 1,156 Minnesota Ming & Manufacturing Co. 4.15% due 06/30/05 - AA .............................. 1,000 1,006 ------- 2,162 Multi-Utilities - 0.5% Centerpoint Energy, Inc. - Sr. Notes 5.875% due 06/01/08 - BBB- ........................... 1,150 1,205 Multiline Retail - 0.4% May Department Stores Co. - Notes 3.95% due 07/15/07 - BBB ............................. 1,000 1,002 Oil & Gas - 2.8% Devon Energy Corp. - Sr. Notes 2.75% due 08/01/06 - BBB ............................. 1,500 1,482 Duke Energy Field Services - Notes 5.75% due 11/15/06 - BBB ............................. 1,450 1,503 Enterprise Products Operating LP - Sr. Notes 144A (a) 4.0% due 10/15/07 - BB+ .............................. 2,000 1,995 Northern Border Pipeline Co. - Sr. Notes 6.25% due 05/01/07 - A- .............................. 2,000 2,112 ------- 7,092 Other Asset Backed - 6.3% CWABS, Inc. - Ser. 2004-10 Cl. AF3 3.842% due 02/01/05 - AAA ............................ 1,445 1,428 CWABS, Inc. Ser. 2003-5 Cl. AF 2 3.042% due 04/25/25 - AAA ............................ 1,300 1,298 Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 3.531% due 12/25/33 - AAA ............................ 900 899 Equity One ABS, Inc. - Ser. 2004-2 Cl. AV2 1.55% due 07/25/34 - AAA ............................. 1,213 1,210 Long Beach Mortgage Loan Trust - Ser. 2004-1 Cl. M3 1.0% due 03/25/35 - AA- .............................. 4,000 4,000 Option One Loan Trust - Ser. 2004-1 CTF Cl A2 1.39% due 01/25/34 - AAA ............................. 999 999 Structured ARM Loan Trust - Ser. 2004-14 Cl. 1 A 5.129% due 10/25/34 - AAA ............................ 5,732 5,832 Vanderbilt & Mortgage, Inc. - Sr. Sub. CTF Cl. A2 4.235% due 08/07/14 - AAA ............................ $ 272 $ 272 ------- 15,938 Other Mortgage - 1.5% LB UBS Commercial Mortgage Trust - CTF Cl. A1 7.95% due 07/15/09 - NA .............................. 1,396 1,494 LB UBS Commercial Mortgage Trust - Ser. 2003-C1 Cl. A1 2.72% due 01/17/08 - AAA ............................. 2,429 2,383 ------- 3,877 Personal Products - 0.6% Colgate Palmolive Co. 3.98% due 04/29/05 - AA- ............................. 1,500 1,506 Real Estate Development - 0.3% Rouse Co. - Noyes 3.625% due 03/15/09 - BB+ ............................ 900 849 Real Estate Investment Trust - 3.5% CarrAmerica Realty Corp. - Notes 6.625% due 03/01/05 - BBB ............................ 1,167 1,173 7.375% due 07/01/07 - BBB ............................ 1,197 1,302 Duke Realty Limited Partnership - Notes 3.35% due 01/15/08 - BBB+ ............................ 1,625 1,593 IStar Financial, Inc. - Sr. Notes 4.875% due 01/15/09 - BBB- ........................... 1,620 1,644 Simon Property Group, Inc. - Notes 3.75% due 01/30/09 - BBB ............................. 2,256 2,220 United Dominion Realty Trust, Inc. 4.5% due 03/03/08 - BBB .............................. 1,000 1,021 ------- 8,953 U.S. Government Agencies - 22.7% Federal Home Loan Bank - Notes 7.5% due 06/01/12 - AAA .............................. 482 511 Federal Home Loan Mortgage Corp. - Bonds 3.907% due 11/01/33 - AAA ............................ 1,393 1,404 4.0% due 03/15/26 - AAA .............................. 6,079 6,075 7.0% due 08/01/12 - AAA .............................. 385 408 7.0% due 02/01/14 - AAA .............................. 1,030 1,091 8.5% due 05/01/15 - AAA .............................. 1,227 1,310 Federal Home Loan Mortgage Corp. - Bonds Ser. 2516 Cl. AX 8.5% due 01/15/16 - AAA .............................. 1,544 1,648 Federal Home Loan Mortgage Corp. - Notes 2.375% due 04/15/06 - AAA ............................ 6,500 6,442 6.5% due 12/01/09 - AAA .............................. 730 765 7.0% due 12/01/10 - AAA .............................. 248 263 7.0% due 12/01/13 - AAA .............................. 1,673 1,774 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SHORT-TERM BOND FUND Par Market Name of Issuer Value Value -------------- -------- --------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued U.S. Government Agencies - Continued 7.5% due 11/01/09 - AAA ........................... $ 645 $ 670 8.0% due 06/01/10 - AAA ........................... 202 215 Federal National Mortgage Assoc. - Bonds 3.638% due 09/01/33 - AAA ......................... 1,790 1,808 3.64% due 01/01/33 - AAA .......................... 1,670 1,682 6.0% due 01/01/17 - AAA ........................... 1,442 1,512 6.0% due 01/01/17 - AAA ........................... 1,284 1,347 6.5% due 04/01/17 - AAA ........................... 3,203 3,397 6.5% due 08/01/17 - AAA ........................... 3,567 3,783 7.0% due 10/01/15 - AAA ........................... 721 765 7.0% due 07/01/34 - AAA ........................... 5,009 5,308 7.5% due 07/01/34 - AAA ........................... 3,156 3,379 8.0% due 07/01/14 - AAA ........................... 944 1,008 8.0% due 09/25/16 - AAA ........................... 561 598 Federal National Mortgage Assoc. - Notes 6.0% due 01/01/11 - AAA ........................... 491 511 7.0% due 12/01/10 - AAA ........................... 239 251 7.5% due 08/01/09 - AAA ........................... 714 758 2.25% due 05/15/06 - # AAA ........................ 6,000 5,929 Government National Mortgage Assoc. - Bonds 8.0% due 12/15/25 - AAA ........................... 1,101 1,190 8.5% due 11/15/15 - AAA ........................... 858 927 Government National Mortgage Assoc. - Notes 7.0% due 12/15/08 - AAA ........................... 712 745 -------- 57,474 U.S. Government - 6.6% U.S. Treasury - Notes 3.25% due 01/15/09 - # AAA ....................... 6,000 5,948 3.375% due 12/15/08 - # AAA ....................... 5,300 5,283 3.625% due 07/15/09 - # AAA ....................... 5,500 5,516 -------- 16,747 Whole Loan CMOs - 7.2% Banc America Commercial Mortgage, Inc. - Ser. 2004-1 Cl. A1 3.156% due 11/10/39 - AAA ......................... 3,152 3,091 CWALT, Inc. - Ser. 2004 J7 Cl. 1AIO 1.3% due 09/25/21 - AAA ........................... 73,479 787 CWMBS, Inc. - Ser. 2002 Mortgage Pass Thru Certs Cl. 2A3 5.0% due 12/25/17 - AAA ........................... 1,390 1,413 GS Mortgage Securities Corp. - Ser. 2004 Cl. A2C 1.58% due 05/25/34 - AAA .......................... 1,000 1,002 Lehman Brothers Commercial Mortgage Trust - Cl. A2 144A (a) 1.749% due 10/15/17 - AAA ......................... 2,500 2,506 Merrill Lynch Mortgage Investments, Inc. - Ser. 2003 A1 Cl. IA 3.981% due 12/25/32 - NA .......................... $ 947 $ 955 Merrill Lynch Mortgage Investments, Inc. - Ser. 2003-C Cl. B1 1.75% due 06/25/28 - AA+ .......................... 2,000 2,041 Morgan Stanley Mortgage Loan Trust - Ser. 2004 (b) 1.0% due 01/25/35 - NA ............................ 249,428 3,000 Sequoia Mortgage Trust - Ser. 2004-4 Cl. A 1.0% due 05/20/34 - AAA ........................... 3,428 3,410 -------- 18,205 Wireless Telecommunications Services - 0.5% AT&T Wireless Services, Inc. - Sr. Notes 7.35% due 03/01/06 - A ............................ 1,300 1,360 -------- TOTAL PUBLICLY-TRADED BONDS- (Cost $244,296) 96.2% 243,533 INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 9.2% State Street Navigator Securities Lending Portfolio .. 23,338 23,338 SHORT-TERM INVESTMENTS - 2.6% Investment in joint trading account 2.29% due 01/03/05 (Cost $6,688) ..................................... 6,688 6,688 -------- -------- TOTAL INVESTMENTS- (Cost $274,322) 108.0% 273,559 Payables, less cash and receivables- (8.0)% (20,306) -------- -------- NET ASSETS- 100.0% $253,253 ======== ======== # At December 31, 2004 all or portion of this security was out on loan. (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 December 31, 2004, securities aggregated $10,141 or 4.0% of net assets of the Portfolio. (b) At December 31, 2004 this security was fair valued. ** Bond ratings are not audited. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 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 year ended December 31, 2004, the Fund had no bank borrowings. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 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 - -------------------------- ------------------- $22,893 $23,338 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforward, which may be applied against any net taxable gains of $153 which expire in 2012. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred approximately $217 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, 2005. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividend and Interest: 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. 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. 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 year ended December 31, 2004, there were no reimbursements paid to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Independence Investment LLC. Independence Investment LLC is an affiliate of John Hancock, which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued Purchases Sales and Maturities - --------- -------------------- $136,284 $95,440 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Depreciation - ---------- ------------ ------------ -------------- $274,293 $951 $(1,685) $(734) 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss or difference in accretion/amortization. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $153 $(734) 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 - ---- ------------------ ---------------------- ----------------- 2004 $7,642 $-- $1,232 2003 8,761 54 552 Included in the Fund's 2003 distributions from ordinary income is $1,302 in excess of investment company taxable income, which in accordance with applicable US tax law, was distributed to shareholders as ordinary income distribution. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Short-Term Bond Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Short-Term Bond Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 1996 - -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund Wellington Management Company, LLP Steven C. Angeli - -------------------------------------------------------------------------------- .. The manager employs bottom-up, fundamental research to identify attractively valued growth stocks. The Fund's sector allocations are broadly diversified but are driven primarily by stock selection. Fund Commentary Performance: For 2004, the Small Cap Emerging Growth Fund returned +9.45%, underperforming the +14.31% return of the Russell 2000 Growth Index. Environment: Small caps capped a sixth consecutive year of outperformance relative to large caps. Within the Russell 2000 Growth Index, nine of 10 sectors advanced. Energy, Materials, Industrials and Telecommunication Services were the strongest sectors. Information Technology was the only sector to decline over the year. Stock selection in Health Care and Consumer Discretionary were the largest detractors from the Trust's relative return. Within Health Care, negative stock selection effects were most acute among health care equipment & supplies companies. Within Consumer Discretionary, selection among media holdings hurt returns. While the portfolio's sector allocations are a result of our bottom-up investment process, we benefited from sector positioning during the year. In particular, we were overweight the strong performing Telecommunications Services sector and underweight the Information Technology sector. Outlook: While confident in the economy's direction, we believe the recovery has been hampered by inflationary pressures throughout the manufacturing supply chain. As a result, decelerating profit growth and weak employment trends are hindering consumption. While we do not foresee a doomsday scenario, we might see lower-than-expected earnings growth, especially in the traditional or more mature parts of Information Technology and within the Consumer Discretionary sector. Therefore, we will continue to focus on individual stock selection across all sectors. [CHART] Line chart Historical Fund Return $10,000 Investment made 4/1/96 (Fund Inception Date) Small Cap Emerging Growth Small Cap Emerging Fund Growth Benchmark (1) --------------- -------------------- Apr-96 $10,000 $10,000 May-96 10,232 10,253 Jun-96 10,126 10,132 Jul-96 9,630 9,593 Aug-96 10,161 10,009 Sep-96 10,450 10,283 Oct-96 10,340 10,402 Nov-96 10,678 10,961 Dec-96 11,033 11,318 Jan-97 11,115 11,492 Feb-97 10,927 11,601 Mar-97 10,594 11,290 Apr-97 10,831 11,456 May-97 11,818 12,368 Jun-97 12,512 12,994 Jul-97 13,256 13,540 Aug-97 13,389 13,755 Sep-97 14,242 14,670 Oct-97 13,761 14,271 Nov-97 13,863 14,428 Dec-97 13,863 14,917 Jan-98 13,521 14,647 Feb-98 14,532 15,531 Mar-98 15,138 16,162 Apr-98 15,222 16,241 May-98 14,459 15,666 Jun-98 14,458 15,579 Jul-98 13,270 14,359 Aug-98 10,901 12,110 Sep-98 11,414 12,794 Oct-98 11,733 13,174 Nov-98 12,320 13,531 Dec-98 13,037 13,956 Jan-99 12,715 13,640 Feb-99 11,876 12,708 Mar-99 11,826 12,602 Apr-99 12,619 13,753 May-99 12,798 14,175 Jun-99 13,630 14,688 Jul-99 13,444 14,340 Aug-99 12,849 13,817 Sep-99 12,620 13,541 Oct-99 12,365 13,270 Nov-99 12,267 13,339 Dec-99 12,590 13,748 Jan-00 11,854 13,389 Feb-00 12,345 14,208 Mar-00 12,574 14,274 Apr-00 12,787 14,358 May-00 12,670 14,139 Jun-00 12,740 14,552 Jul-00 13,003 15,036 Aug-00 13,762 15,708 Sep-00 13,774 15,619 Oct-00 13,768 15,563 Nov-00 10,732 13,964 Dec-00 11,470 15,164 Jan-01 13,023 15,954 Feb-01 11,056 14,907 Mar-01 10,142 14,178 Apr-01 11,316 15,287 May-01 11,655 15,663 Jun-01 11,932 16,204 Jul-01 11,175 15,327 Aug-01 10,648 14,832 Sep-01 8,697 12,835 Oct-01 9,424 13,586 Nov-01 10,224 14,638 Dec-01 11,037 15,541 Jan-02 10,629 15,379 Feb-02 10,383 14,958 Mar-02 11,650 16,161 Apr-02 11,264 16,308 May-02 10,629 15,584 Jun-02 9,917 14,811 Jul-02 8,284 12,574 Aug-02 8,126 12,542 Sep-02 7,370 11,641 Oct-02 7,539 12,015 Nov-02 8,411 13,087 Dec-02 7,924 12,358 Jan-03 7,586 12,015 Feb-03 7,294 11,652 Mar-03 7,369 11,803 Apr-03 8,126 12,922 May-03 8,991 14,378 Jun-03 9,325 14,655 Jul-03 9,985 15,763 Aug-03 10,524 16,610 Sep-03 10,176 16,190 Oct-03 11,139 17,588 Nov-03 11,523 18,162 Dec-03 11,793 18,244 Jan-04 12,245 19,201 Feb-04 12,246 19,173 Mar-04 12,438 19,263 Apr-04 11,725 18,296 May-04 11,967 18,660 Jun-04 12,172 19,281 Jul-04 11,172 17,550 Aug-04 10,725 17,172 Sep-04 11,566 18,122 Oct-04 11,734 18,562 Nov-04 12,385 20,131 Dec-04 12,908 20,855 Value on 12/31/04: - ------------------ $20,855 Small Cap Emerging Growth Benchmark(1) $12,908 Small Cap Emerging Growth Fund - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- American Tower Corp. 3.3% Crown Castle International Corp. 2.8% MEMC Electronic Materials, Inc. 1.9% CB Richard Ellis Group, Inc. 1.8% Take Two Interactive Software 1.8% Jackson Hewitt, Inc. 1.8% Gol-Linhas Aereas Inteligentes SA 1.7% Affiliated Managers Group, Inc. 1.7% Arkansas Best Corp. 1.6% La Quinta Corp. 1.6% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Small Cap Emerging Small Cap Emerging Growth Fund Growth Fund Benchmark/1/ ------------------ ------------------ 1 Year 9.45% 14.31% 3 Years 5.36% 10.30% 5 Years 0.50% 8.69% Since Inception (5/1/96) 2.99% 8.85% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Information Technology 20.6% Industrials 19.3% Consumer Discretionary 17.1% Health Care 15.1% Financials 10.1% Telecommunication Services 7.0% Materials 5.9% Energy 4.0% Consumer Staples 0.9% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. /1/ The Small Cap Emerging Growth Fund benchmark represents the Russell 2000 Value Index from May 1996 to October 2000, the Russell 2000 Index from November 2000 to April 2003 and then the Russell 2000 Growth Index from May 2003 to present. Inception: May 1, 1996 - -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund Wellington Management Company, LLP Steven C. Angeli - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Small Cap Emerging Growth Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,060.40 Expense paid per $1,000* $ 5.87 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.44 Expense paid per $1,000* $ 5.75 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted) ASSETS Long term investments at cost (including $55,742 of securities loaned (Note B)) ..................................... $189,568 Net unrealized appreciation of investments ......................... 34,052 Short-term investments at value .................................... 61,322 -------- Total investments ............................................ 284,942 Receivable for: Investments sold ................................................ 1,229 Dividends ....................................................... 26 -------- Total assets ....................................................... 286,197 -------- LIABILITIES Payables for: Investments purchased ........................................... 943 Fund shares purchased ........................................... 115 Collateral for securities on loan ............................... 57,121 Accrued operating expenses ...................................... 17 -------- Total liabilities .................................................. 58,196 -------- Net assets ......................................................... $228,001 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized) .. 25,707 -------- Net asset value per share .......................................... $ 8.87 ======== Composition of net assets: Capital paid-in ................................................. $289,527 Accumulated net realized loss on investments .................... (95,578) Net unrealized appreciation of investments ...................... 34,052 -------- Net assets ......................................................... 228,001 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 96 Dividends ..................................................... 247 Securities lending ............................................ 35 ------- Total investment income ............................................. 378 ------- EXPENSES Investment advisory fee ....................................... 1,080 Auditors fees ................................................. 11 Custodian fees ................................................ 107 Legal fees .................................................... 14 Printing & mailing fees ....................................... 174 Trustees' fees ................................................ 3 Other fees .................................................... 6 ------- Total expenses ...................................................... 1,395 Less expenses reimbursed ...................................... (211) Less custodian expense reduction offset by commission recapture arrangement (Note C) .................. (75) ------- Net expenses ........................................................ 1,109 ------- Net investment loss ................................................. (731) ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investments ................................. 8,607 Change in unrealized appreciation on investments ................. 11,772 ------- Net realized and unrealized gain .................................... 20,379 ------- Net increase in net assets resulting from operations ............... $19,648 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Small Cap Emerging Growth Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003(a) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment loss ....................................... $ (731) $ (384) Net realized gain (loss) .................................. 8,607 (4,652) Change in net unrealized appreciation ..................... 11,772 32,639 -------- -------- Net increase in net assets resulting from operations ... 19,648 27,603 Distributions to shareholders from: Capital paid-in ........................................... (11,543) -------- Decrease in net assets resulting from distributions .... (11,543) From fund share transactions: Proceeds from shares sold ................................. 37,753 50,786 Shares issued in reorganization ........................... 139,231 Distributions reinvested .................................. 11,543 Payment for shares redeemed ............................... (55,210) (42,137) -------- -------- Increase in net assets from fund share transactions .... 121,774 20,192 -------- -------- NET INCREASE IN NET ASSETS ................................... 141,422 36,252 NET ASSETS Beginning of Period ....................................... 86,579 50,327 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ..................... $228,001 $ 86,579 ======== ======== Analysis of fund share transactions: Sold ...................................................... 4,570 6,929 Issued in reorganization .................................. 17,269 Reinvested ................................................ 1,458 Redeemed .................................................. (6,816) (5,696) -------- -------- Net increase in fund shares outstanding ...................... 15,023 2,691 ======== ========
(a) Certain amounts in 2003 have been reclassified to permit comparison. See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the year end indicated:
Small Cap Emerging Growth Fund -------------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------------- 2004 2003(e)(h) 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) 0.01 0.01 0.14 Net Realized and Unrealized Gain (Loss) on Investment(a) ..................................... 0.77 3.07 (2.49) (0.35) (1.13) -------- ------- ------- ------- ------- Total From Investment Operations ..................... 0.77 3.04 (2.48) (0.34) (0.99) Less Distributions: Distribution from Net Investment Income .............. (0.01) (0.01) (0.15) Distribution from Net Realized Gains on Investments .. (0.14) Distribution from Excess of Net Investment Income/ Gains ............................................. (0.20) Distribution from Capital Paid-in .................... (1.24) (0.30) -------- ------- ------- ------- ------- Total Distributions .................................. (1.24) (0.01) (0.01) (0.79) -------- ------- ------- ------- ------- Net Assets Value at End of Period ....................... $ 8.87 $ 8.10 $ 6.30 $ 8.79 $ 9.14 ======== ======= ======= ======= ======= Total Investment Return(b) .............................. 9.45% 48.83% (28.21)% (3.78)% (8.89)% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ..... 1.14%(d)(f) 1.11%(d)(f) 1.00%(d) 1.00%(d) 0.92%(d) Ratio of Net Investment Income (Loss) to Average Net Assets ............................................ (0.71)% (0.59)% 0.19% 0.06% 1.25% Portfolio Turnover Rate .............................. 160.48%(g) 235.48% 45.03% 60.73% 189.57% Net Assets End of Period (000s Omitted) ................. $228,001 $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 1.35%, 1.21%, 1.04%, 1.02%, and 95%, for the years ended December 31, 2004, 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) Excludes merger activity. (h) Certain amounts in 2003 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP EMERGING GROWTH FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 2.4% Aeroflex, Inc. # * ...................................... 225,400 $ 2,732 Moog, Inc. - Cl. A * .................................... 59,050 2,678 ------- 5,410 Airlines - 2.7% Airtran Holdings, Inc. # * .............................. 206,060 2,205 Gol-Linhas Aereas Inteligentes SA - ADR # * ............. 121,430 3,871 ------- 6,076 Banks - 1.0% Amcore Financial, Inc. .................................. 73,530 2,366 Biotechnology - 5.5% Abgenix, Inc. # * ....................................... 130,880 1,353 Alkermes, Inc. # * ...................................... 176,670 2,489 Amylin Pharmaceuticals, Inc. # * ........................ 73,900 1,726 Encysive Pharmaceuticals, Inc. * ........................ 115,390 1,146 Exelixis, Inc. # * ...................................... 168,327 1,599 Human Genome Sciences, Inc. # * ......................... 103,030 1,239 ICOS Corp. # * .......................................... 57,430 1,624 Neurocrine Biosciences, Inc. # * ........................ 27,400 1,351 ------- 12,527 Chemicals - 0.7% Hercules, Inc. # * ...................................... 100,300 1,489 Commercial Services & Supplies - 4.4% Corporate Executive Board Co. # ......................... 22,200 1,486 CSG Systems International, Inc. # * ..................... 82,340 1,540 DiamondCluster, Inc. # * ................................ 97,300 1,394 Navigant Consulting, Inc. # * ........................... 109,500 2,913 Strayer Education, Inc. # ............................... 25,090 2,754 ------- 10,087 Communications Equipment - 4.7% AudioCodes, Ltd. * ...................................... 97,740 1,623 EFJ, Inc. * ............................................. 164,130 1,584 Kanbay International, Inc. * ............................ 63,210 1,979 Novatel Wireless, Inc. # * .............................. 67,650 1,311 Polycom, Inc. # * ....................................... 137,635 3,210 Sierra Wireless, Inc. # * ............................... 62,050 1,097 ------- 10,804 Computers & Peripherals - 1.0% SBS Technologies, Inc. * ................................ 164,600 2,298 Construction & Engineering - 0.8% Washington Group International, Inc. * .................. 44,310 1,828 Construction Materials - 1.3% Eagle Materials, Inc. # ................................. 35,220 3,041 Containers & Packaging - 0.5% Jarden Corp. # * ........................................ 25,500 1,108 Diversified Financials - 4.5% Affiliated Managers Group, Inc. # * ..................... 56,560 3,831 IndyMac Bancorp, Inc. # ................................. 68,390 $ 2,356 Jackson Hewitt, Inc. # .................................. 157,780 3,984 ------- 10,171 Diversified Telecommunication Services - 1.0% Spectrasite, Inc. * ..................................... 38,450 2,226 Electrical Equipment - 1.5% Fuelcell Energy, Inc. # * ............................... 92,700 918 Techtronic Industries, Ltd. - ADR ....................... 234,940 2,561 ------- 3,479 Food Products - 0.9% Peets Coffee & Tea, Inc. # * ............................ 76,540 2,026 Health Care Equipment & Supplies - 1.4% Foxhollow Technologies, Inc. # * ........................ 1,600 39 Respironics, Inc. * ..................................... 24,235 1,318 Zoll Medical Corp. # * .................................. 54,300 1,868 ------- 3,225 Health Care Providers & Services - 3.2% Advisory Co. # * ........................................ 61,700 2,276 Genesis Healthcare Corp. * .............................. 69,430 2,432 Symbion, Inc. # * ....................................... 118,570 2,618 ------- 7,326 Hotels Restaurants & Leisure - 6.0% La Quinta Corp. - CTF 1 Cl. B # * ....................... 383,240 3,484 Landry's Seafood Restaurants, Inc. # .................... 56,750 1,649 Mikohn Gaming Corp. * ................................... 88,100 900 Rare Hospitality International, Inc. # * ................ 79,650 2,538 Red Robin Gourmet Burgers, Inc. # * ..................... 55,790 2,983 Vail Resorts # * ........................................ 99,150 2,223 ------- 13,777 Household Durables - 4.0% Fleetwood Enterprises, Inc. # * ......................... 143,960 1,938 Helen of Troy, Ltd. # * ................................. 81,820 2,750 Standard Pacific Corp. # ................................ 50,910 3,265 Tempur Pedic International, Inc. # * .................... 51,500 1,092 ------- 9,045 Insurance - 2.6% American Equity Investment Life # ....................... 145,060 1,562 Arch Capital Group, Ltd. * .............................. 40,030 1,549 Healthextras, Inc. # * .................................. 73,890 1,205 Platinum Underwriters Holdings .......................... 54,010 1,680 ------- 5,996 Internet & Catalog Retail - 1.0% Insight Enterprises, Inc. * ............................. 107,530 2,207 Internet Software & Services - 2.2% F5 Networks, Inc. * ..................................... 31,200 1,520 Openwave Systems, Inc. # * .............................. 136,640 2,112 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP EMERGING GROWTH FUND Market Name of Issuer Shares Value -------------- -------- --------- (000's) COMMON STOCK - Continued Internet Software & Services - Continued Opsware, Inc. # * .................................... 200,400 $ 1,471 -------- 5,103 IT Consulting & Services - 0.9% NAVTEQ Corp. # * ..................................... 41,990 1,947 Machinery - 1.3% ESCO Technologies, Inc. # * .......................... 39,080 2,995 Media - 1.5% Lions Gate Entertainment Corp. # * ................... 221,440 2,352 Tivo, Inc. # * ....................................... 174,800 1,026 -------- 3,378 Metals & Mining - 3.3% Arch Coal, Inc. # .................................... 72,510 2,577 Carpenter Technology Corp. # ......................... 42,160 2,465 GrafTech International, Ltd. # * ..................... 261,360 2,472 -------- 7,514 Oil & Gas - 4.0% Cabot Oil & Gas Corp. # .............................. 48,590 2,150 OMI Corp. # .......................................... 57,380 967 Patina Oil & Gas Corp. ............................... 54,020 2,026 Range Resources Corp. # .............................. 87,850 1,797 Whiting Petroleum Corp. * ............................ 69,410 2,100 -------- 9,040 Pharmaceuticals - 4.7% Atherogenics, Inc. # * ............................... 81,510 1,920 Eyetech Pharmaceuticals, Inc. # * .................... 32,400 1,474 Impax Laboratories, Inc. # * ......................... 103,640 1,646 Medicines Co. # * .................................... 94,700 2,727 NPS Pharmaceuticals, Inc. # * ........................ 73,120 1,337 Salix Pharmaceuticals, Ltd. # * ...................... 84,910 1,494 -------- 10,598 Real Estate Operations - 1.8% CB Richard Ellis Group, Inc. - Cl. A * ............... 123,490 4,143 Road & Rail - 5.8% Arkansas Best Corp. .................................. 79,200 3,555 Forward Air Corp. # * ................................ 49,040 2,192 Knight Transportation, Inc. # * ...................... 71,450 1,772 Sirva, Inc. * ........................................ 167,680 3,223 Yellow Roadway Corp. # * ............................. 44,910 2,502 -------- 13,244 Semiconductor Equipment & Products - 5.1% Fairchild Semiconductor Corp. - Cl. A # * ............ 145,120 2,360 MEMC Electronic Materials, Inc. # * .................. 320,800 4,250 Microsemi Corp. # * .................................. 151,950 2,638 Semtech Corp. # * .................................... 109,090 2,386 -------- 11,634 Software - 6.2% Agile Software Corp. * ............................... 259,610 $ 2,121 Salesforce Common, Inc. # * .......................... 148,600 2,517 Take Two Interactive Software # * .................... 114,840 3,995 THQ, Inc. # * ........................................ 149,390 3,427 Verint Systems, Inc. * ............................... 58,950 2,142 -------- 14,202 Specialty Retail - 3.2% AC Moore Arts & Crafts, Inc. # * ..................... 91,620 2,639 Electronics Boutique Holdings Corp. * ................ 10,900 468 Hot Topic, Inc. # * .................................. 85,380 1,468 Men's Wearhouse, Inc. # * ............................ 87,200 2,787 -------- 7,362 Textiles & Apparel - 1.1% Quiksilver, Inc. * ................................... 81,470 2,427 Wireless Telecommunications Services - 5.9% American Tower Corp. - Cl. A * ....................... 398,880 7,339 Crown Castle International Corp. * ................... 371,490 6,182 -------- 13,521 -------- TOTAL COMMON STOCK- (Cost $189,568) 98.1% 223,620 Par Value -------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 25.1% State Street Navigator Securities Lending Portfolio ......................................... $ 57,121 57,121 SHORT-TERM INVESTMENTS - 1.8% Investment in joint trading account 2.29% due 01/03/05 (Cost $4,201) ..................................... 4,201 4,201 -------- -------- TOTAL INVESTMENTS- (Cost $250,890) 125.0% 284,942 Payables, less cash and receivables- (25.0)% (56,941) -------- -------- NET ASSETS- 100.0% $228,001 ======== ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. ADR-American Depository Receipt. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Small Cap Emerging Growth Fund, (formerly John Hancock Small Cap Equity), (the "Fund" or "VST Small Cap Emerging Growth") 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $1,506 1.61% $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 December 31, 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 - -------------------------- ------------------- $55,742 $57,121 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $1,071, $2,042, $26,139, $46,928, $10,248 and $7,993 which expire in 2006, 2007, 2008, 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividend and Interest: 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. 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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $211 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 in expenses of $75. John Hancock has entered into a Sub-Advisory Agreement with Wellington Management Company LLP, which under John Hancock's supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHV LAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $268,720 $159,702 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $252,047 $37,868 $(4,973) $32,895 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $-- $-- $94,421 $32,895 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 - ---- ------------------ ---------------------- ----------------- 2004 $-- $-- $ -- 2003 -- -- 11,543 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE E--COMBINATION On October 15, 2004, the shareholders of the Fund (acquiring fund) approved the combination of the funds in the following table: Acquiring Fund Target Fund -------------- ----------- VST Small Cap Emerging Growth VST Small Cap Growth 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 a taxfree exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets Acquiring Fund Net Assets Appreciation to Combination After Combination - -------------- ----------- ------------ ---------------- -------------------- 17,269 $139,231 $8,409 $71,666 $210,897
NOTE F--OTHER MATTERS (UNAUDITED) 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 a special meeting of Contract owners/Policyholders held on October 15, 2004 on the following matter: For Against Abstain --- ------- ------- To approve, as to the Small Cap Emerging Growth Fund, 92% 3% 5% a proposal to combine with the Small Cap Growth Fund of John Hancock Variable Series Trust I. Shareholders in the Small Cap Growth Fund would receive Small Cap Emerging Growth Fund shares having the same value as their prior Small Cap Growth Fund shares. Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Small Cap Emerging Growth Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Small Cap Emerging Growth Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 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. .. T. Rowe Price Associates, Inc. selects stocks using proprietary fundamental equity research and seeks companies with attractive valuation relative to industry peers and historical norms. .. Wellington Management Company, LLP employs proprietary fundamental research to identify stocks having distinct value characteristics based on industry-specific valuation criteria. Fund Commentary Overall Performance: For the year 2004, the Small Cap Value Trust returned +25.45%, outperforming the +22.26% return of the Russell 2000 Value Index. Wellington Management Company, LLP Environment: In the Russell 2000 Value Index, the Energy and Materials sectors dominated returns for the first three quarters of 2004. Performance was broadly positive across all 10 sectors in the fourth quarter. The peak and subsequent decline in oil prices in late October, as well as the Presidential election, appear to have triggered the sharp year-end rally. The portfolio's strongest sectors relative to the Index were Consumer Discretionary and Health Care, driven by stock selection. The Industrials sector was the largest negative contributor to relative performance, since positive stock performance lagged that of the Index sector. Stock selection was responsible for the relative underperformance of the Information Technology and Consumer Staples sectors. The cash balance, which averaged 2.6% during the year, also detracted in a year of positive returns. Outlook: We would agree with the consensus of strategists who believe that investor returns for the foreseeable future will be more dependent on individual stock selection rather than sector bets. Small cap value stocks are less likely to be up in the straight line fashion that we have seen over the past 18 months, thus providing an opportunity to build larger position sizes near our entry cost and thus focus the portfolio in somewhat fewer names. T. Rowe Price Associates, Inc. Environment: U.S. stock prices climbed higher in 2004. Throughout much of the year, equities struggled to make headway as economic growth moderated amid rising short-term interest rates, surging energy costs and a heated presidential campaign. Late in the year, however, stocks rallied as oil prices retreated from a late-October peak of $55 per barrel. Gains accelerated after the re-election of President Bush. Holdings in nearly every sector of investment generated strong increases, led by Energy. Versus the Index, positions in the Industrials and Business Services and Financials sectors were the main contributors to performance. The portfolio's Consumer Staples and Energy exposures were less favorable. Among Industrial and Business Services companies, stock selection was a source of relative strength, as was an overweight in the group. This sector is strongly leveraged to global economic growth, and many of the world's economies expanded in 2004. In the Financials sector, good stock selection helped drive the Trust's performance. Consumer Staples detracted from relative performance due to stock selection. For example, the fund was overweight a natural foods grocery chain that was weak on news of higher-than-anticipated expenses. An overweight in Energy helped performance, but negative stock selection almost entirely offset this benefit. Outlook: Given that we are near the upper end of historic relative valuation levels for small-cap stocks, we are cautious. We continue to find good risk/reward candidates among small-caps, although they are somewhat harder to come by than in previous years. 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 - -------------------------------------------------------------------------------- [CHART] Line chart Historical Fund Return $10,000 Investment made 8/31/99 (Fund Inception Date) Small Cap Small Cap Value Value Fund Fund Benchmark (1) ---------- ------------------ 8/31/1999 $10,000 $10,000 9/30/1999 9,559 9,685 10/31/1999 9,441 9,695 11/30/1999 9,941 9,748 12/31/1999 10,507 10,080 1/31/2000 9,755 9,661 2/29/2000 9,774 9,828 3/31/2000 11,917 10,552 4/30/2000 12,264 10,547 5/31/2000 12,274 10,528 6/30/2000 12,413 10,488 7/31/2000 12,367 10,716 8/31/2000 13,855 11,277 9/30/2000 13,470 11,210 10/31/2000 13,913 11,203 11/30/2000 12,934 11,061 12/31/2000 14,100 12,176 1/31/2001 14,698 12,512 2/28/2001 14,806 12,494 3/31/2001 14,643 12,294 4/30/2001 16,012 12,864 5/31/2001 16,429 13,194 6/30/2001 16,673 13,725 7/31/2001 16,432 13,417 8/31/2001 15,997 13,370 9/30/2001 14,536 11,894 10/31/2001 15,073 12,205 11/30/2001 15,774 13,082 12/31/2001 16,792 13,883 1/31/2002 17,149 14,067 2/28/2002 17,408 14,153 3/31/2002 18,658 15,213 4/30/2002 19,407 15,749 5/31/2002 18,595 15,227 6/30/2002 18,040 14,891 7/31/2002 15,629 12,678 8/31/2002 15,697 12,622 9/30/2002 14,827 11,721 10/31/2002 15,093 11,897 11/30/2002 15,954 12,846 12/31/2002 15,713 12,298 1/31/2003 15,194 11,951 2/28/2003 14,847 11,549 3/31/2003 15,279 11,673 4/30/2003 16,657 12,782 5/31/2003 17,792 14,087 6/30/2003 18,160 14,325 7/31/2003 18,807 15,040 8/31/2003 19,426 15,611 9/30/2003 19,223 15,432 10/31/2003 20,409 16,689 11/30/2003 21,135 17,330 12/31/2003 21,679 17,958 1/31/2004 22,246 18,579 2/28/2004 22,728 18,940 3/31/2004 23,159 19,201 4/30/2004 22,394 18,208 5/31/2004 22,612 18,429 6/30/2004 23,839 19,365 7/31/2004 23,000 18,474 8/31/2004 23,012 18,655 9/30/2004 24,023 19,394 10/31/2004 24,570 19,695 11/30/2004 26,575 21,443 12/31/2004 27,195 21,954 Value on 12/31/04: - ------------------ $27,195 Small Cap Value Fund $21,954 Small Cap Value Benchmark (1) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of December 31, 2004) % of Investments ----------- United Stationers, Inc. 1.4% O'Reilly Automotive, Inc. 1.4% Belden CDT, Inc. 1.4% AptarGroup, Inc. 1.3% WCI Communities, Inc. 1.2% Genesee & Wyo., Inc. 1.2% Encore Acquisition Co. 1.1% Reinsurance Group of America 1.0% Casey's General Stores, Inc. 1.0% Scottish Annuity & Life 1.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Small Cap Small Cap Value Fund Value Fund Benchmark/1/ ---------- ------------ 1 Year 25.45% 22.26% 3 Years 17.43% 16.51% 5 Years 20.95% 16.84% Since Inception (8/31/99) 20.60% 15.89% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN SECTOR CLASSIFICATIONS (as of December 31, 2004) % of Investments ----------- Financials 24.1% Industrials 23.1% Consumer Discretionary 19.9% Materials 7.6% Energy 6.7% Information Technology 5.2% Utilities 5.1% Health Care 4.4% Consumer Staples 3.9% - -------------------------------------------------------------------------------- * 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. /1/ The Small Cap Value Fund benchmark represents the Russell 2500(TM) Value Index from September 1999 to December 2000 and the Russell 2000(R) Value Index January 2001-present. 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 - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Small Cap Value Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,140.80 Expense paid per $1,000* $ 5.65 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,019.86 Expense paid per $1,000* $ 5.33 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted) ASSETS Long term investments at cost (including $28,720 of securities loaned (Note B)) ........................................................ $176,038 Net unrealized appreciation of investments .......................... 65,503 Short-term investments at value ..................................... 35,064 -------- Total investments ............................................. 276,605 Receivable for: Dividends ........................................................ 408 -------- Total assets ........................................................ 277,013 -------- LIABILITIES Payables for: Investments purchased ............................................ 504 Fund shares purchased ............................................ 224 Collateral for securities on loan ................................ 29,536 Accrued operating expenses ....................................... 82 -------- Total liabilities ................................................... 30,346 -------- Net assets .......................................................... $246,667 ======== Shares outstanding, $0.01 Par Value (unlimited shares authorized).... 12,700 -------- Net asset value per share ........................................... $ 19.42 ======== Composition of net assets: Capital paid-in .................................................. $177,844 Accumulated net realized gain on investments ..................... 3,320 Net unrealized appreciation of investments ....................... 65,503 -------- Net assets .......................................................... $246,667 ======== STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted) INVESTMENT INCOME Interest ......................................................... $ 60 Dividends ........................................................ 4,399 Securities lending ............................................... 52 ------- Total investment income ............................................. 4,511 ------- EXPENSES Investment advisory fee .......................................... 2,001 Auditors fees .................................................... 51 Custodian fees ................................................... 88 Legal fees ....................................................... 31 Printing & mailing fees .......................................... 31 Trustees' fees ................................................... 6 Other fees ....................................................... 8 ------- Total expenses ...................................................... 2,216 Less expenses reimbursed ......................................... (5) Less custodian expense reduction offset by commission recapture arrangement (Note C) ..................... (29) ------- Net expenses ........................................................ 2,182 ------- Net investment income ............................................... 2,329 ------- REALIZED AND UNREALIZED GAIN Net realized gain on investments ................................. 16,658 Change in unrealized appreciation on investments ................. 30,386 ------- Net realized and unrealized gain .................................... 47,044 ------- Net increase in net assets resulting from operations ................ $49,373 ======= See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Small Cap Value Fund (000's Omitted)
Year Ended Year Ended December 31, December 31, 2004 2003 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ..................................... $ 2,329 $ 978 Net realized gain ......................................... 16,658 7,581 Change in net unrealized appreciation ..................... 30,386 39,529 -------- -------- Net increase in net assets resulting from operations ... 49,373 48,088 Distributions to shareholders from: Net investment income ..................................... (1,925) (980) Realized gains ............................................ (13,807) (7,128) -------- -------- Decrease in net assets resulting from distributions .... (15,732) (8,108) From fund share transactions: Proceeds from shares sold ................................. 69,246 59,731 Distributions reinvested .................................. 15,732 8,108 Payment for shares redeemed ............................... (61,725) (38,116) -------- -------- Increase in net assets from fund share transactions .... 23,253 29,723 -------- -------- NET INCREASE IN NET ASSETS ................................... 56,894 69,703 NET ASSETS Beginning of Period ....................................... 189,773 120,070 -------- -------- End of Period (including undistributed net investment income of $0 and $0, respectively) ..................... $246,667 $189,773 ======== ======== Analysis of fund share transactions: Sold ...................................................... 3,891 4,095 Reinvested ................................................ 820 495 Redeemed .................................................. (3,474) (2,697) -------- -------- Net increase in fund shares outstanding ...................... 1,237 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 year end indicated:
Small Cap Value Fund --------------------------------------------------------------------- Year Ended December 31, --------------------------------------------------------------------- 2004 2003 2002(d)(g) 2001(c) 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 .................... 0.19 0.09 0.08 0.09 0.01 Net Realized and Unrealized Gain (Loss) on Investment(a) ......................... 3.99 4.66 (0.96) 2.14 3.37 -------- -------- -------- -------- ------- Total From Investment Operations ......... 4.18 4.75 (0.88) 2.23 3.38 Less Distributions: Distribution from Net Investment Income .. (0.16) (0.09) (0.09) (0.09) (0.01) Distribution from Net Realized Gains on Investments ........................... (1.16) (0.65) (0.11) (0.08) (1.80) Distributions from Capital Paid-In ....... (0.13) -------- -------- -------- -------- ------- Total Distributions ...................... (1.32) (0.74) (0.33) (0.17) (1.81) -------- -------- -------- -------- ------- Net Assets Value at End of Period ........... $ 19.42 $ 16.56 $ 12.55 $ 13.76 $ 11.70 ======== ======== ======== ======== ======= Total Investment Return(b) .................. 25.45% 37.97% (6.43)% 19.10% 34.19% Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ................................ 1.05%(e)(f) 1.05%(e)(f) 1.04%(e) 1.05%(e) 1.05%(e) Ratio of Net Investment Income to Average Net Assets ............................ 1.11% 0.67% 0.62% 0.87% 0.13% Portfolio Turnover Rate .................. 32.61% 29.95% 41.46% 60.36% 220.80% Net Assets End of Period (000s Omitted) ..... $246,667 $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) The Fund entered into a new sub-advisory agreement with T. Rowe Price Associates, Inc. during the period shown. (d) The fund entered into a new sub-advisory agreement with Wellington Management Company during the period shown. (e) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been 1.06%, 1.06%, 1.04%, 1.08%, and 1.29%, for the years ended December 31, 2004, 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) Certain amounts in 2002 have been reclassified to permit comparison. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK Aerospace & Defense - 0.8% Curtiss Wright Corp. - Cl. B ............................ 25,600 $ 1,440 EDO Corp. ............................................... 18,600 591 ------- 2,031 Air Freight & Couriers - 1.2% Hub Group Inc. - Cl. A * ................................ 25,400 1,326 United Technologies Worldwide, Inc. # ................... 23,000 1,565 ------- 2,891 Airlines - 0.8% Airtran Holdings, Inc. # * .............................. 99,800 1,068 Frontier Airlines, Inc. # * ............................. 91,900 1,048 ------- 2,116 Auto Components - 1.2% Keystone Automotive Industries, Inc. * .................. 34,200 795 Modine Manufacturing Co. ................................ 39,800 1,344 Spartan Motors, Inc. .................................... 66,000 788 ------- 2,927 Banks - 5.0% Amcore Financial, Inc. .................................. 29,800 959 Century Bancorp, Inc. - Cl. A ........................... 20,000 590 East West Bancorp, Inc. ................................. 45,900 1,926 First Midwest Bancorp, Inc. ............................. 26,900 976 First Republic Bank # ................................... 41,000 2,173 MB Financial, Inc. ...................................... 500 21 NetBank, Inc. # ......................................... 54,000 562 New Alliance Bancshares, Inc. ........................... 88,700 1,357 Silicon Valley Bancshares # * ........................... 44,900 2,012 Texas Regional Bancshares, Inc. ......................... 52,800 1,726 ------- 12,302 Beverages - 0.2% Coca Cola Bottling Co. .................................. 10,900 622 Biotechnology - 0.2% Diversa Corp. # * ....................................... 53,700 469 Building Products - 1.5% Gibraltar Industries, Inc. # ............................ 52,800 1,247 Insituform Technologies, Inc. - Cl. A * ................. 48,900 1,109 Simpson Manufacturing, Inc. ............................. 37,800 1,319 ------- 3,675 Chemicals - 1.7% Airgas, Inc. ............................................ 48,000 1,273 Arch Chemicals, Inc. .................................... 35,100 1,010 MacDermid, Inc. ......................................... 17,600 635 Material Sciences Corp. * ............................... 45,900 826 Symyx Technologies, Inc. # * ............................ 13,700 412 ------- 4,156 Commercial Services & Supplies - 5.3% Casella Waste Systems, Inc. - Cl. A * ................... 74,700 1,094 Centerplate, Inc. ....................................... 39,100 517 Electro Rent Corp ....................................... 85,000 $ 1,210 G & K Services, Inc. - Cl. A ............................ 31,900 1,385 Healthcare Services Group, Inc. ......................... 51,790 1,079 Icon Public, Ltd. * ..................................... 12,300 475 Landauer, Inc ........................................... 15,900 727 Macquarie Infrastructure Co. # * ........................ 18,000 528 McGrath Rent Corp. ...................................... 36,700 1,601 Nam Tai Electronics # ................................... 27,500 529 United Stationers, Inc. * ............................... 71,200 3,290 Waste Connections, Inc. * ............................... 15,600 534 ------- 12,969 Commingled Fund - 0.5% First Financial Fund, Inc. # ............................ 53,000 1,138 Communications Equipment - 0.8% Black Box Corp. ......................................... 20,600 989 Catapult Communications Corp. * ......................... 39,100 945 ------- 1,934 Computers & Peripherals - 1.0% Electronics for Imaging, Inc. * ......................... 54,200 943 Intergraph Corp. # * .................................... 31,900 859 SBS Technologies, Inc. * ................................ 48,900 683 ------- 2,485 Construction & Engineering - 0.1% Bowne & Co., Inc. # ..................................... 13,800 224 Construction Materials - 0.9% Ameron International Corp. .............................. 22,800 864 Florida Rock Industries, Inc. ........................... 24,000 1,429 ------- 2,293 Containers & Packaging - 1.5% AptarGroup, Inc. ........................................ 58,700 3,098 Myers Industries, Inc. .................................. 49,170 630 ------- 3,728 Diversified Financials - 2.7% Allied Capital Corp. # .................................. 60,600 1,566 American Capital Strategies, Ltd. # ..................... 62,800 2,094 Assured Guaranty, Ltd. .................................. 119,300 2,347 Financial Federal Corp. # * ............................. 14,400 564 ------- 6,571 Electric Utilities - 2.8% Black Hills Corp. # ..................................... 56,300 1,727 Cleco Corp. ............................................. 57,000 1,155 El Paso Electric Co. * .................................. 82,000 1,553 Otter Tail Power Co. # .................................. 20,200 516 PNM Resources, Inc. ..................................... 82,000 2,074 ------- 7,025 Electrical Equipment - 4.2% Acuity Brands, Inc. ..................................... 43,600 1,386 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------- ------- (000's) COMMON STOCK - Continued Electrical Equipment - Continued Belden CDT, Inc. # ...................................... 141,449 $ 3,282 C&D Technologies, Inc. .................................. 36,300 618 Deswell Industries, Inc. # .............................. 60,100 1,486 Franklin Electric Co., Inc. ............................. 26,900 1,137 The Genlyte Corp. * ..................................... 18,200 1,559 Woodward Governor Co. ................................... 12,200 874 ------- 10,342 Electronic Equipment & Instruments - 1.1% Analogic Corp. .......................................... 9,200 412 Exar Corp. * ............................................ 34,200 485 Littelfuse, Inc. * ...................................... 25,400 868 Methode Electronics, Inc. - Cl. A ....................... 31,900 410 Technitrol, Inc. * ...................................... 33,100 602 ------- 2,777 Energy Equipment & Services - 1.4% Atwood Oceanics, Inc. * ................................. 8,800 459 Carbo Ceramics, Inc. .................................... 5,600 387 Lone Star Technologies, Inc. * .......................... 44,000 1,472 Tetra Technologies, Inc. * .............................. 23,500 665 West Hampshire Energy Services, Inc. * .................. 20,500 458 ------- 3,441 Food & Drug Retailing - 1.3% Casey's General Stores, Inc. ............................ 136,300 2,474 Nash Finch Co. # ........................................ 11,700 442 Wild Oats Markets, Inc. # * ............................. 27,400 241 ------- 3,157 Food Products - 0.6% John B Sanfilippo & Son, Inc. * ......................... 31,000 799 Sensient Technologies Corp. # ........................... 27,600 662 ------- 1,461 Gas Utilities - 1.4% Atmos Energy Corp. ...................................... 33,400 914 New Jersey Resources Corp. .............................. 23,700 1,027 NorthWestern Corp. * .................................... 23,600 661 WGL Holdings, Inc. ...................................... 29,000 894 ------- 3,496 Health Care Equipment & Supplies - 1.3% Arrow International, Inc. ............................... 17,400 539 Diagnostic Products Corp. ............................... 26,200 1,442 PolyMedica Corp. ........................................ 34,700 1,294 ------- 3,275 Health Care Providers & Services - 2.8% Amerigroup Corp. * ...................................... 12,500 946 Amsurg Corp. # * ........................................ 45,749 1,351 Capital Senior Living Corp. * ........................... 127,000 719 Corvel Corp. * .......................................... 19,600 525 Maximus, Inc. * ......................................... 51,900 1,615 Owens & Minor, Inc. ..................................... 60,000 $ 1,690 ------- 6,846 Hotels Restaurants & Leisure - 2.5% CEC Entertainment, Inc. * ............................... 19,350 773 Interstate Hotels & Resorts * ........................... 137,500 737 Rare Hospitality International, Inc. * .................. 35,700 1,137 Ruby Tuesday, Inc. ...................................... 87,800 2,290 Sonic Corp. * ........................................... 21,100 644 The Steak and Shake Co. * ............................... 24,400 490 ------- 6,071 Household Durables - 3.9% CSS Industries, Inc. .................................... 31,900 1,013 Mathews International Corp. ............................. 30,300 1,115 Meritage Corp. # * ...................................... 6,800 767 Skyline Corp. ........................................... 25,900 1,057 Stanley Furniture Co., Inc. ............................. 25,000 1,124 WCI Communities, Inc. # * ............................... 98,000 2,881 Yankee Candle, Inc. * ................................... 52,300 1,735 ------- 9,692 Industrial Conglomerates - 0.6% Carlisle Cos., Inc. ..................................... 24,400 1,584 Insurance - 7.8% Delphi Financial Group, Inc. - Cl. A .................... 35,950 1,659 IPC Holdings, Ltd. ...................................... 39,100 1,701 Markel Corp. * .......................................... 2,600 946 Max Re Capital, Ltd. .................................... 68,400 1,459 Platinum Underwriters Holdings .......................... 53,300 1,658 Proassurance Corp. * .................................... 50,000 1,956 Reinsurance Group of America ............................ 52,200 2,529 Scottish Re Group, Ltd. # ............................... 93,200 2,414 The Midland Co. ......................................... 48,300 1,510 Triad Guaranty, Inc. * .................................. 23,600 1,427 Universal American Financial Corp. * .................... 122,400 1,894 ------- 19,153 Internet Software & Services - 0.3% Websense, Inc. * ........................................ 14,700 746 Leisure Equipment & Products - 0.4% SCP Pool Corp. .......................................... 34,200 1,091 Machinery - 4.7% Albany International Corp. - Cl. A ...................... 55,400 1,948 IDEX Corp. .............................................. 35,200 1,426 JLG Industries, Inc. .................................... 74,800 1,468 Kadant, Inc. * .......................................... 63,800 1,308 Nordson Corp. ........................................... 34,000 1,362 Quixote Corp. # ......................................... 48,000 976 Thomas Industries, Inc. ................................. 43,000 1,716 Wolverine Tube, Inc. * .................................. 103,300 1,334 ------- 11,538 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Marine - 0.5% Kirby Corp. * ........................................... 26,400 $ 1,172 Media - 2.1% Advo, Inc. .............................................. 44,200 1,576 Courier Corp. # ......................................... 37,100 1,926 Journal Register Co. * .................................. 50,000 966 Saga Communications, Inc. - Cl. A * ..................... 43,000 725 ------- 5,193 Metals & Mining - 1.8% Aber Diamond Corp. * .................................... 17,400 614 Carpenter Technology Corp. .............................. 40,000 2,338 Meridian Gold, Inc. * ................................... 40,100 761 Mueller Industries, Inc. ................................ 24,400 786 ------- 4,499 Multi-Utilities - 0.7% Vectren Corp. ........................................... 29,000 777 Weststar Energy, Inc. ................................... 39,100 894 ------- 1,671 Multiline Retail - 0.6% Stein Mart, Inc. * ...................................... 83,100 1,418 Oil & Gas - 5.1% Encore Acquisition Co. * ................................ 73,000 2,548 Forest Oil Corp. * ...................................... 50,500 1,602 Magnum Hunter Resources, Inc. * ......................... 99,600 1,285 Penn Virginia Corp. ..................................... 29,000 1,177 Plains Exploration & Production Co. * ................... 75,400 1,960 Todco - Cl. A * ......................................... 88,400 1,628 Vintage Petroleum, Inc. ................................. 57,100 1,296 Whiting Petroleum Corp. # * ............................. 38,100 1,152 ------- 12,648 Paper & Forest Products - 1.5% Chesapeake Corp. ........................................ 18,400 500 Deltic Timber Corp. ..................................... 21,500 913 Potlatch Corp. .......................................... 32,100 1,623 Wausau-Mosinee Paper Corp. .............................. 40,300 720 ------- 3,756 Personal Products - 0.6% NBTY, Inc. * ............................................ 65,800 1,580 Real Estate Investment Trust - 7.7% Acadia Realty Trust ..................................... 55,100 898 Bedford Property Investors, Inc. # ...................... 48,600 1,381 East Group Properties, Inc. ............................. 33,700 1,291 Gables Residential Trust # .............................. 32,300 1,156 Getty Realty Corp. ...................................... 22,200 638 Glenborough Realty Trust, Inc. .......................... 22,800 485 Innkeepers USA Trust .................................... 99,100 1,407 Kilroy Realty Corp. ..................................... 45,800 1,958 LaSalle Hotel Properties * .............................. 48,300 1,537 Maguire Properties, Inc. ................................ 21,900 601 PS Business Parks, Inc. ................................. 18,900 $ 853 RAIT Investment Trust ................................... 26,600 744 Realty Income Corp. # ................................... 25,600 1,295 Strategic Hotel Capital, Inc. ........................... 21,900 361 Sun Communities, Inc. ................................... 30,500 1,228 United Store IT Trust * ................................. 62,900 1,091 Ventas, Inc. ............................................ 30,900 847 Washington Real Estate Investment Trust ................. 39,200 1,328 ------- 19,099 Road & Rail - 3.4% Dollar Thrifty Automotive Group, Inc. * ................. 29,300 885 Genesee & Wyo., Inc. - Cl. A * .......................... 99,750 2,806 Landstar Systems, Inc. * ................................ 24,400 1,797 Overnite Corp. .......................................... 45,400 1,690 USF Corp. ............................................... 29,400 1,116 ------- 8,294 Semiconductor Equipment & Products - 1.3% Helix Technology Corp. # ................................ 44,000 765 MPS Group, Inc. * ....................................... 94,800 1,162 Mykrolis Corp. * ........................................ 52,000 737 Pericom Semiconductor Corp. * ........................... 50,400 476 ------- 3,140 Software - 0.6% Progress Software Corp. * ............................... 36,200 845 SPSS, Inc. * ............................................ 38,200 598 ------- 1,443 Specialty Retail - 7.8% Aaron Rents, Inc. - Cl. B ............................... 76,000 1,900 Building Materials Holdings Corp. - Sr. Notes # ......... 58,600 2,244 Cato Corp. - Cl. A ...................................... 63,000 1,816 Gildan Activewear, Inc. - Cl. A ......................... 53,100 1,805 Hancock Fabrics, Inc. # ................................. 50,000 518 Haverty Furniture Co., Inc. ............................. 70,600 1,306 Hibbett Sporting Goods, Inc. * .......................... 87,100 2,318 O'Reilly Automotive, Inc. # * ........................... 72,900 3,284 Shoe Carnival, Inc. # * ................................. 57,500 747 Stage Stores, Inc. * .................................... 40,800 1,694 TBC Corp. * ............................................. 56,500 1,571 ------- 19,203 Textiles & Apparel - 0.5% Culp, Inc. * ............................................ 32,900 223 Cutter & Buck, Inc. ..................................... 62,000 903 ------- 1,126 Tobacco - 1.2% Standard Commercial Corp. # ............................. 50,000 973 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE FUND Market Name of Issuer Shares Value -------------- ------ --------- (000's) COMMON STOCK - Continued Tobacco - Continued Universal Corp. .................................... 43,900 $ 2,100 -------- 3,073 -------- TOTAL COMMON STOCK- (Cost $176,038) 97.9% 241,541 Par Value ------- (000's) INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED SECURITIES - 12.0% State Street Navigator Securities Lending Portfolio ... 29,536 29,536 SHORT-TERM INVESTMENTS - 2.2% Investment in joint trading account 2.29% due 01/03/05 (Cost $5,528) ...................................... 5,528 5,528 ------ -------- TOTAL INVESTMENTS- (Cost $211,102) 112.1% 276,605 Payables, less cash and receivables- (12.1)% (29,938) ------ -------- NET ASSETS- 100.0% $246,667 ====== ======== * Non-income producing security. # At December 31, 2004 all or portion of this security was out on loan. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- NOTE A--ORGANIZATION John Hancock Small 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 $90 and $10 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2004 as follows: NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - --------------------------- ---------------- ---------------- $1,259 1.67% $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 December 31, 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 - -------------------------- ------------------- $28,720 $29,536 Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 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, 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, 2004, 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued In addition, from the period November 1, 2004 through December 31, 2004, the Fund incurred no net realized capital losses. Dividend and Interest: 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. 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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $5 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 in expenses of $29. John Hancock has entered into Sub-Advisory Agreements with T. Rowe Price Associates, Inc. and Wellington Management Company, LLP, each of which under John Hancock's supervision, are responsible for a portion of the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $77,326 $67,497 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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, commercial paper and collateral for securities lending) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $211,004 $67,272 $(1,671) $65,601 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $518 $2,704 $-- $65,601 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 - ---- ------------------ ---------------------- ----------------- 2004 $5,004 $10,728 $-- 2003 2,961 5,147 -- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Small Cap Value Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Small Cap Value Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 Inception: May 1, 2003 - -------------------------------------------------------------------------------- Total Return Bond Fund Pacific Investment Management Company LLC William H. Gross - -------------------------------------------------------------------------------- .. 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. Fund Commentary Performance: For the year 2004, the Total Return Fund returned +4.91%, outperforming the +4.34% return of the Lehman Brothers Aggregate Bond Index. Environment: For the year, bonds displayed unexpected growth, as all fixed income sectors showed gains. The yield on the 10-year Treasury note fell by 0.03 percentage points, to 4.22% at year end. The Lehman Brothers Aggregate Bond Index, a widely used index for the high-grade bond market, returned 4.34% for the year despite several major headwinds. These included expanding U.S. fiscal deficits, a falling U.S. dollar and market perceptions as the year began that interest rates were bound to rise from levels near historic lows. Besides these headwinds, fixed income markets had to weather a tightening cycle by the Federal Reserve that began in June. The central bank raised the federal funds rate five times during the year for a total of 1.25 percentage points. The latest move came on December 14, when the Fed hiked rates by one-quarter percentage point to 2.25%. Despite this tightening cycle, bond investors were encouraged by statements from the Fed that it would continue to move at a measured pace. Investors also understood that rates were lifted from unusually low levels. Outlook: Global growth should slow this year as the U.S. recovery cools and Europe and Japan prove unable to pick up the slack. Higher unit labor costs and a weaker dollar should create inflationary pressure, but lingering overcapacity worldwide may limit this effect over a cyclical time frame. The yield on the benchmark 10-year Treasury should range between 4 and 4.5%, with the risk of a 0.25 percentage point breakout on the high side. We should remain defensive and look for value in an environment where interest rates are low and core bond sectors have continued to strengthen. Tactical flexibility will be critical in this setting, such as shifting between U.S. and non-U.S. bonds or between market sub-sectors within the U.S. [CHART] Line chart Historical Fund Return $10,000 Investment made 4/30/03 (Fund Inception Date) Total Return Lehman Brothers Bond Aggregate Bond Index ------------ -------------------- Apr-03 $10,000 $10,000 May-03 10,200 10,186 Jun-03 10,165 10,166 Jul-03 9,823 9,824 Aug-03 9,898 9,889 Sep-03 10,161 10,151 Oct-03 10,084 10,057 Nov-03 10,102 10,081 Dec-03 10,199 10,184 Jan-04 10,266 10,265 Feb-04 10,369 10,376 Mar-04 10,466 10,454 Apr-04 10,219 10,182 May-04 10,187 10,141 Jun-04 10,222 10,199 Jul-04 10,321 10,300 Aug-04 10,500 10,497 Sep-04 10,513 10,525 Oct-04 10,589 10,613 Nov-04 10,587 10,528 Dec-04 10,699 10,625 Value on 12/31/04: - ------------------ $10,699 Total Return Bond $10,625 Lehman Brothers Aggregate Bond Index - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (as of June 30, 2004) % of Investments ----------- U.S. Treasury 17.8% Federal Home Loan Mortgage Corp. 15.0% Government National Mortgage Assoc. 10.1% Bear Steams 8.9% CWMBS, Inc. 7.6% Federal National Mortgage Assoc. 6.2% Bank America Funding Corp. 2.8% Small Business Administration 2.8% Credit Suisse First Boston 1.8% NAAC Reperforming Loan Remic Trust 1.6% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* Lehman Brothers Total Return Aggregate Bond Fund Bond Index ------------ --------------- 1 Year 4.91% 4.34% Since Inception (5/1/03) 4.12% 3.71% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND COMPOSITION (as of December 31, 2004) % of Credit Quality Assets - -------------- ------ Government 47.53% AAA 32.26% AA 8.40% A 1.09% BBB 8.68% BB 1.94% B 0.76% Not rated -0.65% Weighted Average Yield 4.17% - -------------------------------------------------------------------------------- * Total returns are for the period ended December 31, 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. Inception: May 1, 2003 - -------------------------------------------------------------------------------- Total Return Bond Fund Pacific Investment Management Company LLC William H. Gross - -------------------------------------------------------------------------------- UNDERSTANDING YOUR FUND'S EXPENSES As a Total Return Bond Fund shareholder, you pay ongoing expenses, such as management fees; distribution fees (12b-1); and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Actual Expenses The first line of the table for each Fund shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be at the close of the period, assuming actual fund returns and expenses. To estimate the expenses that you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the "Expenses Paid During Period" column as shown below for your Series. Hypothetical Example for Comparison Purposes The second line of the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Actual Fund Returns - ------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,046.70 Expense paid per $1,000* $ 4.25 Hypothetical 5% Fund Returns - ---------------------------- Beginning account value 7/1/2004 $1,000.00 Ending account value 12/31/2004 $1,020.99 Expense paid per $1,000* $ 4.19 * Expenses are equal to the Fund's annualized expense ratio for each Series, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted) ASSETS Long term investments at cost ....................................... $51,453 Net unrealized appreciation of investments .......................... 389 Short-term investments at value ..................................... 6,976 ------- Total investments ................................................ 58,818 Cash ................................................................ 193 Foreign currency at value (cost $10) ................................ 10 Receivable for: Investments sold ................................................. 4,323 Fund shares sold ................................................. 3 Interest ......................................................... 408 Unrealized appreciation in forward currency contracts ............ 49 Net receivable for swap contracts ................................ 21 ------- Total assets ........................................................ 63,825 ------- LIABILITIES Payables for: Investments purchased ............................................ 4,798 Accrued operating expenses ....................................... 2 Unrealized depreciation in forward currency contracts ............ 12 ------- Total liabilities ................................................... 4,812 ------- Net assets .......................................................... $59,013 ======= Shares outstanding, $0.01 Par Value (unlimited shares authorized) ...................................................... 5,816 ------- Net asset value per share ........................................... $ 10.15 ======= Composition of net assets: Capital paid-in .................................................. $58,414 Accumulated net realized gain on investments, swaps, options and foreign currency transactions ............................. 202 Distributions in excess of net investment income ................. (50) Net unrealized appreciation of: Investments ................................................... 389 Swap contracts ................................................ 21 Translation of assets and liabilities in foreign currencies ................................................. 37 ------- Net assets .......................................................... $59,013 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2004 - -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted) INVESTMENT INCOME Interest .......................................................... $1,633 EXPENSES Investment advisory fee ........................................... 356 Auditors fees ..................................................... 5 Custodian fees .................................................... 37 Legal fees ........................................................ 6 Printing & mailing fees ........................................... 7 Trustees'fees ..................................................... 1 Other fees ........................................................ 1 ------ Total expenses ....................................................... 413 Less expenses reimbursed .......................................... (9) ------ Net expenses ......................................................... 404 ------ Net investment income ................................................ 1,229 ------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments and swaps .......................................... 1,320 Foreign currency transactions .................................. (450) Options ........................................................ 77 Change in unrealized appreciation (depreciation) on: Investments .................................................... 136 Written options ................................................ (3) Swap contracts ................................................. 52 Translation of assets and liabilities in foreign currencies .... 113 ------ Net realized and unrealized gain ..................................... 1,245 ------ Net increase in net assets resulting from operations ................. $2,474 ====== See notes to financial statements. STATEMENTS OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I - -------------------------------------------------------------------------------- Total Return Bond Fund (000's Omitted)
Period from Year Ended May 1, 2003 (*) December 31, to December 31, 2004 2003 ------------ --------------- INCREASE (DECREASE) IN NET ASSETS From operations Net investment income ............................................... $ 1,229 $ 404 Net realized gain ................................................... 947 142 Change in net unrealized appreciation ............................... 298 149 ------- ------- Net increase in net assets resulting from operations ............. 2,474 695 Distributions to shareholders from: Net investment income ............................................... (1,287) (400) Realized gains ...................................................... (710) (173) ------- ------- Decrease in net assets resulting from distributions .............. (1,997) (573) From fund share transactions: Proceeds from shares sold ........................................... 24,087 43,263 Distributions reinvested ............................................ 1,997 573 Payment for shares redeemed ......................................... (9,554) (1,952) ------- ------- Increase in net assets from fund share transactions .............. 16,530 41,884 ------- ------- NET INCREASE IN NET ASSETS ............................................. 17,007 42,006 NET ASSETS Beginning of Period ................................................. 42,006 ------- ------- End of Period (including distributions in excess of net investment income of ($50) and undistributed net investment income of $4, respectively) ...................................... $59,013 $42,006 ======= ======= Analysis of fund share transactions: Sold ................................................................ 2,374 4,324 Reinvested .......................................................... 197 57 Redeemed ............................................................ (941) (195) ------- ------- Net increase in fund shares outstanding ................................ 1,630 4,186 ======= =======
* Commencement 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 year end indicated:
Total Return Bond Fund ----------------------------------------- Period from May 1, to Year Ended December 31, December 31, 2004 2003(e) ----------------- --------------------- Net Assets Value at Beginning of Period ......................... $ 10.04 $ 10.00 Income from Investment Operations: Net Investment Income ........................................ 0.24 0.12 Net Realized and Unrealized Gain (Loss) on Investment(a) ..... 0.24 0.08 ------- ------- Total From Investment Operations ............................. 0.48 0.20 Less Distributions: Distribution from Net Investment Income ...................... (0.24) (0.12) Distribution from Net Realized Gains on Investments .......... (0.13) (0.04) ------- ------- Total Distributions .......................................... (0.37) (0.16) ------- ------- Net Assets Value at End of Period ............................... $ 10.15 $ 10.04 ======= ======= Total Investment Return(b) ...................................... 4.91% 1.99%(c) Ratios/Supplemental Data: Ratio of Operating Expense to Average Net Assets ............. 0.80%(f) 0.77%(d) Ratio of Net Investment Income to Average Net Assets ......... 2.42% 1.89%(d) Portfolio Turnover Rate ...................................... 844.90% 537.79%(c) Net Assets End of Period (000s Omitted) ......................... $59,013 $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 .81% for the year ended December 31, 2004. SCHEDULE OF INVESTMENTS (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND ** Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS Auto Loan - 1.5% Capital Auto Receivables Asset - Notes Cl. A 1B 1.0% due 01/16/06 - AAA .............................. $ 96 $ 95 Ford Motor Credit Co. - Bonds 7.75% due 03/15/05 - BBB- ............................ 90 91 General Motors Acceptance Corp. 1.995% due 05/18/06 - BBB- ........................... 700 697 ------ 883 Banks - 1.9% Banc America Mortgage Securities, Inc. - Ser. 2004-2 Cl. 5A1 6.5% due 10/25/19 - AAA .............................. 191 193 Credit Suisse First Boston - CTF Cl. 2A1 4.671% due 09/25/34 - AAA ............................ 930 929 ------ 1,122 Credit Card - 0.3% Sears Credit Account Master Trust II -Ser. 2002-5 Cl. A 2.78% due 11/17/09 - AAA ............................. 200 200 Diversified Financials - 0.4% CIT Group, Inc. - Sr. Notes 7.75% due 04/02/12 - A ............................... 200 237 Diversified Telecommunication Services - 1.9% AT&T Broadband Corp. - Notes 8.375% due 03/15/13 - BBB ............................ 200 247 AT&T Corp. - Sr. Notes 7.8% due 11/15/11 - BB+ .............................. 150 173 BellSouth Corp. - Notes 6.0% due 10/15/11 - A ................................ 150 163 France Telecom 7.5% due 03/14/08 - BBB+ ............................. 200 303 France Telecom SA - Notes 9.75% due 03/01/11 - BBB+ ............................ 200 238 ------ 1,124 Electric/Gas - 0.7% Dominion Resources, Inc. - Notes 5.7% due 09/17/12 - BBB+ ............................. 150 159 Pacific Gas & Electric Co. - Bonds 1.81% due 04/03/06 - BBB ............................. 137 137 PSEG Power LLC - Sr. Notes 6.95% due 06/01/12 - BBB ............................. 100 113 ------ 409 Finance - 5.8% AIG SunAmerica Institutional Funding 1.2% due 01/26/05 - AAA .............................. 45,000 438 Bank America Funding Corp. - Ser. 2004- A Cl. 1A3 5.08% due 09/20/34 - AAA ............................. 1,475 1,469 Deutsche Telekom International Finance 6.375% due 07/11/06 - BBB+ ........................... $ 400 $ 570 Tobacco Settlement Financing Corp. - Ser. A 6.25% due 06/01/42 - BBB ............................. 500 466 Tobacco Settlement Revenue Management - Ser. B 6.375% due 05/15/28 - BBB ............................ 200 195 UFJ Finance Aruba - GTD Notes 6.75% due 07/15/13 - BBB ............................. 50 56 Verizon Global Funding Corp. - Notes 7.25% due 12/01/10 - A+ .............................. 200 229 ------ 3,423 Food Products - 0.2% Kraft Foods, Inc. - Notes 6.25% due 06/01/12 - BBB+ ............................ 100 110 Foreign Government - 4.0% Federal Republic of Germany 4.5% due 01/04/13 - AAA 5.0% due 07/04/12 - AAA .............................. 300 448 Republic of Brazil 3.063% due 04/15/09 - BB- ............................ 26 26 8.0% due 04/15/14 - BB- .............................. 279 285 Republic of Brazil - Ser. L 3.063% due 04/15/06 - BB- ............................ 128 129 Republic of Panama 9.625% due 02/08/11 - BB ............................. 350 414 Republic of Peru - Bonds 9.125% due 02/21/12 - BB ............................. 225 262 Russian Federation 8.75% due 07/24/05 - BB+ ............................. 50 51 United Mexican States 1.84% due 01/13/09 - BBB- ............................ 500 507 6.375% due 01/16/13 - BBB- ........................... 230 245 ------ 2,367 Hotels Restaurants & Leisure - 0.3% MGM Mirage, Inc. - Ser. B 6.0% due 10/01/09 - BB+ .............................. 200 206 Media - 0.6% Time Warner, Inc. - Notes 6.875% due 05/01/12 - BBB+ ........................... 300 342 Municipal - 2.3% De Kalb County Georgia Water & Sewage - Ser. A 5.0% due 10/01/35 - AA ............................... 200 206 Harris County Texas 5.0% due 08/15/33 - AAA .............................. 100 102 Massachusetts Saint - Ser. C 5.5% due 11/01/10 - AAA .............................. 500 565 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Municipal - Continued University of Texas Permanent University Fund - Ser. B 4.75% due 07/01/30 - AAA ............................. $ 500 $ 500 ------- 1,373 Other Asset Backed - 5.2% Argent Securities, Inc. - Ser. 2004 W11 Cl. A2 2.60% due 11/25/34 - AAA ............................. 186 186 Bear Stearns Asset Backed Securities - Ser. 2004-HE9 Cl. 1A1 1.0% due 03/25/23 - AAA .............................. 81 81 CWABS, Inc. - Bonds Ser. 2004 6 Cl. 2 A1 2.60% due 10/25/21 - AAA ............................. 155 155 CWABS, Inc. - CTF Cl. A 1 FLTG 2.15% due 01/25/35 - AAA ............................. 97 97 Homestar Mortgage Acceptance Corp. - Ser. 2004-4 Cl. A1 1.79% due 01/25/22 - AAA ............................. 259 259 Household Mortgage Loan Trust - Notes Ser. 2003 HC1 Cl. A 2.76% due 02/20/33 - AAA ............................. 144 144 Indymac ABS, Inc. - Ser 2004 A Cl. A2 2.341% due 07/25/34 - AAA ............................ 287 287 Long Beach Mortgage Loan Trust - Ser. 2004-A Cl. A 2.083% due 02/25/24 - AAA ............................ 150 150 Morgan Stanley ABS Capital - Ser. 2004 HE9 Cl. A 3A 2.358% due 10/25/34 - AAA ............................ 296 296 Morgan Stanley ABS Capital, Inc. - Ser. 2004 HE1 Cl. A3 2.341% due 01/25/34 - AAA ............................ 60 60 NAAC Reperforming Loan Remic Trust - Ser. 2004-R1 Cl. A2 144A (a) 7.5% due 03/25/34 - AAA .............................. 755 809 Residential Asset Funding and Mortgage Securities Corp. - Ser. 2001 KS3 Cl. A II 1.33% due 09/25/31 - AAA ............................. 75 75 Residential Asset Securities Corp. - Ser. 2004 KS6 Cl. AII B1 1.22% due 04/25/13 - AAA ............................. 157 158 Structured Asset Investment Loan Trust - Ser. 2004-2 Cl. 3 A1 2.53% due 03/25/34 - NA .............................. 99 99 Wells Fargo Home Equity - Ser. 2004 2 Cl. A1 1A 2.59% due 02/25/18 - AAA ............................. 186 186 ------- 3,042 Paper & Forest Products - 0.1% Weyerhaeuser Co. - Notes 6.125% due 03/15/07 - BBB ............................ 33 35 U.S. Government Agencies - 29.7% Federal Home Loan Mortgage Corp. - Bonds 3.972% due 06/01/34 - AAA ............................ $1,464 $ 1,438 5.5% due 06/01/24 - AAA .............................. 1,906 1,950 6.0% due 10/15/32 - AAA .............................. 401 407 Federal Home Loan Mortgage Corp. - Bonds Ser. 2849 Cl. PZ 5.0% due 07/15/33 - AAA .............................. 813 705 Federal Home Loan Mortgage Corp. - Bonds Ser. 2906 Cl. GZ 5.0% due 09/15/34 - AAA .............................. 300 273 Federal Home Loan Mortgage Corp. - Cl. ZA 6.5% due 09/15/31 - AAA .............................. 1,228 1,330 Federal Home Loan Mortgage Corp. - Ser. 2489 Cl. PE 6.0% due 08/15/32 - AAA .............................. 1,600 1,663 Federal National Mortgage Assoc. - Bonds Ser. 2004-11 Cl. 1A 1.22% due 03/25/34 - AAA ............................. 358 356 Federal National Mortgage Assoc. - Bonds Ser. 2004-W2 Cl. 1A2F 1.44% due 02/25/44 - AAA ............................. 771 769 Federal National Mortgage Assoc. - Ser. 2004-T1 1A1 6.0% due 01/25/44 - AAA .............................. 753 774 Federal National Mortgage Assoc. - Ser. 2003-116 Cl. FA 2.58% due 11/25/33 - AAA ............................. 1,116 1,122 Government National Mortgage Assoc. - Bonds 5.0% due 05/15/33 - AAA .............................. 5,244 5,254 Small Business Administration - Ser. 2004 10A 4.504% due 02/10/14 - NA ............................. 1,274 1,264 Small Business Administration - Ser. 2004 20K 4.88% due 11/01/24 - AAA ............................. 200 201 ------- 17,506 U.S. Government - 15.6% U.S. Treasury - Bonds 7.875% due 02/15/21 - AAA ............................ 100 135 U.S. Treasury - Notes 0.875% due 04/15/10 - AAA ............................ 1,604 1,588 2.0% due 01/15/14 - AAA .............................. 1,756 1,818 2.0% due 07/15/14 - AAA .............................. 405 418 3.0% due 07/15/12 - AAA .............................. 531 592 4.25% due 01/15/10 - AAA ............................. 1,021 1,184 4.375% due 08/15/12 - AAA ............................ 600 614 4.875% due 02/15/12 - AAA ............................ 2,700 2,854 ------- 9,203 SCHEDULE OF INVESTMENTS--Continued (AUDITED) JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- TOTAL RETURN BOND FUND Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) PUBLICLY-TRADED BONDS - Continued Whole Loan CMOs - 17.0% Ameriquest Mortgage Securities, Inc. - Ser. 2004-X2 Cl. A 144A (a) 2.98% due 06/25/34 - AAA ............................. $ 142 $ 142 Bear Stearns ARM Trust - Ser. 2004-3 Cl. IA 2 3.996% due 07/25/34 - AAA ............................ 855 849 Bear Stearns ARM Trust - Ser. 2004-6 CTF Cl. I A1 4.70% due 09/25/34 - AAA ............................. 1,589 1,600 Bear Stearns ARM Trust - Ser. 2004-7 Cl. 1A1 5.036% due 10/25/34 - AAA ............................ 1,342 1,362 Bear Stearns Trust - Ser. 2004-9 Cl. II A1 5.518% due 08/25/34 - AAA ............................ 715 727 CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1 6.25% due 12/25/33 - AAA ............................. 378 388 CWMBS, Inc. - Ser. 2003-R4 Cl. 1A3 144A (a) 6.0% due 11/25/26 - AAA .............................. 2,000 2,062 CWMBS, Inc. - Ser. 2003-R4 Cl. 2A 144A (a) 6.5% due 01/25/34 - AAA .............................. 623 646 CWMBS, Inc. - Ser. 2004 12 Cl. 11A2 4.431% due 08/25/34 - AAA ............................ 841 849 GS Mortgage Securities Corp. - Ser. 2003-1 Cl. A2 3.12% due 01/25/32 - AAA ............................. 174 175 Mellon Residential Funding Corp. - Ser. 2000 TBC2 Cl. A1 1.34% due 06/15/30 - AAA ............................. 105 105 Residential Asset Mortgage Products - Ser. 2004-RS9 Cl. AII1 2.0% due 09/25/13 - AAA .............................. 280 280 Residential Funding -Ser. 2004-S2 Cl. A1 5.25% due 03/25/34 - AAA ............................. 419 419 Structured Asset Securities - Ser. 2004 Cl. A1 1.97% due 12/25/33 - AAA ............................. 70 70 Structured Asset Securities Corp. - Ser. 2003 NP3 Cl. A1 144A (a) 1.6% due 11/25/33 - AAA .............................. 100 100 WAMU - CTF Cl. A 1.0% due 02/27/34 - NA ............................... 266 266 ------- 10,040 ------- TOTAL PUBLICLY-TRADED BONDS- (Cost $51,233) 87.5% 51,622 Shares ------ PREFERRED STOCK U.S. Government Agencies - 0.4% Federal National Mortgage Assoc. ........................ 4,400 220 ------- TOTAL PREFERRED STOCK- (Cost $220) 0.4% 220 Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) COMMERCIAL PAPER Auto Loan - 0.8% Ford Motor Credit Co. 2.52% due 04/08/05 ................................... $ 500 $ 497 Banks - 1.2% ASB Bank, Ltd. 2.04% due 02/14/05 ................................... 700 698 Finance - 6.4% ANZ Delaware, Inc. 2.42% due 03/16/05 ................................... 600 597 BP Amoco Capital plc 2.10% due 01/03/05 ................................... 600 600 Dexia Delaware 2.01% due 01/21/05 ................................... 600 599 HBOS Treasury Services plc 2.07% due 02/22/05 ................................... 900 897 UBS Finance Delaware LLC 2.03% due 02/22/05 ................................... 200 199 2.07% due 02/28/05 ................................... 400 399 2.41% due 03/15/05 ................................... 500 498 ------- 3,789 U.S. Government Agencies - 1.0% Federal Home Loan Mortgage Corp. - Disc. Notes 2.38% due 03/31/05 ................................... 99 99 Federal National Mortgage Assoc. - Disc. Notes 2.36% due 03/09/05 ................................... 100 100 2.44% due 03/23/05 ................................... 398 398 ------- 597 ------- TOTAL COMMERCIAL PAPER - (Cost $5,581) 9.4% 5,581 SHORT-TERM INVESTMENTS - 2.4% US Treasury - Bills 2.212% due 03/03/05 (Cost $1,395)......................................... 1,395 1,395 ------ ------- TOTAL INVESTMENTS - (Cost $58,429) 99.7% 58,818 Cash and Receivables, less payables- 0.3% 195 ------ ------- NET ASSETS- 100.0% $59,013 ====== ======= See notes to financial statements. (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 December 31, 2004, securities aggregated $3,759 or 6.4% of net assets of the Portfolio. ** Bond ratings are unaudited. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 twenty-three different funds as of December 31, 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, Exchange Traded Funds ("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 certain foreign securities may occur between the times at which the local exchanges on which the foreign securities are listed close 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 may 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 ETF's in a particular foreign market. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 December 31, 2004 are as follows: Name of Issuer Market Value - -------------- ------------ Chevron Texaco Funding Corp., 2.25%, due 01/05/05 $ 29,996 Citicorp., 2.18%, due 01/05/05 29,996 Danske Corp., 2.34%, due 01/04/05 29,998 Falcon Asset Securitization, 2.28%, due 01/04/05 29,998 HSBC Finance Corp., 2.1%, due 01/05/05 29,997 Mortgage Int Network, 2.33%, due 01/03/05 20,000 National Australia Funding Corp., 2.29%, due 01/05/05 29,996 Old Line Funding Corp., 2.33%, due 01/05/05 29,996 Preferred Receivables Funding Corp., 2.34%, due 01/04/05 29,998 Prudential Funding LLC, 2.18%, due 01/05/05 29,997 Rabobank USA Financial Corp., 2.17%, due 01/03/05 12,089 Societe Generale North, 2.32%, due 01/05/05 29,996 State Street Boston Corp., 2.23%, due 01/05/05 29,996 -------- Joint Trading Account Totals $362,053 ======== 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 December 31, 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 $90 and $10 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 year ended December 31, 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 December 31, 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 December 31, 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Principal Amount Unrealized Covered by Contract Expiration Month Gain (Loss) ------------------- ---------------- ----------- Currency Purchased - ------------------ Brazilian Real 21 March 05 $ 1 Chilean Peso 31 February 05 2 Chilean Peso 21 March 05 1 Euro 393 January 05 5 Pound Sterling 86 January 05 -- Hong Kong Dollar 10 January 05 -- Indian Rupee 31 March 05 -- Japanese Yen 1,073 January 05 35 South Korean Won 10 January 05 1 South Korean Won 22 March 05 1 Mexican Peso 20 March 05 -- Peruvian Nouveau 21 March 05 -- Polish Zloty 7 February 05 -- Polish Zloty 8 March 05 1 New Russian Ruble 22 March 05 -- Singapore Dollar 10 January 05 -- Singapore Dollar 22 March 05 1 New Taiwan Dollar 21 March 05 1 ---- $ 49 ==== Currency Sold - ------------- Euro 1,408 January 05 $(12) Japanese Yen 401 January 05 -- Swedish Krona 138 January 05 -- ----- $(12) ===== 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. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued 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 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 December 31, 2004, the Fund had no written options. 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 realized gain or loss 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 year ended December 31, 2004 are summarized as follows:
Net Unrealized Appreciation Par Value Interest Rate Swaps: Counter Party (Depreciation) - --------- -------------------- ------------- -------------- 3,200 To make or receive semi-annual pay- Morgan Stanley $(32) ments through 6/15/2010 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months.
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Net Unrealized Appreciation Par Value Interest Rate Swaps: Counter Party (Depreciation) - --------- -------------------- ------------- -------------- 400 To make or receive semi-annual pay- Bank of $ (4) ments through 6/15/2010 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. 1,400 To make or receive semi-annual pay- Barclays (14) ments through 6/15/2010 based on the difference between (A) the fixed rate of 4.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 500 To make or receive semi-annual pay- JP Morgan 9 ments through 6/15/2015 based on the difference between (A) the fixed rate of 5.00% and (B) floating rate of 6 Month LIBOR, adjusted every 3 months. 900 To make or receive semi-annual pay- RBS (86) ments through 6/15/2025 based on the Greenwich difference between (A) the fixed rate Capital of 6.00% and (B) floating rate of 6 Month LIBOR, adjusted every 6 months. 9,800 To make or receive semi-annual pay- Barclays (45) ments through 6/15/2006 based on the difference between (A) the fixed rate of 3.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 15,000 To make or receive semi-annual pay- Goldman Sachs (69) ments through 6/15/2006 based on the difference between (A) the fixed rate of 3.00% and (B) floating rate of 3 Month LIBOR, adjusted every 3 months. 1,900 To make or receive semi-annual pay- UBS 61 (GBP) ments through 3/15/2032 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 December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued
Net Unrealized Appreciation Par Value Interest Rate Swaps: Counter Party (Depreciation) - --------- -------------------- ------------- -------------- 2,400 To make or receive semi-annual pay- JP Morgan $ 220 (EURO) ments through 3/15/2032 based on the difference between (A) the fixed rate of 6.00% and (B) floating rate of 6 Month EURIBOR, adjusted every 6 months. 28,000 To make or receive semi-annual pay- Barclays (19) (SEK) ments through 6/17/2008 based on the difference between (A) the fixed rate of 4.5% and (B) floating rate of 3 Month STIBOR, adjusted every 3 months.
Net Unrealized Appreciation Par Value Credit Default Swaps: Counter Party (Depreciation) - --------- --------------------- -------------- -------------- 300 To make annual fixed coupon payments Morgan Stanley -- through 5/24/2005 based on the annual fixed rate of 0.70%. 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. 200 To make annual fixed coupon payments Merrill Lynch -- 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. --- $21 ===
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, 2004, 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, 2004 through December 31, 2004, the Fund incurred approximately $301 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, 2005. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2004 - -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Dividend and Interest: 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. 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. Restricted Securities: Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such sales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market, or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Trustees. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 5, 2003, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $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 year ended December 31, 2004, the reimbursements paid from John Hancock and JHVLICO were $9 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Pacific Investment Management Company, LLC, with respect to the Fund. Pacific Investment Management Company, LLC, is an affiliate of John Hancock, which under John Hancock's 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 December 31, 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 year ended December 31, 2004 were as follows: Purchases Sales and Maturities - --------- -------------------- $ 376,276 $350,547 As of December 31, 2004, transactions for written options were as follows: Contracts Premium ($) --------- ----------- Beginning of period 4,000 35 Options opened 5,900 42 Options closed/expired (9,900) (77) ------ --- End of period -- -- 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, 2004 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation - ---------- ------------ ------------ -------------- $58,434 $1,494 $(1,110) $384 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 based on the Fund's income and capital gains computed on a tax basis, which may differ from income and capital gains recognized according to generally accepted accounting principles. These differences primarily relate to certain securities sold at a loss. Therefore, the source of each Fund's distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income or net realized gain on capital transactions, or from capital. The Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund to present the Fund's capital accounts on a tax basis. At December 31, 2004, 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 - ------------- ------------- ------------- -------------- $509 $-- $-- $391 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 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 - ---- ------------------ ---------------------- ----------------- 2004 $1,997 $-- $-- 2003 573 $-- $-- NOTE E--OTHER MATTERS (UNAUDITED) Fund Mergers: On December 15, 2004, the Board of Trustees approved the reorganization of the Funds of John Hancock Variable Series Trust I into the Funds of Manufacturers Investment Trust. Completion of the merger is subject to approval by the shareholders of the Funds at a shareholder meeting expected to be held in April of 2005. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Total Return Bond Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2004, and the related statement of operations for the year then ended, the statement of changes in net assets for the year then ended and for the period from May 1, 2003 (commencement of operations) to December 31, 2003, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Total Return Bond Fund of John Hancock Variable Series Trust I at December 31, 2004, the results of its operations for the year then ended, the statement of changes in net assets for the year then ended and for the period from May 1, 2003 (commencement of operations) to December 31, 2003, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 21, 2005 NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) December 31, 2004 - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION Voting Proxies on Fund Portfolio Securities: A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling, 1-800-576-2227. A report on "Form N-PX" of how the Fund voted any such proxies during the most recent 12-month period ended June 30, 2004, is available from the EDGAR database on the SEC's website at http:// www.sec.gov. Quarterly Portfolio Schedule: The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form NQ". These filings are available on the SEC's website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. (Call 1- 800-SEC-0330) for information on the Public Reference Room.) 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 67) Trustee Expressive Arts Therapist, c/o John Hancock Variable Series (Since 1993) Dana-Farber Cancer Institute; Trust I President, The Advertising John Hancock Place Club of Greater Boston Boston, Massachusetts 02117 Diane C. Kessler (age 58) Trustee Executive Director, c/o John Hancock Variable Series (Since 1999) Massachusetts Council of Trust I Churches John Hancock Place Boston, Massachusetts 02117 Robert Verdonck (age 59) Trustee President and Chief Executive c/o John Hancock Variable Series (Since 1999) Officer, East Boston Savings Trust I Bank John Hancock Place Boston, Massachusetts 02117 Hassell H. McClellan (age 59) Trustee Associate Professor and c/o John Hancock Variable Series (Since 2001) former Graduate Dean, The Trust I Graduate School of the John Hancock Place Wallace G. Carroll School of Boston, Massachusetts 02117 Management, Boston College NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I (UNAUDITED) December 31, 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 47) Chairman and Trustee Executive Vice President, Long John Hancock Place (Since 1998) Term Care, John Hancock Life Boston, Massachusetts 02117 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 59) Chief Legal Officer Vice President & Counsel, John John Hancock Place (Since 2003) Hancock Life Insurance Company Boston, Massachusetts 02117 and Compliance Officer (Since 2004) Janet Wang (age 36) Assistant Compliance Officer Compliance Specialist, John John Hancock Place (Since 2003) Hancock Life Insurance Company Boston, Massachusetts 02117 Raymond F. Skiba (age 59) Treasurer Director of Fund Operations, John John Hancock Place (Since 1986) Hancock Life Insurance Company Boston, Massachusetts 02117 Gladys C. Millan (age 58) Assistant Treasurer Manager of Fund Operations, John John Hancock Place (Since 2003) Hancock Life Insurance Company Boston, Massachusetts 02117 Karen Q. Visconti (age 51) Secretary Director, Product & Market John Hancock Place (Since 1999) Management, John Hancock Life Boston, Massachusetts 02117 Insurance Company Arnold R. Bergman (age 54) 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 Scott Hill (age 28) Assistant Secretary Compliance Specialist, John John Hancock Place (Since 2003) Hancock Life Insurance Company Boston, Massachusetts 02117
*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. 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] John Hancock WORLDWIDE SPONSOR [LOGO] IMSA INSURANCE MARKETPLACE STANDARDS ASSOCIATION S8128 2/05 ITEM 2. CODE OF ETHICS 2 (a) As of the end of the period covered by this report (December 31, 2004), the Board of Trustees of John Hancock Variable Series Trust I (the "Registrant") has adopted a "code of ethics," within the meaning of Item 2, that applies to the Registrant's principal executive officer, principal financial officer and principal accounting officer (or persons performing similar functions), regardless of whether these individuals are employed by the Registrant or by a third party. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Trustees of John Hancock Variable Series Trust I has determined that Robert F. Verdonck and Hassell H. McClellan are each audit committee financial experts, within the meaning of Item 3 of Form N-CSR. In making its determination, the Board considered Mr. Verdonck's relevant experience as the Chief Executive Officer of the East Boston Savings Bank and as Chairman of the Board and member of the Audit Committee of the Federal Home Loan Bank of Boston, and Dr. McClellan's relevant experience as Associate Professor and former Associate Dean of Boston College's Carroll Graduate School of Management, as a director with Smith Whiley & Co. and as a commercial loan officer for Harris Bank (a trade name used by Harris Trust and Savings Bank and its affiliated banks). Mr. Verdonck and Dr. McClellan are each independent within the meaning of Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES 4(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant's annual financial statements are: Fiscal Year 2004 - $522,000 Fiscal Year 2003 - $745,000 4(b) Audit-Related Fees. The aggregate fees billed for each of the last two fiscal years for assurance and related services rendered by the principal accountant that are reasonably related to the performance of the audit of the Registrant's annual financial statements that are not reported under paragraph (a) above are: Fiscal Year 2004 - 0 Fiscal Year 2003 - $25,000 (For services related to SAS 99 procedures.) 4(c) TAX FEES. The aggregate fees billed for each of the last two fiscal years for assurance and related services rendered by the principal accountant for tax compliance, tax advice and tax planning are: Fiscal Year 2004 - $300,000 (For services related to Fund tax distribution, provision and return preparation and $75,500 related to fund merger reviews.) Fiscal Year 2003 - $333,500 ($330,000 for services related to Fund tax distribution, provision and return preparation and $3,500 for services related to Fund merger reviews.) 4(d) ALL OTHER FEES. The aggregate fees billed for each of the last two fiscal years for products and services provided by the principal accountant other than the services described above are: Fiscal Year 2004 - 0 Fiscal Year 2003 - $120,000 (For services related to review of the market timing/late trading policy and procedures controls of affiliated entities of John Hancock Financial Services, Inc., which was paid for by John Hancock Financial Services, Inc. The services also included a review of such policy and controls of the Registrant). 4 (e)(1) The pre-approval policies and procedures of the Registrant's Audit Committee are disclosed below: Audit and Non-Audit Services Pre-Approval Policy (Effective September 24, 2003) I. Statement of Principles Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee of the Board of Trustees is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditor's independence from the John Hancock Variable Series Trust I (the "Trust"). To implement these provisions of the Act, the Securities and Exchange Commission (the "SEC") has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. Accordingly, the Audit Committee has adopted, and the Board of Trustees has ratified, the Audit and Non-Audit Services Pre-Approval Policy (the "Policy"), which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor may be pre-approved. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("general pre-approval"); or require the specific pre-approval of the Audit Committee ("specific pre-approval"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the independent auditor. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the auditor. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require pre-approval by the Audit Committee. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient services, for reasons such as its familiarity with the Trust's business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Trust's ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services and may determine for each fiscal year, the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services for the Trust (including any Audit-related or Tax service fees for affiliates that were subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Trust (including any such services for affiliates subject to pre-approval). The appendices to this policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval unless the Audit Committee considers a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of this Policy is to set forth the procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. The independent auditor has reviewed this Policy and believes that implementation of the policy will not adversely affect the auditor's independence. II. Delegation As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee as its next scheduled meeting. III. Audit Services The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the independent auditor to be able to form an opinion on the Trust's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will monitor the Audit services engagement as necessary, but no less than on a semi-annual basis, and will also approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Trust structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the independent auditor reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee. IV. Audit-related Services Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Trust's financial statements or that are traditionally performed by the independent auditor. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee. V. Tax Services The Audit Committee believes that the independent auditor can provide Tax services to the Trust such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the independent auditor may provide such services. Hence, the Audit Committee believes it may grant general pre-approval to those Tax Services that have historically been provided by the auditor, that the Audit Committee has reviewed and believes would not impair the independence of the auditor, and that are consistent with the SEC's rules on auditor independence. The Audit Committee will not permit the retention of the independent auditor by the Trust in connection with a transaction initially recommended by the independent auditor, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Treasurer of the Trust or outside counsel to determine that the tax planning and reporting positions are consistent with this policy. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services involving large and complex transactions not listed I Appendix B.3 must be specifically pre-approved by the Audit Committee, including tax services proposed to be provided by the independent auditor to an executive officer or Trustee of the Trust, in his or her individual capacity, where such services are paid for by the Trust. VII. All Other Services The Audit Committee believes, based on the SEC's rules prohibiting the independent auditor from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee. A list of the SEC's prohibited non-audit services is attached to this policy as Appendix B.5. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions. VII. Pre-Approval Fee Levels or Budgeted Amounts Pre-approval fee levels or budgeted amounts for all services to be provided by the independent auditor will be established annually by the Audit Committee. (Note that separate amounts may be specified for the Trust and for other affiliates in the investment company complex subject to pre-approval). Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services for the Trust (including any Audit-related or Tax service fees for affiliates subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Trust (including any such services for affiliates subject to pre-approval). VIII. Procedures All requests or applications for services to be provided by the independent auditor that do not require specific approval by the Audit Committee will be submitted to the Treasurer of the Trust and must include a detailed description of the services to be rendered. The Treasurer of the Trust will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee and shall inform the Audit Committee on a timely basis of any such services rendered by the independent auditor. The Treasurer of the Trust will advise the Board of the facts and circumstances of these services so that the Audit Committee can assess the impact of the service on the independent auditor's independence. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Treasurer of the Trust, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Treasurer of the Trust to monitor the performance of all services provided by the independent auditor and to determine whether such services are in compliance with this policy. The Treasurer of the Trust will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Treasurer of the Trust and management will immediately report to the chairman of the Audit Committee any breach of this policy that comes to the attention of the Treasurer of the Trust or any member of management. The Treasurer of the Trust will develop a plan that provides for the monitoring of the independent auditor's services and update it as necessary, and in any event at least annually. The Audit Committee will also review the Treasurer's plan and any updates to determine that the plan provides for the monitoring of the independent auditor's services. IX. Additional Requirements The Audit Committee has determined to take additional measures on an annual basis to meets its responsibility to oversee the work of the independent auditor and to assure the auditor's independence from the Trust, such as reviewing a formal written statement from the independent auditor delineating all relationships between the independent auditor and the Trust, consistent with Independence Standards Board No. 1, and discussing with the independent auditor its methods and procedures for ensuring independence. Appendix B.1 Pre-Approved Audit Services for Fiscal Year 2004 Dated: September 21, 2004 Service Range of Fees - ------------------------------------------------------ --------------------- Trust - ------------------------------------------------------ --------------------- Statutory audits or financial audits for the Trust Pre-Approved-Audit/A/ - ------------------------------------------------------ --------------------- Services associated with SEC registration Pre-Approved-Other/B/ statements, periodic Pre-Approved-OtherB reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., consents), and assistance in responding to SEC comment letters - ------------------------------------------------------ --------------------- Consultations by the Trust's management as to the Pre-Approved-Audit/A/ accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard setting bodies (Note: Under SEC rules, some consultations may be "audit-related" services rather than "audit" services. In such cases, the consultation for "audit-related" services shall be deemed to be "Pre-Approved-Other" and subject to the limit on fees set forth below in Note B.) - ------------------------------------------------------ -------------------- Attest services required by statute or regulation Not Applicable (not paid by the Trust, e.g. 17f-2 Security Counts) - ------------------------------------------------------ -------------------- /A/ Fees for services listed as "Pre-Approved-Audit" shall not exceed the annual fees of $972,000 for audit services for fiscal year 2004 approved on September 21, 2004. /B/ Aggregate fees for services listed as "Pre-Approved-Other" in Appendices B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of $972,000 for audit services for fiscal year 2004 approved on September 21, 2004. Appendix B.2 Pre-Approved Audit-Related Services Dated: September 21, 2004 Service Range of Fees - ------------------------------------------------------ --------------------- Trust - ------------------------------------------------------ --------------------- Due Diligence services pertaining to Pre-Approved-Other/B/ potential Fund mergers - ------------------------------------------------------ --------------------- Issuance of SAS-70 reports on internal Pre-Approved-Other/B/ controls of a service provider - ------------------------------------------------------ --------------------- Consultations by the Trust's management as to the Pre-Approved-Other/B/ accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be "audit" services rather than "audit-related" services. In such cases, the consultation shall be deemed part of the "Pre-Approved - Audit" services and covered under the fee specified in Note A, below.) - ------------------------------------------------------ --------------------- Review of the Trust's semi-annual financial statements Pre-Approved-Audit/A/ - ------------------------------------------------------ --------------------- Information systems reviews not performed in Not Applicable connection with the audit (e.g., application data center and technical reviews) - ------------------------------------------------------ --------------------- General assistance with implementation of the Pre-Approved-Other/B/ requirements of SEC rules - ------------------------------------------------------ --------------------- Regulatory compliance assistance (e.g., Pre-Approved-Other/B/ agreed-upon procedures for Section 15(c) contract renewals, Rule 12b-1 plan renewals) - ------------------------------------------------------ --------------------- /A/ Fees for services listed as "Pre-Approved -Audit" shall not exceed the annual fees of $972,000 for audit services for fiscal year 2003 approved on September 21, 2004. /B/ Aggregate fees for services listed as "Pre-Approved - Other" in Appendices B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of $972,000 for audit services for fiscal year 2004 approved on September 21, 2004. Appendix B.3 Pre-Approved Tax Services Dated: September 21, 2004 Service Range of Fees - --------------------------------------------------------- --------------------- Trust - --------------------------------------------------------- --------------------- U.S. federal, state and local tax planning and advice Pre-Approved-Other/B/ - --------------------------------------------------------- --------------------- U.S. federal, state and local tax compliance Pre-Approved-Audit/A/ - --------------------------------------------------------- --------------------- International tax planning and advice Pre-Approved-Other/B/ - --------------------------------------------------------- --------------------- International tax compliance (e.g., tracking sales Pre-Approved-Other/B/ of Indian securities and filing local Fund tax returns in India by Ernst & Young Private Limited) - --------------------------------------------------------- --------------------- Review of federal, state, local and international Pre-Approved-Other/B/ income, franchise and other tax returns - --------------------------------------------------------- --------------------- Domestic and foreign tax planning, compliance, and advice Pre-Approved-Other/B/ - --------------------------------------------------------- --------------------- Assistance with tax audits and appeals before the Pre-Approved-Other/B/ IRS and similar state, local and foreign agencies - --------------------------------------------------------- --------------------- Tax advice and assistance regarding statutory, Pre-Approved-Other/B/ regulatory or administrative developments (e.g., excise tax reviews, evaluation of Trust's tax compliance function) (Note: Under SEC rules, some tax reviews and evaluations may be "audit" services rather than "Tax" services. In such cases, the tax review and evaluation shall be deemed part of the "Pre-Approved - Audit" services and covered under the fee specified in Note A, below.) - --------------------------------------------------------- --------------------- /A/ Fees for services listed as "Pre-Approved -Audit" shall not exceed the annual fees of $972,000 for audit services for fiscal year 2003 approved on September 21, 2004. /B/ Aggregate fees for services listed as "Pre-Approved - Other" in Appendices B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of $972,000 for audit services for fiscal year 2004 approved on September 21, 2004. Appendix B.4 Pre-Approved All Other Services Dated: September 21, 2004 - ----------------------------------- -------------------------------------------- Service Range of Fees - ----------------------------------- --------------------- --------------------- Trust Affiliates/A/ - ----------------------------------- --------------------- --------------------- Risk management advisory services, Pre-Approved-Other/B/ Pre-Approved-Other/B/ e.g., assessment and testing of security infrastructure controls - ----------------------------------- --------------------- --------------------- Assistance with respect to SEC Pre-Approved-Other/B/ Pre-Approved-Other/B/ examinations, investigations, inquiries and proceedings - ----------------------------------- --------------------- --------------------- Audit, audit-related and tax Not Applicable Pre-Approved-Other/B/ services furnished to Affiliates that are subject to Trust pre-approval requirements - ----------------------------------- --------------------- --------------------- /A/ These include the investment manager (excluding sub-investment managers) and any entity controlling, controlled by or under common control with the investment manager that provides ongoing services to the Trust. Beginning with non-audit service contracts entered into on or after May 6, 2003, the Trust's Audit Committee must pre-approve non-audit services provided not only to the Trust but also to the investment manager and other entities in the complex, where such entities provide ongoing services to the Trust and the independent accountant's services have a direct impact on the Trust's operations or financial reporting. /B/ Aggregate fees for services listed as "Pre-Approved -Other" in Appendices B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of $972,000 for audit services for fiscal year 2004 approved on September 21, 2004. Appendix B.5 Prohibited Non-Audit Services Dated: September 24, 2003 o Bookkeeping or other services related to the accounting records or financial statements of the audit client o Financial information systems design and implementation o Appraisal or valuation services, fairness opinions or contribution-in-kind reports o Actuarial services o Internal audit outsourcing services o Management functions o Human resources o Broker-dealer, investment advisor or investment banking services o Legal services o Expert services unrelated to the audit 4 (e)(2) The percentage of services described in paragraphs (b) through (d) of Item 4 were approved by the Registrant's Audit Committee pursuant to paragraph (c) (7) (i) (C) of Rule 2-01 of Regulation S-X was 100%. 4(f) N/A 4(g) The aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant, and rendered to the Registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were: Fiscal Year 2004 - 0 Fiscal Year 2003 - $120,000 (For services related to review of the market timing/late trading policy and procedures controls of affiliated entities of John Hancock Financial Services, Inc., which was paid for by John Hancock Financial Services, Inc. The services also included a review of such policy and controls of the Registrant). 4(h) N/A. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No material changes. ITEM 11. CONTROLS AND PROCEDURES. (a)(i) The Chairman and Treasurer for the John Hancock Variable Series Trust I (the "Trust") have concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide reasonable assurance that material information relating to the Trust is accumulated and made known to them on a timely basis by appropriate persons, based on their evaluations of these controls and procedures as of a date within 90 days of the filing date of this report. (a)(ii) There was no change in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the Trust's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of Ethics for Senior Financial Officers. (a)(2) Section 302 Certifications. (b) 906 Certification. 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: March 9, 2005 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: March 9, 2005 By: /s/ GLADYS C. MILLAN ----------------------------------- Gladys C. Millan Assistant Treasurer Date: March 9, 2005 EX-99.CODEETH 2 dex99codeeth.txt CODE OF ETHICS JOHN HANCOCK VARIABLE SERIES TRUST I CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS General Principles The Trustees of the John Hancock Variable Series Trust I (the "Trust") have adopted this code of ethics (this "Code") setting forth standard of ethics for the Chief Executive Officer, Chief Financial Officer and Treasurer ("Senior Financial Officers") of the Trust. All Senior Financial Officers are charged with the duty to maintain the standards set forth below. No Code can address every situation that a Senior Financial Officer may face. As a guiding principle, Senior Financial Officers should strive to implement the spirit as well as the letter of applicable laws, rules and regulations, and to provide the type of clear and complete disclosure and information that Trust shareholders have a right to expect. Honest and Ethical Conduct Each Senior Financial Officer owes a duty to the Trust to act with integrity and honesty in the conduct of his or her duties and responsibilities. Each Senior Financial Officer shall comply with all applicable governmental laws, rules and regulations, and accounting standards, while adhering to a high standard of business ethics. Avoidance of Conflicts of Interest Senior Financial Officers shall ethically handle any actual or apparent conflict of interest, direct or indirect, between personal and professional relationships. A Senior Financial Officer should not engage in personal, business or professional relationships or dealings which would impair his or her independence of judgment or adversely affect the performance of his or her duties in the best interests of the Trust and its shareholders. Any relationship or dealing that would present a conflict for a Senior Financial Officer could also present a conflict if it is related to a member of his or her immediate family. Disclosure Senior Financial Officers have a supervisory role with respect to the financial information included in reports filed with regulatory agencies and public disclosures by the Trust, and therefore have particular responsibilities in connection with those communications. . Each Senior Financial Officer shall familiarize himself or herself with the disclosure requirements applicable to the Trust, as well as the business and financial operations of the Trust. . Each Senior Financial Officer shall ensure that reasonable steps are taken within his or her areas of responsibility to promote full, fair, accurate, timely and understandable disclosure in all regulatory filings, as well as when communicating with the Trust's shareholders or the general public, in accordance with applicable law. . No Senior Financial Officer shall violate his or her responsibility to the Trust by knowingly and willfully misrepresenting, or causing others to misrepresent, facts about the Trust to others, including the Trust's independent auditors, governmental regulators or self-regulatory organizations. Compliance with Applicable Law It is the Trust's policy to comply with all applicable laws and governmental rules and regulations. It is the personal responsibility of each Senior Financial Officer to take reasonable steps to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. Compliance Procedures All Senior Financial Officers are responsible for ensuring that their own conduct complies with this Code. If a Senior Financial Officer is aware of any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest or which might be viewed as potentially affecting his or her performance of Trust responsibilities, the Senior Financial Officer shall notify the Trust's Chief Legal Officer of this transaction or relationship. In addition, any Senior Financial Officer who becomes aware of any existing or potential violation of this Code shall notify the Chief Legal Officer promptly, who shall conduct an appropriate investigation. The Chief Legal Officer shall report any violation of this Code to the Audit Committee of the Trust. Anyone who violates the provisions of this Code, fails to report a known violation or refuses to cooperate in the investigation of any potential violation will be subject to disciplinary action, up to and including termination of service with the Trust. Subject to applicable law, the Audit Committee may waive provisions of this Code. Other Policies and Procedures This Code does not supplant or supersede any other Trust policy or procedure relating to conflicts of interest or business practices. Those policies and procedures are separate requirements applying to those working on Trust matters generally, including Senior Financial Officers among others, and are not part of this Code. December 10, 2003 EX-99.CERT 3 dex99cert.txt SECTION 302 CERTIFICATIONS SECTION 302 CERTIFICATIONS I, Michele G. Van Leer, certify that: 1. I have reviewed this report on Form N-CSR of John Hancock Variable Series Trust I; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 28, 2005 /s/ MICHELE G. VAN LEER ------------------------------------- Michele G. Van Leer Chairman SECTION 302 CERTIFICATIONS I, Raymond F. Skiba, certify that: 1. I have reviewed this report on Form N-CSR of John Hancock Variable Series Trust I; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 28, 2005 /s/ RAYMOND F. SKIBA ------------------------------------- Raymond F. Skiba Treasurer EX-99.906CERT 4 dex99906cert.txt SECTION 906 CERTIFICATION SECTION 906 CERTIFICATIONS Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of the John Hancock Variable Series Trust I (the "Registrant") hereby certify, to the best of his or her knowledge, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: /s/ MICHELE G. VAN LEER - ---------------------------------------- Michele G. Van Leer Chairman Date: February 28, 2005 By: /s/ RAYMOND F. SKIBA - ---------------------------------------- Raymond F. Skiba Treasurer Date: February 28, 2005 [A signed original of this written statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the SEC or its staff upon request.] -----END PRIVACY-ENHANCED MESSAGE-----