The latest report from your
Fund's management team
ANNUAL REPORT
Declaration Trust
Growth V.A. Financial Industries Fund
V.A. 500 Index Fund
V.A. International Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Regional Bank Fund
V.A. Small Cap Growth Fund
- ------------------------------------------------------
Growth V.A. Core Equity Fund
& Income V.A. Large Cap Value Fund
V.A. Sovereign Investors Fund
- ------------------------------------------------------
Income V.A. Bond Fund
V.A. High Yield Bond Fund
V.A. Money Market Fund
V.A. Strategic Income Fund
DECEMBER 31, 1999
Table of Contents
John Hancock Funds - Declaration Trust
Page
1) CEO Corner 3
2) Portfolio Manager Commentary
This commentary reflects the views of the portfolio managers or portfolio
management teams through the end of the Fund's period discussed in this
report. Of course, the managers' or team's views are subject to change as
market and other conditions warrant.
Growth
V.A. Financial Industries Fund 4
V.A. 500 Index Fund 7
V.A. International Fund 10
V.A. Large Cap Growth Fund 13
V.A. Mid Cap Growth Fund 16
V.A. Regional Bank Fund 19
V.A. Small Cap Growth Fund 22
Growth & Income
V.A. Core Equity Fund 25
V.A. Large Cap Value Fund 28
V.A. Sovereign Investors Fund 31
Income
V.A. Bond Fund 34
V.A. High Yield Bond Fund 37
V.A. Money Market Fund 40
V.A. Strategic Income Fund 42
3) Financial Statements 45
4) Notes to Financial Statements 115
TRUSTEES
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
Richard S. Scipione
* Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Investment Officer and
Chief Operating Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
V.A. Bond Fund
V.A. Core Equity Fund
V.A. Financial Industries Fund
V.A. High Yield Bond Fund
V.A. Large Cap Growth Fund
V.A. Large Cap Value Fund
V.A. Mid Cap Growth Fund
V.A. Regional Bank Fund
V.A. Small Cap Growth Fund
V.A. Sovereign Investors Fund
V.A. Strategic Income Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
V.A. 500 Index Fund
V.A. International Fund
V.A. Money Market Fund
TRANSFER AGENT
John Hancock Servicing Center
P.O. Box 9298
Boston, Massachusetts 02205-9298
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISERS
Indocam International Investment Services
90 Boulevard Pasteur
Paris, France 75015
John Hancock Advisers International Limited
34 Dover Street
London, England W1X3RA
V.A. International Fund
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
V.A. Core Equity Fund
ISSUER
John Hancock
Life Insurance Company
John Hancock Variable
Life Insurance Company*
200 Clarendon Street
Boston, Massachusetts 02117
*Not Licensed in New York
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR SHAREHOLDERS:
As "The American Century" drew to a close this past year, the U.S.
economy ended the era on a high note. With robust growth continuing in
1999, our economy stood poised to enter the history books for producing
the longest expansion on record.
The stock market also rang out the century in style. For an
unprecedented fifth straight year, both the Dow Jones Industrial
Average and the Standard & Poor's 500 Index produced 20%-plus returns.
However, the market's advances were restricted to a very select group
of stocks, primarily in the technology sector. Many others, including
some of the household blue-chip names, languished or lost ground as the
result of investors' seemingly insatiable appetite for tech stocks.
Bonds struggled through their second-worst year in more than two
decades, as the strength of the U.S. economy and the rebound of many
others around the world provoked inflation fears. Though their outlook
from here looks brighter, in many instances, bond mutual fund investors
actually lost a little ground or made only slight advances in 1999.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND THOMAS
FINUCANE AND THOMAS GOGGINS, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Financial Industries Fund. Caption below reads "Fund management team
members. Standing (l-r): Jay McKelvey, Tom Goggins and Tom Finucane.
Sitting (l-r): Lisa Welch, Jim Schmidt and Patricia Ouimet."]
John Hancock
V.A. Financial Industries Fund
Rising interest rates send financial stocks tumbling
Financial stocks had a tough year in 1999. A combination of factors
worked on the group, from robust economic growth, rising interest rates
and inflation fears, to Y2K concerns, fewer consolidations and a torrid
technology sector that lured investors away. The only pockets of
strength came from the largest financial institutions, like Citigroup.
Bank stocks were especially vulnerable to the three interest-rate hikes
by the Federal Reserve aimed at slowing down the economy and preempting
inflation. Several high-profile earnings disappointments didn't help,
even though bank fundamentals, for the most part, were sound.
"Banks,
despite their
stocks'
behavior,
continue to
exhibit solid
fundamentals..."
Fund performance
Given these circumstances, John Hancock V.A. Financial Industries
Fund's performance was quite modest. We did, however, do better than
other funds focused primarily on financial stocks, which had trouble
breaking even. For the year ended December 31, 1999, the Fund returned
1.23% at net asset value, compared to the -1.04% return of the average
open-end financial services fund, according to Lipper, Inc. The average
variable annuity specialty/miscellaneous fund returned 50.22%.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is American Express 4.7%, the second is
Fiserv 4.6%, the third Legg Mason 3.7%, the fourth Morgan Stanley Dean
Witter 3.5% and the fifth Marsh & McLennan 3.3%. A note below the table
reads "As a percentage of net assets on December 31, 1999."]
Contributors and detractors
Our overweighting in investment bankers and life insurance companies
compared to the S&P Financial Index, and our underweight in banks
helped the Fund post positive results. On the flip side, the weakness
of the new European currency, the euro, hurt our holdings in EMU-member
countries. However, we remain optimistic about the prospects for
further consolidation in Europe and the increased focus there on
shareholder value.
Insurance choices pay off
Property and casualty companies struggled all year in a tough pricing
environment, and we significantly cut our stake, from 12% six months
ago to 4% by year end, eliminating such names as Berkshire Hathaway and
Progressive, which had earnings shortfalls. Our large life insurance
and reinsurance companies, on the other hand, had good results,
including AXA Financial and American International Group. Insurance
broker Marsh & McLennan was also a key performer. Including all its sub
categories, insurance remained the Fund's top sector at 32% of net
assets.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with -10%
at the bottom and 60% at the top. The first bar represents the 1.23%
total return for John Hancock V.A. Financial Industries Fund. The second
bar represents the -1.04% total return for Average open-end financial
services fund. The third bar represents the 50.22% total return for
Average variable annuity specialty/miscellaneous fund. A note below the
chart reads "The total return for John Hancock V.A. Financial Industries
Fund is at net asset value with all distributions reinvested. The
average open-end financial services fund and variable annuity
specialty/miscellaneous fund are tracked by Lipper, Inc. See the
following page for historical performance information."]
Shift to the big brokers
As the booming bull market continues, investment management companies
benefited from a high volume of equity offerings and a growing stream
of merger advisory revenues, as well as renewed trading profits. Our
largest names, including Morgan Stanley Dean Witter and American
Express, were two of the Fund's top contributors. During the year, we
cut some of our positions in regional brokerage houses, such as Raymond
James and Freedom Securities, as the regionals lost investment-banking
market share to the leading national firms. In their place, we bought a
stake in Charles Schwab, which has become the model for multi-channel
financial product distribution. The move didn't help us this period,
but we believe in the company long term.
Bank fundamentals strong, stock prices weak
Banks, despite their stocks' behavior, continue to exhibit solid
fundamentals, given that global markets stabilized and economic growth
was better than anticipated. As a result, they have shown excellent
loan growth and relatively low credit losses. Bank earnings were up
approximately 12% for 1999, even with the rising interest-rate
environment, again confirming our belief that the market unfortunately
overestimates the impact of rising rates on bank profits. Our best bank
performers were money-center bank Citigroup and the large
super-regionals. While U.S. banks remain our second largest sector
weighting, at 23% of the Fund, our underweight versus the financial
index served us well this year. Consolidation slowed from its red-hot
1998 pace due to Y2K concerns, a more difficult pricing environment and
leftover indigestion from some prior acquisitions.
Reform legislation bodes well
This year produced an historic piece of financial services reform
legislation. The bill amends the Glass-Steagall and Bank Holding
Company acts to permit banks, securities companies and insurance
companies to affiliate in the same holding company. With its passage,
we expect a period of consolidation to result featuring just such
cross-industry consolidations. The potential for such deregulation was
one of the motivating factors for creating John Hancock V.A. Financial
Industries Fund. Specifically, we think there will be further cases of
banks buying brokers, and, more important, for the first time we should
see banks interested in acquiring life insurance companies.
"This year
produced an
historic piece
of financial
services
reform
legislation."
A look ahead
As long as the economy shows no signs of slowing and inflation remains
a threat, the prospect for further rate increases remains real. While
that should keep the waters choppy for financial stocks in the near
term, the longer-term outlook is brighter. After their recent
struggles, financial stocks are very compelling, with their valuations
at substantial discounts to the market average. That, together with
landmark regulatory reform now poised to spark change, bodes well for
the financial sector.
- ---------------------------------------------------------------------------
Sector investing is subject to different, and sometimes greater, risks
than the market as a whole. International investing involves special
risks such as political, economic and currency risks and differences in
accounting standards and financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (4/30/97)
------- -------
Cumulative Total Returns 1.23% 48.42%
Average Annual Total Returns (1) 1.23% 15.95%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of
investment-related charges on the underlying funds, but do not include
insurance and other charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth more
or less than their original cost, depending on when you sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return since
inception would have been 15.86%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Financial Industries Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $10,000 investment in the Standard & Poor's 500
Index -- an unmanaged index that includes 500 widely traded common
stocks and is often used as a measure of stock market performance. It
is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Financial Industries Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $19,075
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Financial
Industries Fund on April 30, 1997 and is equal to $14,842 as of December
31, 1999.
BY ROGER HAMILTON, CFA, PORTFOLIO MANAGER
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. 500
Index Fund. Caption below reads "Fund management team members Barry
Evans (l) and Roger Hamilton (r)."]
John Hancock
V.A. 500 Index Fund
S&P 500 Index scores fifth consecutive year of double-digit gains
Powered by the stratospheric climb of technology and telecommunications
stocks, the S&P 500 Index finished 1999 at a record high. For the 12
months ended December 31, 1999, the Index climbed by more than 20%,
marking the fifth consecutive year in which it posted double-digit
gains. This five-for-five record run resulted in a 219% cumulative gain
from 1994 to 1999.
Despite intensifying inflation concerns and interest rate worries,
investors kept pushing technology and telecommunications stocks "to
infinity and beyond." They bet that the global economic recovery would
stimulate a level of demand for tech and telecom products so strong
that rising interest rates wouldn't jeopardize earnings growth.
But the meteoric rise of tech and telecom stocks belied a more somber
truth. Many non-technology stocks suffered in 1999, and some
out-and-out stumbled. Although the Index posted a gain of 21.04%,
including reinvested dividends, the average stock in it rose only about
half as much. In fact, the final tally showed that while 46% of the
companies that made up the S&P 500 posted gains, a surprising 54%
posted losses for the year. Even established blue-chip companies, such
as soft-drink maker Coca-Cola and drug company Merck, found themselves
in the losing column. Without the gains posted by white-hot technology
and telecommunications shares, the S&P 500 Index's returns would have
been very modest, at best.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Microsoft 4.9%, the second is General
Electric 4.1%, the third Cisco Systems 2.8%, the fourth Wal-Mart Stores
2.5% and the fifth Exxon 2.3%. A note below the table reads "As a
percentage of net assets on December 31, 1999."]
"...bright
promise of
the Internet...
helped set
technology and
telecommunications
stocks
ablaze."
Performance overview
For the 12-month period ended December 31, 1999, John Hancock V.A. 500
Index Fund had a total return of 20.81% at net asset value. By
comparison, the average variable annuity S&P 500 Index objective fund
had a total return of 20.48%, according to Lipper, Inc. Historical
performance information can be found on page 9.
Our goal is to have the Fund's holdings closely track those of the S&P
500 Index, while minimizing the costs associated with buying and
selling shares of stocks. Although there are frequent changes in the
composition of the Index, we re-balance the Fund's holdings less
frequently to keep our transaction costs at a minimum. When we get new
money that cannot immediately be deployed into Index components, we buy
S&P 500 Stock Index futures. They allow us to participate in the
Index's performance without incurring the transaction costs of buying
stocks.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with 0% at
the bottom and 30% at the top. The first bar represents the 20.81% total
return for John Hancock V.A. 500 Index Fund. The second bar represents
the 21.04% total return for S&P 500 Index. The third bar represents the
20.48% total return for Average variable annuity S&P 500 Index objective
fund. A note below the chart reads "The total return for John Hancock
V.A. 500 Index Fund is at net asset value with all distributions
reinvested. The average variable annuity S&P 500 Index objective fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
"S&P Index
funds aren't
immune to
market
downdrafts..."
Tech, telecom dominate
The bright promise of the Internet, together with a rebounding world
economy, helped set technology and telecommunications stocks ablaze. In
fact, all but one of the S&P 500 Index's 30 best performers for the
year were members of those two groups. Topping the Index was QUALCOMM,
a provider of digital wireless communications products and services,
which climbed an eye-popping 2,619%. More than one-third of its 1999
gains -- $153 to be exact -- came in the last week of the year after a
brokerage analyst set a 12-month price target of $1000. Because of its
incredible rise, QUALCOMM accounted for more than 9% of the S&P 500
Index's value by year's end.
Rounding out the 10 biggest gainers, Sprint PCS (+343%) emerged as the
top player in the wireless phone wars. Cell-phone firm Nextel
Communications (+337%) enjoyed rapid subscriber and cash flow growth.
LSI Logic (+319%) benefited from improving demand and pricing for
semiconductors. Nortel Networks (+303%), Oracle (+290%) and Network
Appliance (+270%) all were boosted by strong earnings growth. Yahoo!
(+265%) benefited from rising advertising revenues, strong subscriber
growth and being named a component of the S&P 500 Index. Sun
Microsystems (+262%) climbed, thanks to a sales surge of
Internet-infrastructure technology. National Semiconductor (+216%) was
boosted by the more favorable semiconductor environment.
Laggards
The biggest detractors from the Index came from a broad range of
industries. Funeral home operator Service Corporation International
(-82%) sent condolences to investors, blaming a variety of factors
including a declining death rate. Drug store chain Rite Aid (-77%)
collapsed when creditors forced out management after accounting woes.
McKesson HBOC (-71%) stumbled on news of alleged accounting
irregularities and the pressures of managed care. HEALTHSOUTH (-65%)
was hurt when managed-care firms trimmed reimbursements. Quintiles
Transnational (-65%) suffered after the firm warned of profit
shortfall. Pollution control companies Waste Management (-63%) and
Allied Waste (-63%) were hurt by worse-than-expected losses. Xerox
(-62%) slumped in response to intensified competition and sliding
earnings.
Outlook
The Fund's returns, as always, will be dictated by the performance of
the S&P 500 Stock Index. It's important for shareholders to realize
that the S&P Stock Index's performance has been extremely strong over
the past five years, especially when viewed from a historical basis.
S&P Index funds aren't immune to market downdrafts, and they will rise
and fall in concert with the underlying stocks in the Index. But no
matter what the market environment, our goal will be to closely track
the performance to the S&P 500 Stock Index.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 20.81% 124.03%
Average Annual Total Returns (1) 20.81% 27.32%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% and the
management fee to 0.10% of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 20.41% and 26.98%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. 500 Index Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. 500 Index Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $24,250 as of
December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. 500 Index
Fund on August 29, 1996 and is equal to $22,404 as of December 31, 1999.
BY MIREN ETCHEVERRY FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 3" photo at bottom right side of page of John Hancock V.A.
International Fund. Caption below reads "Fund management team members
(l-r): Jean-Claude Kaltenbach and, Miren Etcheverry."]
John Hancock
V.A. International Fund
International markets roar back to life
Recently, shareholders voted to approve a new subadvisory investment
management contract with Indocam International Investment Services,
effective January 1, 2000.
Overseas financial markets made a remarkable recovery in 1999,
astounding investors by their quick rebound from 1998's global economic
turmoil. Japan and the emerging markets had the best returns, as many
of the Southeast Asian countries that sparked the problems in 1997 came
back to life. Lower interest rates and a pickup in exports and growth
produced especially strong results in South Korea, Thailand and
Malaysia, while rising commodity prices helped Latin American markets.
"...we went
from a
large
underweighting in
Japan to
a significant
overweighting..."
Japan was one of the bigger winners and most prominent highlights of
the year, as the government took steps to fix the ailing banking
system, corporate restructuring began to take hold and the first signs
of economic recovery emerged. That prompted a flood of foreign
investors to re-enter the Japanese market and caused the yen to
strengthen versus the dollar -- further benefiting American investors.
Europe's results were more modest for U.S. investors because the
decline of its newly minted currency, the euro, throughout the year
eroded most of the markets' gains.
[Pie chart at bottom left hand column with heading "Portfolio
Diversification". The chart is divided into seven sections (from top to
left): Latin America 1%, Canada 5%, Pacific Rim ex-Japan 8%, Short-Term
Investments & Other 8%, U.K. & Ireland 16%, Japan 27% and Continental
Europe 35%. A note below the chart reads "As a percentage of net assets
on December 31, 1999."]
Taken as a whole, overseas stock markets outperformed the United States
for the first time in several years, many driven by the same technology
and telecommunications frenzy that brought U.S. stock indices to record
highs. For the year ended December 31, 1999, world stock markets as
measured by the Morgan Stanley Capital International (MSCI) All Country
World Free Ex-U.S. Index returned 28.80%, compared to the 21.04% return
of the Standard & Poor's 500 Index.
Fund performance
John Hancock V.A. International Fund participated fully in the strength
of the overseas markets and outperformed our MSCI benchmark, returning
31.55% at net asset value for the year ended December 31, 1999. On a
relative basis, our performance was less than the 42.88% return of the
average variable annuity international fund, according to Lipper, Inc.
Historical performance information can be found on page 12. Our lag
occurred in the first half of the year, when we had little exposure to
emerging markets as they began their ascent and were significantly
overweighted in Europe when results were more modest. We also missed
April's sharp advance by cyclical companies, although we made up for
that later.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with 0% at
the bottom and 50% at the top. The first bar represents the 31.55% total
return for John Hancock V.A. International Fund. The second bar
represents the 42.88% total return for Average variable annuity
international fund. A note below the chart reads "The total return for
John Hancock V.A. International Fund is at net asset value with all
distributions reinvested. The average variable annuity international
fund is tracked by Lipper, Inc. See the following page for historical
performance information."]
Shifting emphasis helps
As we grew more confident in the prospects for recovery in Asia, we
repositioned the portfolio to reflect that, moving the Fund to a more
average weight in Europe -- ending the year at 51% of net assets from
76% a year ago. Shifting to an overweighted position in Canada and
making good stock choices there also helped, given the strong
performance of telecommunications company Nortel Networks. Like the
market in general, our Fund's best performers were our technology,
telecommunications and electronics stocks across all continents.
Japan
During the course of the year, we went from a large underweighting in
Japan to a significant overweighting compared to our benchmark, and
that served us well, given Japan's 61% return. Our position grew from
11% to 27% of net assets, and Japan was the largest country contributor
to our performance. Sony, which recently began a major corporate
restructuring, was our top holding and best performer. Others included
Fujitsu, one of the largest manufacturers of computers and electronic
components which is thriving on the telecom equipment boom, and
investment banker Nomura Securities, which rose as confidence grew in
the financial sector. The two fundamental themes driving the Japanese
markets are the prospects for economic recovery and corporate
restructuring and our portfolio is composed of blue-chip companies
benefiting from those themes.
Europe: cut but still important
We got to our reduced focus in Europe by cutting our overweightings in
France, Switzerland, Belgium, Italy and the United Kingdom. Being
underweighted in Italy, which lagged, while making good stock choices
there also helped performance. Going forward, we plan to keep an
important position in Europe because of the opportunities for corporate
restructurings and merger activity. In addition, its economic outlook
has strengthened, fueled by Asia's recovery and the weak euro that
helped exporters. Europe produced some of our biggest winners, such as
leading wireless phone manufacturer Nokia and telecom company
Mannesmann. Our biggest disappointment was also there in Allied Irish
Banks, which was unduly hurt by concerns over its recent merger with a
bank in Singapore.
"...stock
valuations
remain
attractive
compared
to U.S.
equities."
Cautious optimism ahead
We remain encouraged about the long-term prospects for international
equities, while recognizing the short-term uncertainties surrounding
interest rates. Overall, worldwide economic growth is solid and for the
most part stock valuations remain attractive compared to U.S. equities.
As for the Fund, the addition of a subadviser should bolster our
investment capabilities, but will not alter our strategy. The Fund will
continue to own a diversified portfolio of stocks chosen through a
combination of top-down country allocation, which takes political and
economic factors into consideration, and sector and individual stock
selections, targeting companies with stable growth, reasonable
valuations and strong managements.
- ---------------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 31.55% 72.26%
Average Annual Total Returns (1) 31.55% 17.68%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 30.19% and
16.26%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. International Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index, which measures the
performance of a broad range of developed and emerging stock markets.
The index represents securities that are freely traded on a variety of
equity exchanges around the world. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. International Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. International Fund on August 29, 1996 and is equal to
$17,225 as of December 31, 1999. The second line represents the MSCI All
Country World Free Ex-U.S. Index and is equal to $16,017 as of December 31,
1999.
BY DAVID L. EISENBERG, CFA, AND GEOFFREY PLUME, CFA, PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Large
Cap Growth Fund. Caption below reads "Fund management team members (l-r):
John Golden, David Eisenberg and Geoffrey Plume."]
John Hancock
V.A. Large Cap Growth Fund
Double-digit growth for 1999
Fiscal 1999 began last January with the same narrow band of
large-company growth stocks fueling the market upward as they had for
the past few years. That trend continued through mid-April, when market
leadership broadened as investors took note of a pick-up in global
economic growth. Economically sensitive value stocks,
small-capitalization companies and energy-related issues moved up in
price. Not long after, however, investors grew increasingly concerned
about the inflation outlook at home and the possibility of the Federal
Reserve Board's raising interest rates -- which it did twice over the
summer. Market volatility ensued and technology, pharmaceutical, retail
and financial stocks came under significant pressure. By fall, many of
the same large-cap growth stocks that took center stage earlier did so
once again.
Near period's end, investors refocused on mounting inflationary
pressures. In November, the Fed raised rates for the third time,
creating another meaningful pullback in some of the same industry
sectors that suffered over the summer. The exception was technology.
Undaunted, technology stock prices hit extreme highs as the rest of the
market posted mediocre results.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Microsoft 4.5%, the second is General
Electric 3.5%, the third Cisco Systems 3.5%, the fourth IBM 3.5% and the
fifth Intel 3.2%. A note below the table reads "As a percentage of net
assets on December 31, 1999."]
Performance results
For the 12 months ended December 31, 1999, the Fund posted a total
return of 20.71% at net asset value. This compares with the 21.04%
return of the S&P 500 Index and the 29.93% return of the average
variable annuity growth fund, according to Lipper, Inc. The Fund's
double-digit performance was driven, in large part, by its heavy
weighting in high-flying technology stocks. The same holds true for
many of its competitors, who had even greater exposure to the
technology sector, and that gave them a performance edge. Historical
performance information can be found on page 15.
"Technology-
related and
communication
services
stocks were
the Fund's
strongest
contributors
to performance."
Financial services cut
Rising interest rates prompted us to move out of several financial
companies that were strong contributors to performance earlier in the
year. Taking profits, we either pared back or eliminated the Fund's
positions in Providian, Wells Fargo, Bank of America, American Express
and Citigroup, sharply reducing the portfolio's overall financial
weighting. What remained was an emphasis on several bank, consumer
finance and insurance stocks that, as possible acquisition targets,
stand to be beneficiaries of the recently passed financial reform bill.
American General and MBNA Corp. are two such holdings.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with 0% at
the bottom and 40% at the top. The first bar represents the 20.71% total
return for John Hancock V.A. Large Cap Growth Fund. The second bar
represents the 29.93% total return for Average variable annuity growth
fund. A note below the chart reads "The total return for John Hancock
V.A. Large Cap Growth Fund is at net asset value with all distributions
reinvested. The average variable annuity growth fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Health care
Looming patent expirations and Medicare reform made for a tough year in
pharmaceutical stocks. Early on, we significantly reduced the Fund's
health-care exposure, sidestepping the sector's downturn. By mid-fall,
however, valuations had become so attractive that we added back to
companies such as Schering-Plough and Warner-Lambert. The proposed
acquisition of Warner-Lambert by American Home Products sent
Warner-Lambert's stock price -- and many others -- soaring in November
and then plunging in December as investors decided that mergers in this
arena have had a spotty record of success. We had reduced the Fund's
position in Warner-Lambert before December's rout and realized profits.
While we are still holding some fundamentally sound pharmaceutical
stocks, we are also exploring growth prospects in medical device and
biotechnology companies.
"...we shall
become
increasingly
selective
going
forward."
Retail
In the period's first half, we favored cyclically oriented retailers,
such as Home Depot, Costco, Lowe's and Wal-Mart Stores -- all of which
experienced strong run-ups in price. By late summer, believing in the
likelihood of an economic slowdown, we re-deployed assets into the more
defensive consumer staple sector. Although holdings such as Kroger, CVS
and Safeway suffered along with many others later in the period, they
remain in the portfolio because we believe investors will find their
predictable earnings appealing should the economy slow.
Technology and communication services
Technology-related and communication services stocks were the Fund's
strongest contributors to performance. Among the main drivers were
those companies focused on the Internet and its build-out, such as EMC
Corp., Sun Micro-systems and Cisco Systems. The expansion of global
telecom also fueled the performance of Motorola and Lucent
Technologies, two companies involved in the building of the tele-
communications infrastructure. Wireless service providers such as
Nextel Communications and Sprint PCS also rocketed to new heights as
subscriber growth accelerated.
Interestingly, the dawning of the digital age and the explosion of the
Internet are helping the performance of several non-tech holdings, such
as Best Buy, a consumer electronics retailer, and advertising and cable
companies such as the Interpublic Group and Cablevision Systems,
respectively.
Outlook
We enter 2000 with somewhat of a wary eye on technology stocks. Prices
have risen so dramatically that a correction of some sort cannot be
ruled out. Although we expect to continue having substantial exposure
to tech stocks because of their strong growth potential, we shall
become increasingly selective going forward. Given the economy's
uncertain direction, multinational corporations and diversified
industrial firms that can participate in growth overseas, as well as
predictable stable growth players at home, shall also continue to have
fair representation within the portfolio.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 20.71% 61.39%
Average Annual Total Returns (1) 20.71% 15.41%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 20.69% and
14.51%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Large Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $24,250
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Large Cap
Growth Fund on August 29, 1996 and is equal to $16,139 as of December
31, 1999.
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Mid
Cap Growth Fund. Caption below reads "Mid Cap Growth Fund management
team members (l-r)" Barbara Friedman, Lisa Welch and John Golden."]
John Hancock
V.A. Mid Cap Growth Fund
Mid-cap growth stocks take off; Fund posts strong return
The U.S. stock market surprised investors with another year of strong
double-digit gains. Early on, lower short-term interest rates fueled a
rise in mid-cap growth stocks. But signs of slower economic growth soon
caused investors to move back into large-cap names. In early April,
renewed confidence in the economy's strength and the likelihood of
higher interest rates ignited another rise in less expensive mid-cap
stocks, which climbed even as interest rates moved higher. In
mid-summer, inflation concerns, rising interest rates and Y2K
uncertainties stalled the market's climb. With the expectation that
interest-rate hikes were mostly over, inflation was under control and
prospects for technology stocks were stronger than ever, the market
re-accelerated in the fourth quarter. The Russell Midcap Growth Index
returned 51.29% for the year ended December 31, 1999, well ahead of the
21.04% return for the Standard & Poor's 500 Index.
"The Fund
also got a
boost from
strong stock
selection in
the media
sector."
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Omnipoint 1.8%, the second is i2
Technologies 1.8%, the third CMGI 1.8%, the fourth McLeodUSA 1.5% and
the fifth Oak Industries 1.5%. A note below the table reads "As a
percentage of net assets on December 31, 1999."]
Performance review
John Hancock V.A. Mid Cap Growth Fund returned 56.18% at net asset
value, during the same period. This return exceeded the 46.25% return
for the average variable annuity mid-cap fund, according to Lipper,
Inc. Historical performance information appears on page 18.
The Fund benefited from its focus on mid-cap stocks with market
capitalizations between $1 billion and $10 billion, particularly in the
top-performing technology sector. A surge of mid-cap buyouts by both
foreign corporations and large U.S. companies also helped. The Fund
owned stakes in several companies where takeovers were either announced
or took place. These included Ascend Communications, DSP
Communications, Frontier, Omnipoint and Orange Plc in the technology
sector; AMFM and Outdoor Systems in the media area and Oak Industries,
which makes electronic components, and Select Appointments, a European
temporary help agency.
Telecommunications leads
Our concentration in telecommunications semiconductor and service
stocks served us particularly well. Among our top performers were
Global Crossing, NEXTLINK Communications and McLeodUSA, all of which
are involved in building fiber-optic networks, as well as Corning,
which supplies the fiber for the networks. Other winners included
wireless phone companies Omnipoint, Nextel Communications and
VoiceStream Wireless, and Conexant Systems, Comverse Technology and
QUALCOMM, all of which provide equipment to the telecommunications
industry. Each of these stocks returned over 100% for the period.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with 0% at
the bottom and 60% at the top. The first bar represents the 56.18% total
return for John Hancock V.A. Mid Cap Growth Fund. The second bar
represents the 46.25% total return for Average variable annuity mid-cap
fund. A note below the chart reads "The total return for John Hancock
V.A. Mid Cap Growth Fund is at net asset value with all distributions
reinvested. The average variable annuity mid-cap growth fund is tracked
by Lipper, Inc. See the following page for historical performance
information."]
Software and Internet winners
Many of our other technology names also did quite well. In the software
sector, i2 Technologies, a leading supply-chain vendor, and VERITAS
Software both saw their stock prices climb with growing demand for
their products. Internet stocks, which we had begun adding to in
August, also took off late in the year. We benefited from owning CMGI,
a holding company with a portfolio of Internet stocks, and DoubleClick,
an Internet advertising company.
Media and energy pay off
The Fund also got a boost from strong stock selection in the media
sector. We focused on media outlets that offer consumer companies a
more targeted and cost-effective way to advertise. Among the names we
owned were Outdoor Systems, a billboard company that was acquired by
Infinity Broadcasting; Univision Communications, a Spanish language
television company; Hispanic Broadcasting, a Spanish language radio
company; and AMFM, a U.S. radio company that is being bought out by
Clear Channel Communications.
Our stake in energy stocks, which we began increasing late last winter
when oil prices were around $11 per barrel, also helped the Fund's
returns. Oil service stocks like BJ Services did particularly well as
oil prices approached $25 per barrel, at which point we began taking
profits and reducing our position.
Health care and finance disappoint
Health-care stocks weakened as concerns grew that tightened Medicare
reimbursement policies would hurt profit margins. We sold names like
Cardinal Health, a drug distribution company, and Total Renal Care, a
kidney dialysis company facing internal problems, and focused on
biotechnology companies. In the finance area, we cut back on bank and
insurance stocks, which were hurt by rising interest rates. With
passage of financial reform legislation, however, we expect to see more
consolidation in the insurance sector. Late in the year, we began
buying more shares of Ace, Ltd., a Bermuda-based property and casualty
company, and adding new names like ReliaStar Financial, a life insurer.
"...we've
increased our
investment
in mid-cap
names
with an
international
presence..."
Opportunities ahead
We expect higher interest rates, the labor shortage and higher energy
prices to slow U.S. economic growth in 2000. In addition, some of the
wholesale price increases that we've seen lately may not get passed
onto the consumer, but could instead erode corporate profit margins. In
this kind of environment, we believe strong stock selection -- avoiding
companies whose profit margins may deteriorate -- will become
increasingly important. As we go forward, we also expect the economies
of Europe and Asia to accelerate. With this in mind, we've increased
our investment in mid-cap names with an international presence,
concentrating on sectors that we already like.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (1/7/98)
------- -------
Cumulative Total Returns 56.18% 72.35%
Average Annual Total Returns (1) 56.18% 31.63%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the total return for the one-year
period and since inception would have been 54.82% and 29.40%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Mid Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in both the Standard & Poor's 500 Index and
the Russell Midcap Growth Index. The Standard & Poor's 500 Index is an
unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. The Russell Midcap
Growth Index is an unmanaged index that contains those securities from
the Russell Midcap Index with a greater-than-average growth
orientation. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Mid Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the Russell Midcap Growth Index and is equal to $17,832 as of
December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Mid Cap
Growth Fund on January 7, 1998 and is equal to $17,234 as of December
31, 1999. The third line represents the Standard & Poor's 500 Index and
is equal to $15,565 as of December 31, 1999.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND THOMAS
FINUCANE AND THOMAS GOGGINS, PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A.
Regional Bank Fund. Caption below reads "Fund management team members.
Standing (l-r): Jay McKelvey, Tom Goggins and Tom Finucane. Sitting (l-r):
Lisa Welch, Jim Schmidt and Patricia Ouimet."]
John Hancock
V.A. Regional Bank Fund
Bank stocks lag amid rising interest rates and inflation fears
Bank stocks ran into stiff headwinds during 1999, as the economy
remained remarkably strong, interest rates rose and inflation fears
grew. Banks also fell prey to Y2K concerns and neglect, as investors
left the sector to chase high-flying technology stocks. Even the
passage in November of long-awaited financial reform legislation --
which long term will be a benefit to financial stocks -- sparked only a
two-week rally before bank stocks, with the exception of the behemoth
Citigroup, were quashed again by rate jitters.
Regional bank stocks in particular were hurt by the three interest-rate
hikes implemented by the Federal Reserve in 1999 to cool off the
economy and prevent an inflation spike. There were also a few
headline-grabbing earnings disappointments that overshadowed the
majority of banks, whose fundamentals remained strong.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Mid-State Bancshares 3.9%, the second is
Valley National Bancorp 3.9%, the third Commerce Bancshares 3.8%, the
fourth M&T Bank Corp. 3.7% and the fifth Cullen/Frost Bankers 3.4%. A
note below the table reads "As a percentage of net assets on December
31, 1999."]
Fund performance
The difficult environment caused many financial services mutual funds
to lose ground and John Hancock V.A. Regional Bank Fund was no
exception. For the year ended December 31, 1999, the Fund returned
- -4.86% at net asset value compared to the -1.04% return of the average
open-end financial services fund, according to Lipper, Inc., and the
average 50.22% of Lipper's catchall group of variable annuity
specialty/miscellaneous funds. The Fund's underperformance was clearly
due to our focus on regional banks and thrifts, since these
smaller-sized companies were decidedly out of favor again in 1999. We
also do not own non-bank financial stocks, such as investment brokerage
firms, or the several large money- center banks -- like Citigroup --
that were the best performers this year.
"The difficult
environment
caused many
financial
services
mutual funds
to lose
ground..."
Fundamentals still strong
We recognize that sector investing is a long-term proposition, and
while sector-specific funds are subject to different and sometimes
greater volatility than the market as a whole, they can also provide
long-term investors with greater outperformance. Despite the current
backdrop, we remain encouraged by the generally positive fundamentals
of our banks and thrifts. The feared global financial crisis of 1998
never materialized and economic growth has been better than
anticipated. As a result, our banks have shown excellent loan growth
and low credit losses. Bank earnings were up approximately 12% for
1999, even in a rising interest-rate environment. This is further proof
that the stock market unfortunately overestimates the impact that
rising rates have on bank profits. While we do expect a small decrease
in net profit margins in 2000, we still anticipate bank earnings growth
of approximately 8% to 10% over 1999.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 10% with -10%
at the bottom and 60% at the top. The first bar represents the -4.86%
total return for John Hancock V.A. Regional Bank Fund. The second bar
represents the -1.04% total return for Average open-end financial
services fund. The third bar represents the 50.22% total return for
Average variable annuity specialty/miscellaneous fund. A note below the
chart reads "The total return for John Hancock V.A. Regional Bank Fund
is at net asset value with all distributions reinvested. The average
open-end financial services fund and variable annuity
specialty/miscellaneous fund are tracked by Lipper, Inc. See the
following page for historical performance information."]
"...passage
of historic
financial-
services
reform
legislation
was the most
important
development..."
Consolidation slows, but remains a key theme
Consolidation activity slowed from its torrid 1998 pace for a number of
reasons. Y2K computer issues were a distraction, banks were still
digesting some recent acquisitions and the pricing environment became
more difficult. This year, three of the Fund's holdings were involved
in mergers. As we have said before, even though the pace of
consolidations will always be affected by market forces, the process is
bound to continue to address the over-capacity that still exists in the
U.S. banking system.
Reform legislation: catalyst for rebound?
The passage of historic financial-services reform legislation was the
most important development for financial companies this year. The bill
amends the Glass-Steagall and Bank Holding Company Acts to permit
banks, insurance companies and securities brokers to affiliate in the
same holding company. As a result, we expect a period of consolidation
featuring just such cross-industry combinations. Specifically, we think
there will be further cases of banks buying brokers, and, more
important, for the first time we should see banks interested in
acquiring insurance companies. This consolidation should produce more
efficient and profitable financial services providers. It will also
reward shareholders through takeover premiums and a greater industry
focus on operating with maximum efficiency to generate shareholder
value.
Strategy stays constant
Throughout the year, we took profits and trimmed our stakes in the
super-regional banks that were the year's better performers, including
Wells Fargo and, earlier in the year, Bank of America. We also took
advantage of price declines to add to our position in banks whose
stocks were undervalued compared to the companies' fundamentals. With
regional bank prices compellingly attractive, we added to such quality
names as First Tennessee, Valley National and Citizens Bank.
Interest rates, cheap stock prices
Uncertainty could keep bank stocks in its grip for a while longer. With
the economy still on a roll, and the market and the Fed focused on
inflation, the possibilities for further rate hikes remain likely.
Until it is clear that the Fed is done raising rates, this nervous
environment will prevail, keeping a cloud over the market and financial
stocks. Our longer-term outlook, on the other hand, is much brighter.
After their recent struggles, bank-stock valuations are very
compelling, selling for 50% less than the price/earnings ratio of the
S&P 500 Index. As long as bank fundamentals remain solid and once
reform legislation kicks in, investors should increasingly recognize
the attractive opportunities the sector offers.
- ---------------------------------------------------------------------------
Sector investing is subject to different, and sometimes greater, risks
than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (5/1/98)
------- -------
Cumulative Total Returns (4.86%) (10.98%)
Average Annual Total Returns (1) (4.86%) (6.74%)
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net
assets.Without the limitation of expenses, the average total return
since inception would have been (6.78%).
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Regional Bank Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Regional Bank Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $13,522
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Regional
Bank Fund on May 1, 1998 and is equal to $8,902 as of December 31, 1999.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND LAURA
ALLEN, CFA, AND ANURAG PANDIT, CFA, PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Small
Cap Growth Fund. Caption below reads "Fund management team members (l-r):
Anurag Pandit, Bernice Behar and Laura Allen."]
John Hancock
V.A. Small Cap Growth Fund
Internet and technology stocks spark a small-cap stock rally in 1999
Good stock picking, particularly among technology names, provided John
Hancock V.A. Small Cap Growth Fund with outstanding results well in
excess of both our peers and benchmark in 1999. For the 12 months ended
December 31, 1999, the Fund posted a total return of 68.52% at net
asset value, compared to the 38.28% return of the average variable
annuity small-cap fund, according to Lipper, Inc. Historical
performance information appears on page 24.
"Since
technology
was the place
to be this
year, we were
well served
by our
sizable
stake..."
A year of rebound
The Fund achieved these results in a year when small-company growth
stocks diverged sharply from small-company value stocks and rallied
significantly, outdistancing the Standard & Poor's 500 Index for the
first time in several years. Small-cap growth stocks were powered
mostly by the amazing strength of the technology sector -- Internet
stocks in particular -- and biotech stocks to a lesser degree. Their
bright prospects caused investors to look beyond rising interest rates,
Y2K worries and profit concerns that weighed on many other industry
groups this year. For the year ended December 31, 1999, the Russell
2000 Growth Index -- the Fund's benchmark -- returned 43.09%, while the
Russell 2000 Value Index lost ground, returning -1.49%. At the same
time, the S&P 500 Index returned 21.04%, most of that performance
coming from a small band of technology names.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Data Return Corp. 1.2%, the second is
Cognizant Technology Solutions 1.2%, the third Pegasus Communications
1.2%, the fourth Aspen Technology 1.1% and the fifth BindView
Development 1.1%. A note below the table reads "As a percentage of net
assets on December 31, 1999."]
Technology rules; telecom grows
Since technology was the place to be this year, we were well served by
our sizable stake in the sector. Although we build the portfolio
stock-by-stock, the broad technology sector, including
telecommunications, provides us with many companies that fit our
investment criteria of having strong and consistent earnings growth,
dominant market share and enlightened management.
During the year, we shifted our semiconductor emphasis away from
companies that service the computer industry toward companies focused
on telecommunications, so we could take better advantage of the
explosion in the worldwide development of telecommunications
infrastructure and services. This area provided us with some of the
Fund's top performers, including RF Micro Devices and Alpha Industries,
which supply chip sets for Nokia and Motorola cell phones,
respectively. Telecom service providers like NEXTLINK Communications
and Allegiance Telecom continue to experience huge growth as they have
beaten the Bell operating companies at developing and providing
sophisticated voice, data and Internet transmission services to mid-
and small-sized companies. With their success, these companies grew too
large for the Fund's small-cap focus so we took profits.
Internet plays
Internet companies held much of the limelight this year and they
provided us with stellar performance. We firmly believe in the
Internet, not just for the myriad ways in which it touches consumers,
but also for the revolutionary impact it is having on how business is
conducted. That said, our weighting does not remain constant, as
happened this year when our stake ranged from 3% to 15% at various
times, the largest stakes at the beginning and end of the year.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 20% with 0% at
the bottom and 80% at the top. The first bar represents the 68.52% total
return for John Hancock V.A. Small Cap Growth Fund. The second bar
represents the 38.28% total return for Average variable annuity small-
cap fund. A note below the chart reads "The total return for John
Hancock V.A. Small Cap Growth Fund is at net asset value with all
distributions reinvested. The average variable annuity small-cap fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
For now, our Internet focus is in two areas. The first is Internet
"tool" companies that provide information about where the Internet is
going and how it, and individual Web sites, are being used. This group
includes companies such as Media Metrix and Forrester Research, for
broad trends, and Accrue Software, WebTrends and Broadbase Software for
company-specific Web-site analysis. A more recent focus is on the
business-to-business subsector ("B2B") involving companies that provide
Internet tools and Web sites to help companies conduct business with
each other online. An example is our recent addition of Chemdex, an
Internet company that distributes pharmaceutical and chemical supplies
online.
Takeovers abound
During the year, the Fund held stakes in more than 20 companies,
representing more than 10% of the Fund's net assets, that were taken
over by larger companies at significant premiums. Among the group were
AboveNet, Level One, Nielsen Media Research, Executive Risk, Hambrecht
& Quist and Abacus Direct.
Radio shines
Our media stocks have been exceptional this year, as consolidation
activity picked up and the strong economy provided a boost to radio
companies' advertising revenue. Pegasus Communications Corp., the
largest rural distributor of Direct TV, saw its stock rise along with a
huge growth in demand for satellite TV. Cumulus Media and Citadel
Communications also served us well, as they are the top consolidation
players in the mid- and small-sized radio markets. Our focus on niche
players like Hispanic Broadcasting and Radio One, which dominate in
urban markets, also paid off.
"Even with
their
advances, the
small-cap
group remains
compellingly
attractive..."
Education disappoints
Along with our strong performance came several disappointments,
particularly among our education companies that provide adult
education, such as ITT Educational Services. The group was held back by
the strong economy, which caused more people to go to work rather than
school.
Going forward
We are keeping our outlook cautiously optimistic for small-company
growth stocks. Even with their advances, the small-cap group remains
compellingly attractive, and that bodes well for both a further market
rally and more takeover activity in the private market, especially
among the high-quality companies the Fund targets.
- ---------------------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 68.52% 102.63%
Average Annual Total Returns (1) 68.52% 23.55%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 68.14% and
22.30%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Small Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell 2000 Index and the Russell
2000 Growth Index. The Russell 2000 Index is an unmanaged small-cap
index that is comprised of 2,000 U.S. stocks. The Russell 2000 Growth
Index is an unmanaged index that contains Russell 2000 Index stocks
with a greater-than-average growth orientation. It is not possible to
invest in an index.
Line chart with the heading John Hancock V.A. Small Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Small Cap Growth Fund on August 29, 1996 and is equal
to $20,263 as of December 31, 1999. The second line represents the
Russell 2000 Growth Index and is equal to $18,525 as of December 31,
1999. The third line represents the Russell 2000 Index and is equal to
$16,724 as of December 31, 1999.
BY PAUL MCMANUS FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Core
Equity Fund. Caption below reads "Fund management team members (l-r):
Stephen Lanzendorf, John Montgomery and Paul McManus."]
John Hancock
V.A. Core Equity Fund
Internet stocks lead a narrow advance
1999 was another banner year for the popular stock averages, but once
again their strength masked extreme selectivity on the part of
investors. The technology sector proved to be a favorite, especially in
the fourth quarter, when the technology-laden Nasdaq Composite Index
skyrocketed. Propelling the rally, however, were a mere handful of
Internet and telecommunications stocks, many of them with sky-high
valuations that fell outside of the Fund's parameters. All in all, it
was a difficult environment for the Fund, which emphasizes broad
diversification and concentrates on undervalued stocks of companies
with improving fundamentals.
Another important development that contributed to the lackluster
performance of the broader market was rising short-term interest rates.
As the year progressed and it became clear that the U.S. economy was
continuing to grow at a robust pace, the Federal Reserve Board raised
interest rates in June, August and November. Despite the Fed's recent
tightening bias, though, rates remained near the low end of their
historical range, and the rate hikes did not stop investors from piling
into a select few market leaders, virtually without regard to value.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Microsoft 4.7%, the second is General
Electric 3.5%, the third Cisco Systems 3.4%, the fourth Citigroup 3.1%
and the fifth MCI WorldCom 2.2%. A note below the table reads "As a
percentage of net assets on December 31, 1999."]
Fund performance
Rather than chase stocks that we considered to be drastically
overvalued, or make big bets on specific stocks or sectors, we
maintained the Fund's disciplined investment strategy. While in some
market environments, for relatively short periods of time, certain
sectors may significantly outperform the rest of the market, we believe
a core-holdings fund such as this one is best served in the long run by
a consistent focus on both diversification and growth at a reasonable
price. Unfortunately, 1999 was one of those years when our approach was
not favored by market conditions, as evidenced by the performance gap
between the Fund and the S&P 500.
"...the Fund's
technology
holdings
did not
have the
eye-popping
gains of the
market
leaders..."
For the year ended December 31, 1999, the John Hancock V.A. Core Equity
Fund had a total return of 13.89% at net asset value. In comparison,
the S&P 500 returned 21.04%, including reinvested dividends. The Fund's
returns were much closer to those of its peer group, as reflected in
the 14.51% return of the average variable annuity growth and income
fund, according to Lipper, Inc. Longer-term performance information can
be found on page 27.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 20% at the top. The first bar represents the 13.89% total
return for John Hancock V.A. Core Equity Fund. The second bar represents
the 14.51% total return for Average variable annuity growth and income
fund. A note below the chart reads "The total return for John Hancock
V.A. Core Equity Fund is at net asset value with all distributions
reinvested. The average variable annuity growth and income fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
Technology and retailing lead the way
Although some of the Fund's technology holdings did not have the
eye-popping gains of the market leaders, we maintained a technology
weighting roughly comparable to that of the S&P 500, and some of our
technology holdings were top contributors to the Fund's performance.
Included were hardware companies Hewlett Packard and Dell Computer,
semiconductor maker Intel and a variety of other technology holdings,
including Teradyne, Cisco Systems, America Online and Microsoft.
"...investors
will likely
continue
to focus
on interest
rates."
The strong economy also benefited well- managed retailers like Home
Depot and Wal-Mart Stores. Home Depot was one of the sector's strongest
performers, boosted by a 3-for-2 split and the stock's inclusion in the
Dow Jones Industrial Average as of late October. From then until year
end, the price of Home Depot shares rose roughly 39%. Wal-Mart advanced
on the basis of strong sales and earnings results, as well as an
announced partnership with America Online.
In the financial sector, a few stocks, such as Citigroup, were able to
buck the interest-rate headwinds in virtue of cost reductions stemming
from recent mergers or acquisitions.
Aerospace and health care struggle
Holding back the Fund's returns were stocks in the aerospace industry.
While industry consolidation helped their performance earlier in the
year, cutbacks in government defense spending resulted in a weak second
half for most aerospace stocks, including B.F. Goodrich, General
Dynamics and Textron. Another weak sector was health care, especially
the hospital management and large pharmaceutical sub-sectors. Hospital
management holdings HEALTHSOUTH and Omnicare were hurt by continued
problems concerning the government's Medicare reimbursement policy. We
sold those two stocks because we didn't see the situation improving any
time soon. The large pharmaceutical company stocks were a different
story. They normally suffer some temporary weakness when the
presidential campaign season rolls around because of the candidates'
penchant for complaining about high drug prices. After reducing the
Fund's large drug-company holdings earlier in 1999 in favor of
biotechnology stocks, we rotated back into drug stocks later in the
year, after the biotechnology sector had enjoyed a strong run.
Outlook
Aside from election-year uncertainties, investors will likely continue
to focus on interest rates. It might be difficult in the short term for
stocks -- even in the technology sector -- to continue advancing in the
face of rising interest rates. However, unless the economy slows
noticeably from its recent pace, the Fed will have no choice but to
increase rates again. In the stock market, the situation appears
somewhat reminiscent of late 1996, when Fed Chairman Alan Greenspan
criticized market participants for their "irrational exuberance" and
raised rates shortly thereafter. We may be in for a repeat performance
of that scenario. Looking at the big picture, though, stocks recovered
nicely from the weakness following the Fed's decision to tighten early
in 1997, and we expect that they could do so should further rate
increases be in the cards for the first half of 2000.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 13.89% 113.61%
Average Annual Total Returns (1) 13.89% 25.52%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 24.99%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Core Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Core Equity Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $24,250
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Core
Equity Fund on August 29, 1996 and is equal to $21,362 as of December
31, 1999.
BY TIMOTHY E. KEEFE, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Large
Cap Value Fund. Caption below reads "Fund management team members (l-r):
Sylvester Marquardt, Tim Keefe and David Eisenberg."]
John Hancock
V.A. Large Cap Value Fund
Technology stocks take market to new heights
The U.S. stock market turned in another banner year, with investor
interest expanding to stocks of all sizes but focusing on just a few
sectors. John Hancock V.A. Large Cap Value Fund more than fully
participated in the market's gains, returning 56.65% at net asset value
for the year ended December 31, 1999. Our strategy of finding great
businesses at relatively low prices compared to the company's true
value again worked well, with the Fund dramatically outperforming the
Standard & Poor's 500 Index, which returned 21.04% for 1999. The Fund
also crushed the average variable annuity growth and income fund, which
returned 14.51% during the same period, according to Lipper, Inc. For
historical performance information, please see page 30.
"Strong stock
selection was
the key to
our success."
The Fund's performance came amidst a backdrop of tremendous market
volatility. Cyclical stocks, those more closely connected to moves in
the economy, rallied in April as investors regained confidence in U.S.
economic growth and overseas economies showed signs of stabilizing. But
the comeback was short-lived, as rising interest rates put pressure on
many sectors, including finance. Even as interest rates climbed,
however, technology and telecommunications stocks continued to hit on
all cylinders, propelling the market to new heights by year-end.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Oak Industries 9.2%, the second is ANTEC
7.5%, the third Amphenol Corp. 5.3%, the fourth QUALCOMM 4.7% and the
fifth Parametric Technology Group 4.1%. A note below the table reads "As
a percentage of net assets on December 31, 1999."]
Strong stock selection
Strong stock selection was the key to our success. Despite a lighter
stake in technology than the S&P 500, the Fund benefited from major
investments in names like QUALCOMM, a semiconductor company that makes
advanced communications systems based on digital wireless technology.
QUALCOMM is a perfect example of our relative value investment
strategy, which we apply to companies wherever we find them -- even in
technology, which is not traditionally viewed as a value sector. We
bought the stock early in the year when it seemed cheap compared to its
potential to grow revenues based on its patented wireless technology.
Conexant Systems, a top provider of broadband and wireless
semiconductors, was a similar story. In 1999, each of these stocks
returned over 500% and together generated approximately 20% of the
Fund's return. We also saw software stocks like Computer Associates
International do well as investors began anticipating a ramp-up in
corporate technology spending. Commonwealth Telephone Enterprises, a
phone company serving rural Eastern Pennsylvania, took off as the
company began successfully entering new markets. Other top performers
included AT&T-Liberty Media Group, a company with ownership interests
in major entertainment networks and video distribution businesses;
Nielsen Media Research, a leading provider of TV audience research that
was recently bought out; and Danka Business Systems, a newly
restructured company that distributes and services office equipment.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 20% with 0% at
the bottom and 60% at the top. The first bar represents the 56.65% total
return for John Hancock V.A. Large Cap Value Fund. The second bar
represents the 14.51% total return for Average variable annuity growth
and income fund. A note below the chart reads "The total return for John
Hancock V.A. Large Cap Value Fund is at net asset value with all
distributions reinvested. The average variable annuity growth and income
fund is tracked by Lipper, Inc. See the following page for historical
performance information."]
Opportunities in electronics
During the spring, we began building a large stake in Oak Industries,
which makes components for the cable TV, wireless and fiber-optics
markets. The stock was cheap, business prospects were excellent and we
expected Oak to spin out or sell off its Lasertron optics division.
Instead Corning, a fiber manufacturer, announced it was acquiring Oak
this past fall. Oak's stock price soared, providing the Fund with
approximately 20% of its return. We also bought Amphenol, a similar
type of company, which has since done well. By contrast, our investment
in ANTEC -- which makes equipment for both the cable TV and broadband
communications industries -- tumbled on near-term concerns. Given the
company's excellent long-term prospects, we held on. We also acquired
Sony at a bargain price, given the company's assets, new video game
offerings and restructuring efforts. Between the time we bought it and
year end, the stock doubled.
Disappointments in finance and health care
Unfortunately, weak pricing and rising interest rates hurt almost all
our insurance stocks. Our largest investment was Ace, Ltd., a property
and casualty insurer with consistent earnings growth that recently
merged with CIGNA. As the stock's price fell, we added to our stake,
believing the company's prospects remain strong. But we gave up on some
of our auto insurance stocks including Progressive, expecting continued
weak pricing. Fortunately, these losses were offset by investments in
Fuji Bank as well as Citigroup, both of which did well as Asian
economies improved. In the health-care sector, we sold Total Renal Care
Holdings, a leading provider of kidney dialysis treatment, whose stock
price tumbled as internal problems surfaced.
"Volatility,
however,
offers
bargain-
hunters like
us great
opportunities..."
Recent additions
During the second half of the year, we made several sizable additions.
We snapped up a stake in Iron Mountain, a paper storage company, on
weakness related to its acquisition of Pierce Leahy, its next largest
competitor. The stock has since rebounded nicely. We also bought zero
coupon bonds issued by Brightpoint, a distributor of wireless phones
and accessories to retailers, whose recent restructuring has begun to
re- awaken investor interest. Finally, we took some profits in QUALCOMM
to buy promising names like software developer Parametric Technology
and disk-drive maker Seagate Technology.
Optimism ahead
Going forward, although 50%-plus annual Fund returns aren't necessarily
the norm, we're optimistic that we'll continue to find more buying
opportunities like these. We expect the stock market to remain volatile
in 2000, especially as investors wait to see what will happen with
interest rates and inflation. Volatility, however, offers
bargain-hunters like us great opportunities to buy leading businesses
at prices that make a lot of sense.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (1/6/98)
------- -------
Cumulative Total Returns 56.65% 90.14%
Average Annual Total Returns (1) 56.65% 38.26%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the annual total return since
inception would have been 38.10%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Value Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Large Cap Value Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Large Cap Value Fund on January 6, 1998 and is equal
to $19,014 as of December 31, 1999. The second line represents the Standard
& Poor's 500 Index and is equal to $15,565 as of December 31, 1999.
BY JOHN F. SNYDER III, PORTFOLIO MANAGEMENT TEAM LEADER, BARRY H.
EVANS, CFA, AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A.
Sovereign Investors Fund. Caption below reads "Portfolio managers (l-r):
Barry Evans, Peter Schofield and John Snyder."]
John Hancock
V.A. Sovereign Investors Fund
Driven by narrow universe of stocks, market
indices end the century with big gains
The last year of the millennium was certainly full of surprises for
investors. A year ago, after an unprecedented four years of
double-digit gains, most market experts warned investors that stocks
couldn't possibly repeat their outstanding performance again in 1999.
However, with stronger-than-expected growth and continued low
inflation, the economy beat the odds and the experts were proven wrong.
With the favorable economic backdrop, the major stock market indices
posted remarkable gains with the Standard & Poor's 500 Stock Index
rising 21.04%, the Dow Jones Industrial Average advancing 27.20% and
the Nasdaq Composite Index surging a whopping 86.12%.
The market's blockbuster returns were driven by a very narrow universe
of stocks. Investors spent the year chasing after the same small group
of high-flying technology stocks. In hopes of landing on the next big
winner in the information-technology revolution, investors focused on
momentum stocks -- those that are going up -- while ignoring both
quality and valuations. In the process, most non-technology stocks were
left behind and many even declined for the year. In fact, there was a
huge discrepancy between the winners and losers. Even though the Nasdaq
Composite soared, a large number of stocks in the Index actually posted
losses for the year. And the return on the S&P 500, if you exclude
technology stocks, was only 3.1%, according to the Leuthold Group, a
stock market research firm.
[Table at bottom left hand column entitled "Top Five Common Stock
Holdings". The first listing is Interpublic Group 3.8%, the second is
Chevron Corp. 3.5%, the third Citigroup 2.9%, the fourth Avery Dennison
2.6% and the fifth SYSCO Corp. 2.6%. A note below the table reads "As a
percentage of net assets on December 31, 1999."]
"...our more
conservative
investment
approach was
clearly out
of favor."
Understanding performance
In this technology-driven market, our more conservative investment
approach was clearly out of favor. As we have discussed in past
reports, most technology companies don't meet our investment criterion
of consistently increasing dividends for the past 10 years. That's
because technology companies tend to reinvest their earnings rather
than using them to pay out dividends. What's more, we focus on
companies with stable earnings growth, solid fundamentals and
reasonable valuations. In a momentum-driven market -- as we experienced
in 1999 -- investors were interested in only one thing -- that is,
rising stock prices -- and they ignored our key tenets of earnings
growth, valuations and fundamentals. So it's not surprising when you
look at the performance figures that the Fund wasn't able to keep up
with its more aggressive peers.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 2% with 0% at
the bottom and 10% at the top. The first bar represents the 3.84% total
return for John Hancock V.A. Sovereign Investors Fund. The second bar
represents the 9.78% total return for Average variable annuity equity
income fund. A note below the chart reads "The total return for John
Hancock V.A. Sovereign Investors Fund is at net asset value with all
distributions reinvested. The average variable annuity equity income
fund is tracked by Lipper, Inc. See the following page for historical
performance information."]
"...we believe
that the
economy will
continue to
grow, albeit
at a slower
rate..."
While investment styles go in and out of favor -- and it's impossible
to time those shifts in the market -- history has shown that it's
better to invest for the long term rather than trying to chase the
flavor of the day. The Fund is designed for conservative investors who
want solid returns over the long haul without a lot of risk. Although
we, too, are frustrated by the narrowness of the current market, we
still firmly believe that our Dividend Performers strategy has
delivered, and will continue to deliver, on that promise. So we
encourage you to keep the long-term picture in mind when you look at
short-term performance numbers.
Performance scorecard
For the 12 months ended December 31, 1999, John Hancock V.A. Sovereign
Investors Fund returned 3.84% at net asset value, compared to the 9.78%
return of the average variable annuity equity income fund, according to
Lipper, Inc. See page 33 for historical performance information.
Profit-taking in retail stocks
One of our top-performing sectors in this narrow market was retail
stocks. Thanks to strong wage growth and a healthy stock market,
consumers have gone on a spending spree. That has benefited retailers
such as mass-merchandise giant Wal-Mart Stores and department store
Dayton Hudson. While the fundamentals of these companies remain
extremely solid, we believe their valuations have become a bit
expensive. In addition, it's hard to imagine that consumers will be
able to continue spending at the same rate throughout 2000. So we have
taken advantage of the market's strength to take profits in these
holdings in favor of ones that offer better relative value.
Increasing capital goods
In turn, we've added to our position in capital goods stocks, because
we firmly believe that the stock market will broaden out in 2000. When
it does, capital good stocks will start to look more appealing to
investors. Not only are these stocks undervalued, but they are
benefiting from a pickup in the U.S. industrial sector as well as a
turnaround in the global economy. So we've beefed up our holdings in
multinational capital goods companies such as Avery Dennison, Dover
Corporation and Minnesota Mining & Manufacturing.
Outlook
As we enter the new millennium, we are cautiously optimistic. As
investors try to figure out where the market is headed in 2000, we are
likely to experience some volatility. A big question weighing on
investors' minds is whether the technology bull market will continue
for another year, and that's likely to add to the uncertainty.
On the positive side, however, we believe that the economy will
continue to grow, albeit at a slower rate, and we see no reason for
inflation to pick up significantly. Given that, we expect interest
rates to begin to trend down in the second half of the year. As we
mentioned above, we also believe that participation in the market's
bounty will eventually broaden, allowing a wider variety of stocks to
prosper. When that happens, we expect stocks that were out of favor in
1999 -- many of which are Dividend Performers -- to make a recovery.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 3.84% 68.79%
Average Annual Total Returns (1) 3.84% 16.97%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
for the one-year period and since inception would have been 3.84%
and 16.59%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Sovereign Investors Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $10,000 investment in the Standard & Poor's 500
Index -- an unmanaged index that includes 500 widely traded common
stocks and is often used as a measure of stock market performance. It
is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Sovereign Investors Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $24,250
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Sovereign
Investors Fund on August 29, 1996 and is equal to $16,880 as of December
31, 1999.
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND ANTHONY A.
GOODCHILD, BENJAMIN MATTHEWS AND TRIET NGUYEN, PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Bond
Fund. Caption below reads "Fund management team members (l-r): Ben
Matthews, Jim Ho, Triet Nguyen and Tony Goodchild."]
John Hancock
V.A. Bond Fund
Inflation concerns, rising interest rates depress bond market
Calendar 1999 was the second-worst year for the broad fixed-income
market in more than two decades. The persistent strength of the U.S.
economy not only caused investors to worry about higher inflation, it
also prompted the Federal Reserve Board to raise short-term interest
rates three times during the year. When the books finally closed on
1999, the majority of benchmark fixed-income indices posted negative or
flat results, with only a few showing ever-so-slight gains. In a
dramatic about-face from 1998, U.S. Treasury securities turned in the
worst performance of all fixed-income sectors, while emerging-market
bonds rallied to the top spot. The remaining sectors performed
fitfully, causing most bond funds to produce disappointing results.
"...second-
worst year
for the broad
fixed-income
market in
more than
two
decades."
[Table at bottom left hand column entitled "Top Five Bond Sectors".
The first listing is U.S. Government & Agencies 43%, the
second is Finance 14%, the third Utilities 8%, the fourth
Telecommunications 6% and the fifth Media 4%. A note below the table
reads "As a percentage of net assets on December 31, 1999."]
Market turmoil hindered Fund's performance
For the 12 months ended December 31, 1999, John Hancock V.A. Bond Fund
returned a total of -0.51% at net asset value. This compares with the
- -1.94% return of the average variable annuity corporate debt A-rated
fund, according to Lipper, Inc. Historical performance information can
be found on page 36.
Flexibility proved vital
Throughout 1999, the bulk of the Fund's net assets remained invested in
the corporate arena -- both in investment-grade bonds and to a lesser
extent in high-yield issues. Remaining assets were invested in U.S.
government bonds, agency securities and asset-backed obligations. We
avoided emerging-market debt, believing that the current risks and
volatility associated with these securities remain excessive.
We also paid particular attention to the Fund's average duration (a
measure of its sensitivity to interest rate changes) relative to its
benchmark. For defensive purposes, we maintained a relatively short
duration through early fall, as a shorter duration tends to help buoy a
portfolio's share price when interest rates rise. Keeping in mind that
such a stance may also inhibit a portfolio from participating fully in
price appreciation possibilities, we extended duration slightly in the
year's final months as it appeared much of the bad news had already
been priced into the market. Our duration posture now stands at neutral
to the portfolio's benchmark.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 5% with -5% at
the bottom and 15% at the top. The first bar represents the -0.51% total
return for John Hancock V.A. Bond Fund. The second bar represents the -
1.94% total return for Average variable annuity corporate debt A-rated
fund. A note below the chart reads "The total return for John Hancock
V.A. Bond Fund is at net asset value with all distributions reinvested.
The average variable annuity corporate debt A-rated fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Corporate tactics
At the outset of the fiscal year, we bolstered the Fund's corporate
bond exposure, participating in that sector's run-up through mid-April.
By mid-year, we had begun paring back on corporate issues, as increased
volatility seemed likely. We used the proceeds to slightly increase the
Fund's stake in long-term U.S. Treasury bonds. Doing so enabled us to
avoid the worst of the summer's downdraft in the corporate sector. By
early September, corporate prices presented value and we began adding
back positions. When the new-issue calendar failed to be as heavy as
first anticipated, credit spreads (the difference in yield between
bonds of different credit quality) narrowed and prices rose.
Cyclical theme introduced
With the economy strong, we introduced A- and BBB-rated names of a
cyclical nature in the energy, paper, industrial and real estate
investment trust (REIT) sectors during the year. These included Ocean
Energy, Apache Finance Canada Corp., Abitibi-Consolidated, Packaging
Corp. of America, Lyondell Chemical, Lockheed Martin and ProLogis
Trust.
Telecom and cable stars
The very same investor sentiment and dynamic growth potential that are
fueling the stock performance of telecommunication and cable companies
are also doing so on the fixed-income side. With a sizable weighting in
telecom and cable bonds, the Fund was able to participate in the
technology explosion. Holdings such as Orange Plc, a wireless operator
in the U.K., Qwest Communications, Chancellor Broadcasting, Adelphia
Communications, Continental Cable-vision, Metromedia Fiber, Global
Crossing, SFX Broadcast, PSINet and Nextel Communications all worked
well for the Fund.
"...we are
optimistic
that the
bond market
will find its
footing before
2000 ends."
U.S. government sector strategies
We moved out of intermediate-term holdings and into 30-year issues
later in the period to create more of a barbell structure, which means
these assets are clustered at both the short and long end of the
Treasury maturity spectrum. This type of structure historically works
well in a flattening yield curve environment. Should the Fed continue
to demonstrate its vigilance in containing inflation, as we expect it
will, then the yield curve may well flatten. Short-term rates could
rise and longer-term rates could decline, as investors become more
comfortable owning longer-term debt once the threat of inflation is
removed.
In the fall, we swapped out of some mortgage-backed issues as they
recovered in price and purchased a few government agency positions,
such as Fannie Mae. Should the economy slow later in 2000, agency bonds
tend to have a structure that can benefit from a decline in mortgage
rates.
Crosscurrents may still exist in the near term
We enter 2000 with market uncertainty intact. It appears all eyes are
on upcoming economic reports and the Fed to determine what direction
the economy, inflation and interest rates may likely take. Corporate
bond supply could prove a problem in the months ahead as the new-issue
calendar may start to pick up steam. Despite the possibility of
near-term unease, we are optimistic that the bond market will find its
footing before 2000 ends.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns (0.51%) 24.25%
Average Annual Total Returns (1) (0.51%) 6.72%
YIELD
As of December 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. Bond Fund (1) 6.66%
Total return measures the change in value of an investment from the beginning
to the end of a period, assuming all distributions were reinvested.
Performance figures reflect the effect of investment-related charges on the
underlying funds, but do not include insurance and other charges levied at
the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (0.77%) and
5.59%, respectively, and the yield would have been 6.40%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Lehman Brothers Corporate Bond Index --
an unmanaged index that mirrors the investment objectives and
characteristics of the Fund. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Bond Fund, representing
the growth of a hypothetical $10,000 investment over the life of the
fund. Within the chart are two lines. The first line represents the
value of the hypothetical $10,000 investment made in the John Hancock
V.A. Bond Fund on August 29, 1996 and is equal to $12,419 as of December
31, 1999. The second line represents the Lehman Brothers Corporate Bond
Index and is equal to $12,302 as of December 31, 1999.
BY ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
FREDERICK L. CAVANAUGH, JR., JANET L. CLAY, CFA, AND DANIEL S. JANIS,
PORTFOLIO MANAGERS
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. High
Yield Bond Fund. Caption below reads "Fund management team members (l-r):
Janet Clay, Dan Janis, Arthur Calavritinos and Fred Cavanaugh."]
John Hancock
V.A. High Yield Bond Fund
Fund outperforms its peers as most bonds struggle
In 1999, bond investors in nearly every category suffered through their
worst year since 1994 and second-worst since 1973. The U.S. economy
remained surprisingly robust, economies worldwide stabilized and
commodity prices rose, so fears grew that inflation would re-emerge. A
glut of new corporate bond issuance in anticipation of Y2K was also met
with lackluster demand, as investors were lured to the dazzling returns
of technology stocks. This combination of factors caused interest rates
to rise and bond prices to fall from the spring until the year's end.
Starting in June, the Federal Reserve Board raised short-term interest
rates three times to try to cool off the economy and prevent an
outbreak of inflation, which bond investors dread since it erodes the
value of their fixed-income streams. U.S. Treasury bonds, which are the
most sensitive to interest-rate moves, were especially hard hit.
High-yield bonds, those rated below investment grade, fared better than
Treasuries as their higher yields helped better offset price declines.
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into six sections (from top to
left): Convertible Bonds 4%, Short-Term Investments & Other 4%,
Preferred Stock 6%, Common Stock 7%, Foreign Corporate Bonds 19% and
U.S. Corporate Bonds 60%. A note below the chart reads "As a percentage
of net assets on December 31, 1999."]
Fund performance
John Hancock V.A. High Yield Bond Fund's overweighting in cyclical
names and our ability to invest in a limited amount of equities helped
the Fund substantially outperform its peers. For the year ended
December 31, 1999, the Fund posted a total return of 13.12% at net
asset value, compared to the 3.83% return of the average variable
annuity high current yield fund, according to Lipper, Inc. Historical
performance information can be found on page 39.
"...overweighting
in cyclical
names and
our ability to
invest in a
limited
amount of
equities
helped..."
Paper, energy rebound
Rising oil prices and rebounding Asian economies boosted our cyclical
companies whose fortunes are closely tied to moves in the economy.
Energy and paper companies in particular were two areas of strength.
Our bond and stock holdings in Key Energy Services rebounded as oil and
gas drilling revived with oil prices and fueled demand for the types of
well- maintenance services that Key Energy provides. Brazilian company
Trikem, a producer of PVC, was also one of our top performers.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 13.12% total
return for John Hancock V.A. High Yield Bond Fund. The second bar
represents the 3.83% total return for Average variable annuity high
current yield fund. A note below the chart reads "The total return for
John Hancock V.A. High Yield Bond Fund is at net asset value with all
distributions reinvested. The average variable annuity high current
yield fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
Canadian paper companies Repap New Brunswick and Abitibi-Consolidated,
whose stock we hold, contributed significantly to performance, as paper
prices rose along with Asian demand, which had virtually dried up
during Asia's near-depression last year.
"...individual
credit
selection is
becoming
more
important
than ever."
Avoiding trouble
Individual security selection was an important factor for us this year
- -- especially the names we avoided. The number of high-yield companies
that failed to execute their business plans rose somewhat in 1999,
including such high-profile names as Iridium and Fruit of the Loom,
neither of which we owned. Our underweight in textile and health-care
companies in general served us well, although we did not succeed in
sidestepping all troubles. By definition, companies rated below
investment grade are subject to greater risk of default and earnings
disappointments. Textile loom manufacturer Steel Heddle and Imperial
Home Decor were two examples, as was Integrated Health Services, which
was stung by questions about billing practices in Florida and federal
reimbursement levels.
Better quality and value overseas
In contrast to the saturated U.S. market, we are now finding better
quality and value overseas, particularly lately in Western Europe,
where high-yield bond issuance is continuing to grow, offering us
better deals and higher-quality companies to choose from. As a result,
we added or boosted our stakes in overseas telecommunications, paper
and energy companies. Our biggest positions are a 5% stake in the
Netherlands and the United Kingdom. In fact, our foreign holdings
contributed to our outperformance this year, because their prices were
steadier, at the same time that we continued to earn an attractive
level of current income. In addition to the paper and energy companies
we mentioned earlier, we also had good results from our
telecommunications names, such as Dutch phone company VersaTel Telecom
International, which provides voice, data and Internet transmission
service to small and mid-sized businesses in Europe. Omnipoint did well
when it was recently taken over by VoiceStream. We will continue to use
our ability to invest overseas to take advantage of this growing part
of the high-yield universe, keeping in mind, of course, the added risks
that accompany international investing.
A look ahead
Our outlook remains cautiously optimistic for high-yield bonds, as they
continue to present very attractive values and income streams. Yet we
believe individual credit selection is becoming more important than
ever. Should the Fed's tightening measures slow the U.S. economy down
too much, it will become even more difficult for high-yield companies
with aggressive business plans to reach their earnings targets. We will
continue to apply our in-depth fundamental analysis toward finding
companies worth the extra risk that we are taking to own them.
- ---------------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting. See the prospectus for the risks of investing in
high-yield bonds.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (1/6/98)
------- -------
Cumulative Total Returns 13.12% 2.04%
Average Annual Total Returns (1) 13.12% 1.02%
YIELD
As of ended December 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. High Yield
Bond Fund (1) 11.87%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of
investment-related charges on the underlying funds, but do not include
insurance and other charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 12.94% and
0.78%, respectively, and the yield would have been 11.69%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. High Yield Bond Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Lehman Brothers High Yield Bond
Index -- an unmanaged index of fixed-income securities that are
similar, but not identical, to the bonds in the Fund's portfolio. It is
not possible to invest in an index.
Line chart with the heading John Hancock V.A. High Yield Bond Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Lehman Brothers High Yield Bond Index and is equal to
$10,430 as of December 31, 1999. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock V.A. High
Yield Bond Fund on January 6, 1998 and is equal to $10,204 as of
December 31, 1999.
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 3" photo at bottom right side of page of John Hancock V.A. Money
Market Fund. Caption below reads "Fund management team members Barry
Evans and Dawn Baillie."]
John Hancock
V.A. Money Market Fund
Robust economy provokes Federal Reserve to raise rates
three times in 1999
Money-market yields rose in 1999 as the result of several important
changes in the economic environment. Global economies began to
stabilize from the turmoil in 1998 that had caused the U.S. Federal
Reserve Board and governments around the world to lower rates to
prevent global recession. At the same time, the U.S. economy continued
to grow at an amazingly strong rate.
"Money-market
yields rose
in 1999..."
When the year began, signs of strength were not so pronounced, and with
global uncertainties remaining, the Fed stayed on the sidelines during
the first three months. Although inflation remained tame, U.S. growth
began to pick up steam, aided in part by the booming stock market and
the "wealth effect" it created. In the spring, investors grew more
nervous and pushed interest rates higher, anticipating that the
economy's strength, coupled with the lowest unemployment level in
years, would lead to Fed action. Even the market's moves were not
enough to slow the roaring U.S. economy, and the Fed wound up raising
short-term rates three times between June and November as preemptive
strikes aimed at gradually cooling down the economy and nipping any
hint of inflation in the bud. As a result, the federal funds rate --
that which banks charge each other for overnight loans -- rose from
4.75% at the beginning of the year to 5.50% at the end of December.
Money-market yields also moved up in response, since the federal funds
rate is a key pricing benchmark for money-market securities.
7-day effective yield
On December 31, 1999, John Hancock V.A. Money Market Fund had a 7-day
effective yield of 5.02%. By comparison, the average taxable
money-market fund had a 7-day effective yield of 5.13%, according to
Lipper, Inc.
Maturity moves
For the first three months of 1999, we kept the Fund's maturity
slightly longer than average, because with the global economies still
in turmoil, we expected the Fed to stand aside, which it did. Our more
aggressive approach allowed us to lock in some higher yields early on.
But with each passing month, as evidence grew that the U.S. economy was
gaining steam, the Fed's attention turned away from the global scene
toward the home front. Anticipating rate hikes, we scaled back the
Fund's maturity to be right in line with the average money-market
fund's by the end of June, and we stayed on average for the rest of the
year. This way, we didn't have our money locked up for as long, and
were ready to reinvest in higher-yielding securities after the Fed's
rate hikes in June, August and November. The only exception came as we
approached year end and shortened briefly to enable the Fund to
accommodate potential increased liquidity demands as a result of the
approaching changeover to the year 2000.
[Bar chart at the top of left hand column with heading "7-Day Effective
Yield". Under the heading is a note that reads "As of December 31,
1999." The chart is scaled in increments of 1% with 0% at the bottom and
6% at the top. The first bar represents the 5.02% total return for John
Hancock V.A. Money Market Fund. The second bar represents the 5.13%
total return for Average taxable money-market fund. A note below the
chart reads "The average taxable money-market fund is tracked by Lipper,
Inc. Past performance is no guarantee of future results."]
"...we expect
growth to
slow, but
possibly not
until the
second half
of 2000."
A look ahead
With three interest rate hikes now working their way through the
economy, we expect growth to slow, but possibly not until the second
half of 2000. In the meantime, inflation will remain a concern, and the
ever-vigilant Fed will likely stay in the middle of the action, with
the real possibility of raising rates some more to keep inflation in
check. By how much, and when, depends largely on the important monthly
and quarterly economic data. Several key reports include the
fourth-quarter gross domestic product (GDP) numbers and those dealing
with employment figures, especially the employment cost index. It is
the most accurate way to measure wage inflation, and since it's a
quarterly, rather than a monthly, report, it also is very useful in
determining if new trends are emerging. Given the prevailing
uncertainty, we will keep the Fund's maturity close to the average
until it is clear that the Fed is done raising rates. As always, we
will also stay focused on providing the Fund with a competitive level
of current income, while preserving stability of capital.
- ---------------------------------------------------------------------------
An investment in the Fund is not insured or guaranteed by the FDIC or any
other government agency. Although the Fund seeks to maintain a net asset
value of $1.00 per share, it is possible to lose money by investing in the
Fund.
BY FREDERICK L. CAVANAUGH, JR., PORTFOLIO MANAGEMENT TEAM LEADER, AND
ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGER
[A 3" x 3" photo at bottom right side of page of John Hancock V.A.
Strategic Income Fund. Caption below reads "Fund management team members
(l-r): Dan Janis, Arthur Calavritinos and Fred Cavanaugh."]
John Hancock
V.A. Strategic Income Fund
Inflation jitters, rising rates roil global bond markets
The ongoing strength of the U.S. economy, the comeback of many foreign
economies and persistent worldwide inflation fears weighed heavily on
most global bond markets throughout 1999. Reacting to evidence that the
U.S. economy was growing at a much faster-than-anticipated clip and
that many overseas economies had apparently bottomed, the Federal
Reserve raised interest rates three times by a total of three-quarters
of a percentage point to stave off potential inflation pressures. Bond
investors dislike even the hint of inflation because it eats into the
returns of fixed-income investments. In response, Treasuries had their
second-worst year since 1973. Although there was spotty evidence that
inflation was on the rise, it remained under the historically low level
of 3%.
"Among
our best
performers
were
telecommunications
companies..."
European government bonds performed slightly better, although rising
interest rates on that continent muted their returns. Practically the
year's only bright spot was the comeback of emerging-market bonds.
Beginning the year at depressed levels, emerging-market bonds posted
double-digit gains, as Asian and Latin American economies rebounded,
alleviating fears of a global economic meltdown.
[Table at bottom left hand column entitled "Top Five Bond Sectors". The
first listing is Telecommunications 33%, the second is U.S. Government
23%, the third Media 7%, the fourth Leisure 5% and the fifth Foreign
Governments 4%. A note below the table reads "As a percentage of net
assets on December 31, 1999."]
The high amounts of income they carry helped high-yield corporate bonds
outpace Treasuries, although they posted only modest gains. Demand for
high-yield bonds was rather anemic given the red-hot stock market and
concerns about potential Y2K. Meanwhile, the supply of high-yield
securities expanded. Many corporations rushed to issue debt in the
summer and fall to lock in relatively low interest rates, while others
accelerated issuance in order to sidestep potential fourth quarter
Y2K-related bumps.
Performance review
For the 12 months ended December 31, 1999, John Hancock V.A. Strategic
Income Fund posted a total return of 4.82% at net asset value, compared
with the 0.79% return of the average variable annuity general bond
fund, according to Lipper, Inc. Historical performance information can
be found on page 44.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year ended
December 31, 1999." The chart is scaled in increments of 1% with 0% at
the bottom and 5% at the top. The first bar represents the 4.82% total
return for John Hancock V.A. Strategic Income Fund. The second bar
represents the 0.79% total return for Average variable annuity general
bond fund. A note below the chart reads "The total return for John
Hancock V.A. Strategic Income Fund is at net asset value with all
distributions reinvested. The average variable annuity general bond fund
is tracked by Lipper, Inc. See the following page for historical
performance information."]
High-yield corporate bonds
Throughout the period, we continued to maintain a relatively large
weighting in high-yield corporate bonds, reflecting our view that they
continue to offer an attractive combination of value and high income.
Among our best performers were telecommunications companies such as
TeleCorp PCS, a wireless telecommunications provider that continued to
enjoy good subscriber growth. Another strong performer was RCN Corp., a
provider of communications services to the residential market that was
boosted by expansion of its service area. On the flip side, our
disappointments included movie theater chain Regal Cinemas, which
posted worse-than-expected earnings after failing to execute its
aggressive expansion plan, and coal company AEI Resources, which
suffered from weak coal prices and rising transportation costs.
Government bond choices
Our stake in high-quality government bonds was tilted in favor of U.S.
Treasuries during the period. Although they had a rather tough go of
it, we continued to hold onto Treasuries because they offered yields
well in excess of most high-quality government bonds elsewhere,
including Europe. We also had holdings in government bonds from the
United Kingdom and Canada, which offered competitive yields and
performed well relative to their U.S. counterparts.
Despite their recent run-up, we did not increase our stake in
emerging-market bonds, which made up less than 3% of the Fund's total
net assets at the end of the period. We think that the potential risks
of owning them over the long term far outweigh the potential rewards.
As has been proven time and again during the last decade, there's often
another proverbial shoe that eventually drops in emerging markets and
investors usually pay a pretty steep price for them. Given the breadth
of our concerns, we chose to invest in emerging markets on a very
selective basis only.
"We believe
that the
high-yield
corporate
market still
offers very
good value."
Outlook
Our view is that high-quality foreign government bonds offer little
value now, with yields well below U.S. Treasuries. And with all the
uncertainty clouding the outlook for emerging markets, we're likely to
keep our stake in them relatively small even though they're attractive
from a yield standpoint. We believe that the high-yield corporate
market still offers very good value. Yields on most high-yield bonds
are around 12%, a historically wide spread compared with the 6.5% yield
on Treasuries. The U.S. economy has recently shown some signs of
slowing, which would likely be a positive for high-yield bonds since
interest rates could stabilize or fall as a result. As long as economic
growth remains reasonably good, companies that issue high-yield debt
will likely fare well.
- ---------------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 4.82% 30.85%
Average Annual Total Returns (1) 4.82% 8.39%
YIELD
As of ended December 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. Strategic
Income Fund (1) 9.17%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 4.80% and
8.05%, respectively, and the yield would have been 9.15%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Strategic Income Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Lehman Brothers Government/Corporate
Bond Index -- an unmanaged index that measures the performance of U.S.
government bonds, U.S. corporate bonds and Yankee bonds. It is not
possible to invest in an index.
Line chart with the heading John Hancock V.A. Strategic Income Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Strategic Income Fund on August 29, 1996 and is equal
to $13,086 as of December 31, 1999. The second line represents the
Lehman Brothers Government/Corporate Bond Index and is equal to $12,302
as of December 31, 1999.
FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
December 31, 1999
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
FINANCIAL 500 INDEX INTERNATIONAL LARGE CAP MID CAP REGIONAL SMALL CAP
INDUSTRIES FUND FUND FUND GROWTH FUND GROWTH FUND BANK FUND GROWTH FUND
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at value - Note D:
Common stocks and rights
(cost - $40,561,767,
$26,691,135, $6,322,532,
$17,686,521, $3,914,727,
$21,491,150 and $13,700,474,
respectively) $47,253,646 $37,800,781 $8,705,667 $21,708,313 $5,751,575 $19,518,770 $20,626,058
Short-term investments
(cost - $1,578,000,
$145,000, $811,763,
$286,000, $620,000,
$926,000 and $263,000,
respectively)
- - Note B 1,578,000 145,000 811,763 286,000 620,000 926,000 263,000
Corporate savings account 293 -- -- 691 832 750 350
----------- ----------- ---------- ----------- ---------- ----------- -----------
48,831,939 37,945,781 9,517,430 21,995,004 6,372,407 20,445,520 20,889,408
Cash -- 19,391 697 -- -- -- --
Foreign currency, at value
(cost - none, none, $303,
none, none, none and none,
respectively) -- -- 299 -- -- -- --
Receivable for investments sold 865,257 -- 256,841 262,845 -- -- 290,013
Receivable for shares sold 146,134 1,518 -- 344 39,915 41 1,235
Receivable for futures variation
margin - Note B -- 850 -- -- -- -- --
Dividends and interest receivable 48,439 34,092 3,777 7,330 1,425 48,801 2,355
Foreign tax receivable 2,151 -- 6,647 -- -- -- --
Receivable from John Hancock
Advisers, Inc.
and affiliates - Note C -- 7,419 5,862 -- 286 -- --
Deferred organization expenses
- - Note B -- 3,554 3,554 3,554 -- -- 3,554
Other Assets 5,271 4,724 631 773 3 45 870
----------- ----------- ---------- ----------- ---------- ----------- -----------
Total Assets 49,899,191 38,017,329 9,795,738 22,269,850 6,414,036 20,494,407 21,187,435
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian including foreign
currencies
(cost - $348,287, none, none, none,
none, none and none, respectively) 350,882 -- -- -- -- -- --
Payable for investments purchased 188,996 -- 54,813 365,133 32,687 165,307 284,083
Payable for shares repurchased -- 28,716 199 2,135 72 268 8,332
Payable for forward foreign currency
exchange contracts
sold - Note B -- -- 447 -- -- -- --
Payable upon return of securities on
loan - Note B -- -- 334,763 -- -- -- --
Foreign tax payable -- 23 -- -- -- -- --
Payable to John Hancock Advisers, Inc.
and affiliates - Note C 33,589 -- -- 14,439 -- 14,504 5,769
Accounts payable and accrued expenses 13,284 35,374 30,903 16,211 18,477 19,233 22,641
----------- ----------- ---------- ----------- ---------- ----------- -----------
Total Liabilities 586,751 64,113 421,125 397,918 51,236 199,312 320,825
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 46,819,623 26,883,898 6,808,850 17,256,995 4,461,080 22,344,520 12,767,174
Accumulated net realized gain (loss)
on investments, financial futures
contracts and foreign currency
transactions (4,198,815) (49,819) 230,353 593,186 64,872 (80,199) 1,173,892
Net unrealized appreciation
(depreciation) of investments,
financial futures contracts
and foreign currency transactions 6,694,123 11,118,802 2,382,132 4,021,792 1,836,848 (1,972,380) 6,925,584
Undistributed net investment income
(distributions in
excess of net investment income) (2,491) 335 (46,722) (41) -- 3,154 (40)
----------- ----------- ---------- ----------- ---------- ----------- -----------
Net Assets $49,312,440 $37,953,216 $9,374,613 $21,871,932 $6,362,800 $20,295,095 $20,866,610
===============================================================================================================================
Net Asset Value Per Share:
(Based on 3,409,541, 2,097,858,
606,901, 1,387,351,
369,783, 2,371,635 and 1,055,999
shares, respectively,
of beneficial interest outstanding -
unlimited number of
shares authorized with no par value) $14.46 $18.09 $15.45 $15.77 $17.21 $8.56 $19.76
===============================================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and shows the value of what the Fund owns, is due and
owes on December 31, 1999. You'll also find the net asset value per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
(continued)
December 31, 1999
- ---------------------------------------------------------------------------------------
V.A. V.A. V.A.
CORE EQUITY LARGE CAP SOVEREIGN
FUND VALUE FUND INVESTORS FUND
------------ ------------ ------------
<S> <C> <C> <C>
Assets:
Investments at value - Note D:
Common stocks (cost - $35,516,045,
$27,369,628 and $39,421,747,
respectively) $43,061,738 $36,445,309 $45,266,398
Preferred stocks (cost - none, $323,092
and none, respectively) -- 408,125 --
Bonds (cost - none, $959,984 and none,
respectively) -- 1,410,000 --
U.S. government obligations
(cost - none, none and $2,343,102,
respectively) -- -- 2,184,926
Joint repurchase agreements
(cost - $1,770,000, none and $3,398,000,
respectively) 1,770,000 -- 3,398,000
Corporate savings account 914 -- 381
------------ ------------ ------------
44,832,652 38,263,434 50,849,705
Receivable for investments sold -- 1,407,857 --
Receivable for shares sold 157,672 77,289 22,467
Dividends and interest receivable 35,489 24,229 114,324
Foreign tax receivable 45 -- --
Deferred organization expenses - Note B 3,554 -- 3,554
Other assets 2,228 33 3,151
------------ ------------ ------------
Total Assets 45,031,640 39,772,842 50,993,201
- ---------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- 77,031 --
Payable for forward foreign currency
exchange contracts purchased - Note B -- 453 --
Payable for forward foreign currency
exchange contracts sold - Note B -- 446 --
Payable for investments purchased -- 896,171 701,194
Payable to John Hancock Advisers, Inc.
and affiliates - Note C 26,625 19,317 26,057
Accounts payable and accrued expenses 13,698 13,320 11,753
------------ ------------ ------------
Total Liabilities 40,323 1,006,738 739,004
- ---------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 36,923,119 25,215,093 44,937,264
Accumulated net realized gain (loss) on
investments, financial futures
contracts and foreign currency
transactions 522,590 3,944,623 (369,437)
Net unrealized appreciation of
investments, financial futures
contracts and foreign currency
transactions 7,545,693 9,609,824 5,686,475
Distributions in excess of net
investment income (85) (3,436) (105)
------------ ------------ ------------
Net Assets $44,991,317 $38,766,104 $50,254,197
=======================================================================================
Net Asset Value Per Share:
(Based on 2,283,348, 2,150,502 and
3,149,115 shares, respectively, of
beneficial interest
outstanding - unlimited number of
shares authorized with no par value) $19.70 $18.03 $15.96
=======================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
(continued)
December 31, 1999
- ------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Investments at value - Note D:
Bonds (cost - $11,694,423, $8,816,927,
none and $21,974,386, respectively) $11,228,394 $7,653,430 -- $20,904,118
Common stocks (cost - none, $752,020,
none and $127,949, respectively) -- 661,797 -- 199,832
Preferred stocks and warrants
(cost - $51, $592,934, none and $335,445,
respectively) 675 667,402 -- 425,751
Short-term investments (cost - none,
none, $26,480,203 and none,
respectively) -- -- $26,480,203 --
Joint repurchase agreements
(cost - $1,196,000, $48,000, $5,973,000 and
$278,000, respectively) 1,196,000 48,000 5,973,000 278,000
Corporate savings account 441 519 -- 602
------------ ------------ ------------ ------------
12,425,510 9,031,148 32,453,203 21,808,303
Receivable for investments sold -- -- 1,063,927 --
Receivable for shares sold 8,577 -- 322,922 6,561
Receivable for forward foreign currency
exchange contracts sold - Note B 913 34,442 -- 59,159
Dividends and interest receivable 219,190 232,989 197,719 448,826
Foreign tax receivable -- 282 -- 571
Receivable from John Hancock Advisers,
Inc. and affiliates - Note C 945 3,096 -- --
Deferred organization expenses - Note B 3,554 -- 3,554 3,554
Other Assets 837 19 2,527 1,303
------------ ------------ ------------ ------------
Total Assets 12,659,526 9,301,976 34,043,852 22,328,277
- ------------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- -- 71,316 --
Payable for investments purchased 30,066 -- 992,320 --
Payable for shares repurchased 79,395 242 -- --
Payable for forward foreign currency
exchange contracts purchased - Note B -- 527 -- 17,772
Payable to John Hancock Advisers, Inc.
and affiliates - Note C -- -- 12,613 10,094
Accounts payable and accrued expenses 19,477 14,675 16,096 18,428
------------ ------------ ------------ ------------
Total Liabilities 128,938 15,444 1,092,345 46,294
- ------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 13,213,558 10,556,294 32,951,455 23,346,435
Accumulated net realized loss on
investments, financial futures contracts
and foreign currency transactions (239,968) (128,739) -- (149,318)
Net unrealized depreciation of
investments, financial futures
contracts and foreign currency
transactions (464,496) (1,146,051) -- (867,965)
Undistributed net investment income
(distributions in excess of
net investment income) 21,494 5,028 52 (47,169)
------------ ------------ ------------ ------------
Net Assets $12,530,588 $9,286,532 $32,951,507 $22,281,983
======================================================================================================
Net Asset Value Per Share:
(Based on 1,277,244, 1,117,910,
32,951,507 and 2,281,028 shares,
respectively, of beneficial interest
outstanding - unlimited number of
shares authorized with no par value) $9.81 $8.31 $1.00 $9.77
======================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Year ended December 31, 1999
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
FINANCIAL 500 INDEX INTERNATIONAL LARGE CAP MID CAP REGIONAL SMALL CAP
INDUSTRIES FUND FUND FUND GROWTH FUND GROWTH FUND BANK FUND GROWTH FUND
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends (net of foreign
withholding tax of $13,059,
$4,151, $15,337, none, $5, none
and none, respectively) $775,381 $458,579 $112,506 $91,655 $8,658 $452,443 $8,979
Interest (including securities
lending income of none, none,
$357, none, none, $75 and $1,279,
respectively) 58,408 -- 10,893 29,778 12,659 45,166 16,690
----------- ----------- ----------- ----------- ----------- ----------- -----------
833,789 458,579 123,399 121,433 21,317 497,609 25,669
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Investment management fee - Note C 398,471 114,145 66,480 121,727 20,806 173,090 80,965
Custodian fee 20,354 91,559 89,942 21,455 24,718 16,887 45,208
Auditing fee 12,382 12,218 12,218 10,950 13,602 12,382 12,382
Accounting and legal services fee -
Note C 8,707 5,834 1,312 2,952 511 3,822 1,972
Printing 2,917 5,433 7,387 4,680 5,553 6,590 5,092
Trustees' fee 2,582 1,329 350 566 84 1,119 408
Legal fees 1,362 900 2,915 454 74 844 271
Miscellaneous 1,170 10,664 261 561 131 1,228 410
Registration and filing fees 19 13 2,653 101 57 27 127
Organization expense - Note B -- 2,136 2,136 2,136 -- -- 2,136
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 447,964 244,231 185,654 165,582 65,536 215,989 148,971
- ------------------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C -- (130,049) (100,697) (3,265) (37,793) -- (41,006)
- ------------------------------------------------------------------------------------------------------------------------------
Net Expenses 447,964 114,182 84,957 162,317 27,743 215,989 107,965
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 385,825 344,397 38,442 (40,884) (6,426) 281,620 (82,296)
- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain
(Loss) on Investments,
Financial Futures Contracts and Foreign
Currency Transactions:
Net realized gain (loss) on
investments sold (3,548,074) 52,728 716,863 1,316,751 187,318 232,178 2,352,183
Net realized gain on financial
futures contracts -- 38,790 -- -- -- -- --
Net realized gain (loss) on foreign
currency transactions (2,150) 1 (35,180) -- -- -- --
Change in net unrealized
appreciation/depreciation
of investments 3,535,108 5,780,736 1,498,760 1,878,149 1,607,019 (1,578,109) 5,122,311
Change in net unrealized
appreciation/depreciation
of financial futures contracts -- (25,510) -- -- -- -- --
Change in net unrealized appreciation/
depreciation of foreign currency
transactions 2,240 -- (1,595) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Foreign
Currency Transactions (12,876) 5,846,745 2,178,848 3,194,900 1,794,337 (1,345,931) 7,474,494
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $372,949 $6,191,142 $2,217,290 $3,154,016 $1,787,911 ($1,064,311) $7,392,198
===============================================================================================================================
The Statement of Operations summarizes for each of the Funds the investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations (continued)
Year ended December 31, 1999
- ---------------------------------------------------------------------------------------
V.A. V.A. V.A.
CORE EQUITY LARGE CAP SOVEREIGN
FUND VALUE FUND INVESTORS FUND
------------ ------------ ------------
<S> <C> <C> <C>
Investment Income:
Dividends (net of foreign withholding
tax of $2,216, $15,602 and $2,137,
respectively) $419,289 $130,447 $593,329
Interest 52,921 219,968 350,421
------------ ------------ ------------
472,210 350,415 943,750
------------ ------------ ------------
Expenses:
Investment management fee - Note C 254,281 147,515 248,937
Custodian fee 20,202 17,927 11,665
Auditing fee 10,964 12,218 12,382
Accounting and legal services fee -
Note C 6,545 4,476 7,445
Printing 4,116 4,481 4,697
Organization expense - Note B 2,136 -- 2,136
Trustees' fee 1,378 890 1,763
Miscellaneous 1,284 940 1,542
Legal fees 986 618 1,186
Registration and filing fees 57 46 13
------------ ------------ ------------
Total Expenses 301,949 189,111 291,766
- ---------------------------------------------------------------------------------------
Net Investment Income 170,261 161,304 651,984
- ---------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments, Financial Futures
Contracts and Foreign Currency
Transactions:
Net realized gain (loss) on
investments sold 1,489,402 5,328,068 (211,594)
Net realized loss on foreign
currency transactions -- (5,671) --
Change in net unrealized
appreciation/depreciation of
investments 3,097,564 7,741,100 1,075,319
Change in net unrealized
appreciation/depreciation of financial
futures contracts -- 1,003 --
Change in net unrealized
appreciation/depreciation of foreign
currency transactions -- (906) --
------------ ------------ ------------
Net Realized and Unrealized Gain on
Investments, Financial
Futures Contracts and
Foreign Currency Transactions 4,586,966 13,063,594 863,725
- ---------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $4,757,227 $13,224,898 $1,515,709
=======================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations (continued)
Year ended December 31, 1999
- ------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest $827,479 $980,370 $1,228,171 $1,713,632
Dividends (net of foreign withholding
tax of none, $763, none and $856,
respectively) 17 48,151 -- 29,289
------------ ------------ ------------ ------------
827,496 1,028,521 1,228,171 1,742,921
------------ ------------ ------------ ------------
Expenses:
Investment management fee - Note C 57,967 54,095 117,918 117,404
Custodian fee 35,710 13,946 12,521 19,006
Auditing fee 12,218 10,715 12,382 16,600
Printing 5,516 4,207 4,023 9,008
Organization expense - Note B 2,136 -- 2,136 2,136
Accounting and legal services fee -
Note C 2,094 1,598 4,300 3,504
Trustees' fee 544 411 914 896
Miscellaneous 445 327 503 646
Legal fees 339 7,626 611 537
Registration and filing fees 13 46 13 212
------------ ------------ ------------ ------------
Total Expenses 116,982 92,971 155,321 169,949
- ------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C (30,015) (16,324) -- (3,603)
- ------------------------------------------------------------------------------------------------------
Net Expenses 86,967 76,647 155,321 166,346
- ------------------------------------------------------------------------------------------------------
Net Investment Income 740,529 951,874 1,072,850 1,576,575
- ------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments, Financial Futures
Contracts and
Foreign Currency Transactions:
Net realized gain (loss) on investments
sold (216,207) 86,112 -- (150,711)
Net realized loss on financial futures
contracts -- -- -- (17,996)
Net realized gain (loss) on foreign
currency transactions (169) 18,128 -- 11,884
Change in net unrealized appreciation/
depreciation of investments (584,709) 25,496 -- (563,340)
Change in net unrealized appreciation/
depreciation of financial futures
contracts -- -- -- (2,996)
Change in net unrealized appreciation/
depreciation of foreign currency
transactions 913 33,915 -- 31,585
------------ ------------ ------------ ------------
Net Realized and Unrealized
Gain (Loss) on
Investments, Financial Futures
Contracts and
Foreign Currency Transactions (800,172) 163,651 -- (691,574)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($59,643) $1,115,525 $1,072,850 $885,001
======================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------
V.A. FINANCIAL
INDUSTRIES FUND V.A. 500 INDEX FUND V.A. INTERNATIONAL FUND
------------------------- -------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------- ---------------------------
1998 1999 1998 1999 1998 1999
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $506,912 $385,825 $291,272 $344,397 $32,354 $38,442
Net realized gain (loss)
on investments sold,
financial futures contracts
and foreign currency transactions (508,505) (3,550,224) 1,119,454 91,519 (142,171) 681,683
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions 1,601,203 3,537,348 4,459,671 5,755,226 899,109 1,497,165
----------- ------------ ------------ ------------ ------------ ------------
Net Increase in Net Assets Resulting
from Operations 1,599,610 372,949 5,870,397 6,191,142 789,292 2,217,290
----------- ------------ ------------ ------------ ------------ ------------
Distributions to Shareholders:*
Dividends from net investment income (510,853) (362,866) (292,838) (344,375) (32,354) (46,076)
Distributions in excess of net
investment income -- -- -- -- (13,953) (9,515)
Distributions from net realized
gain on investments sold,
financial futures contracts and
foreign currency transactions (11,398) (153,776) (1,211,700) (231,893) -- (259,599)
Distributions in excess of net
realized gain on investments sold,
financial futures contracts and
foreign currency transactions -- -- -- (15,178) -- --
Tax return of capital -- (23,257) -- -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Total Distributions to Shareholders (522,251) (539,899) (1,504,538) (591,446) (46,307) 315,190
----------- ------------ ------------ ------------ ------------ ------------
From Fund Share Transactions:**
Shares sold 41,125,976 10,055,880 15,705,605 13,349,010 3,453,932 1,131,817
Shares issued to shareholders in
reinvestment of distributions 522,251 539,899 1,504,538 591,446 46,307 315,190
----------- ------------ ------------ ------------ ------------ ------------
41,648,227 10,595,779 17,210,143 13,940,456 3,500,239 1,447,007
Less shares repurchased (6,622,052) (15,685,364) (15,126,656) (8,044,099) (834,714) (1,175,008)
----------- ------------ ------------ ------------ ------------ ------------
Net Increase (Decrease) 35,026,175 (5,089,585) 2,083,487 5,896,357 2,665,525 271,999
----------- ------------ ------------ ------------ ------------ ------------
Net Assets:
Beginning of period 18,465,441 54,568,975 20,007,817 26,457,163 3,792,004 7,200,514
----------- ------------ ------------ ------------ ------------ ------------
End of period (including
undistributed net investment income
(distributions in excess of net
investment income) of ($1,308),
($2,491), $325, $335, ($30,980) and
($46,722), respectively) $54,568,975 $49,312,440 $26,457,163 $37,953,216 $7,200,514 $9,374,613
=========== ============ ============ ============ ============ ============
* Distributions to Shareholders:
Per share dividends from net
investment income $0.1354 $0.1078 $0.1980 $0.1710 $0.0674 $0.0791
----------- ------------ ------------ ------------ ------------ ------------
Per share dividends in excess of net
investment income -- -- -- -- $0.0118 $0.0163
----------- ------------ ------------ ------------ ------------ ------------
Per share distributions from net
realized gain on investments sold,
financial futures contracts and
foreign currency transactions $0.0030 $0.0457 $0.7583 $0.1105 -- $0.4454
----------- ------------ ------------ ------------ ------------ ------------
Per share distributions in excess
of net realized gain on investments
sold, financial futures contracts
and foreign currency transactions -- -- -- $0.0072 -- --
----------- ------------ ------------ ------------ ------------ ------------
Tax return of capital -- $0.0069 -- -- -- --
----------- ------------ ------------ ------------ ------------ ------------
** Analysis of Fund Share Transactions:
Shares sold 2,866,051 691,929 1,100,338 816,451 300,316 86,360
Shares issued to shareholders in
reinvestment of distributions 37,039 38,926 99,865 34,866 3,843
----------- ------------ ------------ ------------ ------------ ------------
2,903,090 730,855 1,200,203 851,317 2,903,090 107,993
Less shares repurchased (501,775) (1,096,716) (1,048,754) (490,081 (74,252) (92,089)
----------- ------------ ------------ ------------ ------------ ------------
Net Increase (Decrease) 2,401,315 (365,861) 151,449 361,236 229,907 15,904
=========== ============ ============ ============ ============ ============
The Statement of Changes in Net Assets shows how the value of each
Fund's net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, if any,
and any increase or decrease in money shareholders invested in each
Fund. The footnotes illustrate the number of Fund shares sold,
reinvested and repurchased during the last two periods, along with the
per share amount of distributions made to shareholders of each Fund for
the period indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
(continued)
- -------------------------------------------------------------------------------------------------------------------------
V.A. LARGE CAP
GROWTH FUND V.A. MID CAP GROWTH FUND V.A. REGIONAL BANK FUND
------------------------- -------------------------- ---------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998(1) 1999 1998(2) 1999
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($48) ($40,884) $627 ($6,426) $126,597 $281,620
Net realized gain (loss)
on investments sold and
foreign currency transactions 17,279 1,316,751 (110,615) 187,318 42,921 232,178
Change in net unrealized
appreciation/depreciation of
investments
and foreign currency transactions 1,630,671 1,878,149 229,829 1,607,019 (394,271) (1,578,109)
------------ ----------- ------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,647,902 3,154,016 119,841 1,787,911 (224,753) (1,064,311)
------------ ----------- ------------ ------------ ------------ ------------
Distributions to Shareholders: *
Dividends from net investment income -- -- (627) -- (123,559) (281,482)
Distributions from net realized gain
on investments sold
and foreign currency transactions -- (491,445) -- (5,407) (7,896) (347,453)
Tax return of capital -- -- (125) -- -- --
------------ ----------- ------------ ------------ ------------ ------------
Total Distributions to Shareholders -- (491,445) (752) (5,407) (131,455) (628,935)
------------ ----------- ------------ ------------ ------------ ------------
From Fund Share Transactions: **
Shares sold 5,891,440 10,666,325 1,858,855 3,390,736 23,505,925 7,383,736
Shares issued to shareholders in
reinvestment of distributions -- 491,445 752 5,407 131,455 628,935
------------ ----------- ------------ ------------ ------------ ------------
5,891,440 11,157,770 1,859,607 3,396,143 5,891,440 8,012,671
Less shares repurchased (900,237) (2,320,226) (199,625) (594,918) (3,024,755) (6,280,747)
------------ ----------- ------------ ------------ ------------ ------------
Net Increase 4,991,203 8,837,544 1,659,982 2,801,225 20,612,625 1,731,924
------------ ----------- ------------ ------------ ------------ ------------
Net Assets:
Beginning of period 3,732,712 10,371,817 -- 1,779,071 -- 20,256,417
------------ ----------- ------------ ------------ ------------ ------------
End of period (including
undistributed net investment income
(distributions in excess of net
investment income) of ($12),
($41), none, none, $3,038 and
$3,154, respectively) $10,371,817 $21,871,932 $1,779,071 $6,362,800 $20,256,417 $20,295,095
============ =========== ============ ============ ============ ============
* Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.0040 -- $0.0694 $0.1190
------------ ----------- ------------ ------------ ------------ ------------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- $0.3598 -- $0.0160 $0.0036 $0.1489
------------ ----------- ------------ ------------ ------------ ------------
Tax return of capital -- -- $0.0008 -- -- --
------------ ----------- ------------ ------------ ------------ ------------
** Analysis of Fund Share Transactions:
Shares sold 505,076 738,312 180,723 257,673 2,519,857 798,204
Shares issued to shareholders in
reinvestment of distributions -- 31,974 72 329 14,871 73,089
------------ ----------- ------------ ------------ ------------ ------------
505,076 770,286 180,795 258,002 505,076 871,293
Less shares repurchased (76,970) (158,856) (19,519) (49,495) (351,377) (683,009)
------------ ----------- ------------ ------------ ------------ ------------
Net Increase 428,106 611,430 161,276 208,507 2,183,351 188,284
============ =========== ============ ============ ============ ============
(1) Commenced operations on January 7, 1998.
(2) Commenced operations on May 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
(continued)
- -------------------------------------------------------------------------------------------------------------------------
V.A. SMALL CAP
GROWTH FUND V.A. CORE EQUITY FUND V.A. LARGE CAP VALUE FUND
------------------------- -------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED
------------------------- -------------------------- DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999 1998(1) 1999
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($33,890) ($82,296) $103,965 $170,261 $88,381 $161,304
Net realized gain (loss) on
investments sold and
foreign currency transactions (402,192) 2,352,183 292,353 1,489,402 (21,183) 5,322,397
Change in net unrealized
appreciation/depreciation of
investments and foreign
currency transactions 1,479,880 5,122,311 3,818,765 3,097,564 1,868,627 7,741,197
------------ ----------- ------------ ------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations 1,043,798 7,392,198 4,215,083 4,757,227 1,935,825 13,224,898
------------ ----------- ------------ ------------ ------------ ------------
Distributions to Shareholders: *
Dividends from net investment income -- -- (102,677) (174,331) (81,327) (162,651)
Distributions in excess of net
investment income -- -- -- (86) -- --
Distributions from net realized
gain on investments sold
and foreign currency transactions -- (441,478) (388,348) (895,808) -- (1,365,816)
------------ ----------- ------------ ------------ ------------ ------------
Total Distributions to Shareholders -- (441,478) (491,025) (1,070,225) (81,327) (1,528,467)
------------ ----------- ------------ ------------ ------------ ------------
From Fund Share Transactions: **
Shares sold 4,538,788 7,383,931 16,435,328 21,277,999 16,705,530 12,838,972
Shares issued to shareholders in
reinvestment of distributions -- 441,478 491,025 1,070,225 81,327 1,528,467
------------ ----------- ------------ ------------ ------------ ------------
4,538,788 7,825,409 16,926,353 22,348,224 4,538,788 14,367,439
Less shares repurchased (1,191,507) (2,141,408) (2,678,249) (7,735,163) (1,273,103) (4,666,018)
------------ ----------- ------------ ------------ ------------ ------------
Net Increase 3,347,281 5,684,001 14,248,104 14,613,061 15,513,754 9,701,421
------------ ----------- ------------ ------------ ------------ ------------
Net Assets:
Beginning of period 3,840,810 8,231,889 8,719,092 26,691,254 -- 17,368,252
------------ ----------- ------------ ------------ ------------ ------------
End of period (including
undistributed
net investment income
(distributions in excess of net
investment income) of ($12),
($40), $1,579, ($85), $3,516 and
($3,436), respectively) $8,231,889 $20,866,610 $26,691,254 $44,991,317 $17,368,252 $38,766,104
============ =========== ============ ============ ============ ============
* Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.0967 $0.0861 $0.0962 $0.0980
------------ ----------- ------------ ------------ ------------ ------------
Per share distributions in excess of
net investment income -- -- -- $0.0001 -- --
------------ ----------- ------------ ------------ ------------ ------------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- $0.4314 $0.2702 $0.4028 -- $0.6493
------------ ----------- ------------ ------------ ------------ ------------
** Analysis of Fund Share Transactions:
Shares sold 430,241 499,482 1,023,938 1,133,853 1,560,370 949,975
Shares issued to shareholders in
reinvestment of distributions -- 23,955 28,311 55,765 7,693 91,349
------------ ----------- ------------ ------------ ------------ ------------
430,241 523,437 1,052,249 1,189,618 430,241 1,041,324
Less shares repurchased (115,191) (153,686) (165,911) (410,573) (124,862) (334,023)
------------ ----------- ------------ ------------ ------------ ------------
Net Increase 315,050 369,751 886,338 779,045 1,443,201 707,301
============ =========== ============ ============ ============ ============
(1) Commenced operations on January 6, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
(continued)
- ----------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN
INVESTORS FUND V.A. BOND FUND V.A. HIGH YIELD BOND FUND
------------------------ ------------------------ --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED
------------------------ ------------------------ DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999 1998(1) 1999
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $436,382 $651,984 $421,763 $740,529 $532,172 $951,874
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions (157,903) (211,594) 155,311 (216,376) (164,756) 104,240
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions 3,493,431 1,075,319 72,362 (583,796) (1,205,462) 59,411
----------- ----------- ----------- ----------- ----------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,771,910 1,515,709 649,436 (59,643) (838,046) 1,115,525
----------- ----------- ----------- ----------- ----------- ------------
Distributions to Shareholders: *
Dividends from net investment income (454,539) (651,984) (421,762) (740,530) (518,660) (945,546)
Distributions in excess of net
investment income -- (617) -- -- -- --
Distributions from net realized
gain on investments sold,
financial futures contracts
and foreign currency transactions -- -- (170,439) -- -- (74,253)
Tax return of capital -- (2,297) -- -- (8,794) --
----------- ----------- ----------- ----------- ----------- ------------
Total Distributions to Shareholders (454,539) (654,898) (592,201) (740,530) (527,454) (1,019,799)
----------- ----------- ----------- ----------- ----------- ------------
From Fund Share Transactions: **
Shares sold 21,913,811 19,084,625 8,832,995 5,640,516 10,161,830 2,548,352
Shares issued to shareholders in
reinvestment of distributions 454,539 654,898 592,175 740,530 527,454 1,019,800
----------- ----------- ----------- ----------- ----------- ------------
22,368,350 19,739,523 9,425,170 6,381,046 22,368,350 3,568,152
Less shares repurchased (3,703,040) (4,515,757) (2,495,458) (3,719,713) (1,204,237) (2,496,893)
----------- ----------- ----------- ----------- ----------- ------------
Net Increase 18,665,310 15,223,766 6,929,712 2,661,333 9,485,047 1,071,259
----------- ----------- ----------- ----------- ----------- ------------
Net Assets:
Beginning of period 12,186,939 34,169,620 3,682,481 10,669,428 -- 8,119,547
----------- ----------- ----------- ----------- ----------- ------------
End of period (including undistributed
net investment income
(distributions in excess of net
investment income) of $495,
($105), $11, $21,494, ($300) and
$5,028, respectively) $34,169,620 $50,254,197 $10,669,428 $12,530,588 $8,119,547 $9,286,532
=========== =========== =========== =========== =========== ============
* Distributions to Shareholders:
Per share dividends from net investment
income $0.2548 $0.2404 $0.6266 $0.6448 $0.8426 $0.8767
----------- ----------- ----------- ----------- ----------- ------------
Per share distributions in excess of
net investment income -- $0.0002 -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.1710 -- -- $0.0657
----------- ----------- ----------- ----------- ----------- ------------
Tax return of capital -- $0.0009 -- -- $0.0143 --
----------- ----------- ----------- ----------- ----------- ------------
** Analysis of Fund Share Transactions:
Shares sold 1,514,230 1,204,042 838,775 556,313 1,069,122 305,760
Shares issued to shareholders in
reinvestment of distributions 30,975 42,073 56,408 73,574 59,435 122,160
----------- ----------- ----------- ----------- ----------- ------------
1,545,205 1,246,115 895,183 629,887 1,545,205 427,920
Less shares repurchased (253,627) (285,296) (235,975) (367,396) (140,657) (297,910)
----------- ----------- ----------- ----------- ----------- ------------
Net Increase 1,291,578 960,819 659,208 262,491 987,900 130,010
=========== =========== =========== =========== =========== ============
(1) Commenced operations on January 6, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
(continued)
- ------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND V.A. STRATEGIC INCOME FUND
--------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $577,123 $1,072,850 $859,114 $1,576,575
Net realized loss on investments sold,
financial futures contracts
and foreign currency transactions -- -- (8,657) (156,823)
Change in net unrealized
appreciation/depreciation of
investments,
financial futures contracts and foreign
currency transactions -- -- (397,587) (534,751)
------------ ------------ ------------ ------------
Net Increase in Net Assets Resulting
from Operations 577,123 1,072,850 452,870 885,001
------------ ------------ ------------ ------------
Distributions to Shareholders: *
Dividends from net investment income (577,123) (1,072,850) (859,114) (1,576,590)
Distributions from net realized gain on
investments sold, financial
futures contracts and foreign currency
transactions -- -- (33,336) --
------------ ------------ ------------ ------------
Total Distributions to Shareholders (577,123) (1,072,850) (892,450) (1,576,590)
------------ ------------ ------------ ------------
From Fund Share Transactions: **
Shares sold 33,372,181 48,097,999 10,522,329 8,665,787
Shares issued in reorganization - Note F -- -- -- 2,569,836
Shares issued to shareholders in
reinvestment of distributions 578,296 944,404 892,895 1,576,592
------------ ------------ ------------ ------------
33,950,477 49,042,403 11,415,224 12,812,215
Less shares repurchased (25,808,161) (32,610,270) (1,495,808) (4,858,040)
------------ ------------ ------------ ------------
Net Increase 8,142,316 16,432,133 9,919,416 7,954,175
------------ ------------ ------------ ------------
Net Assets:
Beginning of period 8,377,058 16,519,374 5,539,561 15,019,397
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income
(distributions in excess of net
investment income) of $3, $52,
($8,929) and ($47,169), respectively) $16,519,374 $32,951,507 $15,019,397 $22,281,983
============ ============ ============ ============
* Distributions to Shareholders:
Per share dividends from net investment
income $0.0478 $0.0452 $0.8496 $0.7977
------------ ------------ ------------ ------------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.0229 --
------------ ------------ ------------ ------------
** Analysis of Fund Share Transactions:
Shares sold 33,372,181 48,097,999 1,015,843 872,439
Shares issued in reorganization - Note F -- -- -- 253,313
Shares issued to shareholders in
reinvestment of distributions 578,296 944,404 86,949 159,651
------------ ------------ ------------ ------------
33,950,477 49,042,403 1,102,792 1,285,403
Less shares repurchased (25,808,161) (32,610,270) (144,814) (491,471)
------------ ------------ ------------ ------------
Net Increase 8,142,316 16,432,133 957,978 793,932
============ ============ ============ ============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES FUND
------------------------------------------
PERIOD YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997(1) 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $13.44 $14.45
------------ ------------ ------------
Net Investment Income (2) 0.11 0.18 0.11
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 3.39 0.97 0.06
------------ ------------ ------------
Total from Investment Operations 3.50 1.15 0.17
------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.05) (0.14) (0.10)
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions (0.01) (0.00)(8) (0.05)
Tax Return of Capital -- -- (0.01)
------------ ------------ ------------
Total Distributions (0.06) (0.14) (0.16)
------------ ------------ ------------
Net Asset Value, End of Period $13.44 $14.45 $14.46
============ ============ ============
Total Investment Return at Net Asset
Value (3) 35.05%(5) 8.55% 1.23%
Total Adjusted Investment Return at Net
Asset Value (3,4) 34.71%(5) -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $18,465 $54,569 $49,312
Ratio of Expenses to Average Net Assets 1.05%(6) 0.92% 0.90%
Ratio of Adjusted Expenses to Average
Net Assets (7) 1.39%(6) -- --
Ratio of Net Investment Income to
Average Net Assets 1.32%(6) 1.25% 0.77%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 0.98%(6) -- --
Portfolio Turnover Rate 11% 38% 72%
Fee Reduction Per Share (2) $0.03 -- --
(1) Commenced operations on April 30, 1997.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indicated: net investment income,
gains (losses), distributions and total investment return of each Fund.
It shows how the Fund's net asset value for a share has changed since
the end of the previous period. Additionally, important relationships
between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. 500 INDEX FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.44 $12.62 $15.23
------------ ------------ ------------ ------------
Net Investment Income (2) 0.17 0.30 0.20 0.17
Net Realized and Unrealized Gain on
Investments and Financial Futures
Contracts 0.98 2.72 3.37 2.98
------------ ------------ ------------ ------------
Total from Investment Operations 1.15 3.02 3.57 3.15
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.16) (0.30) (0.20) (0.17)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts (0.55) (0.54) (0.76) (0.11)
Distributions in Excess of Net Realized
Gain on Investments Sold and Financial
Futures Contracts -- -- -- (0.01)
------------ ------------ ------------ ------------
Total Distributions (0.71) (0.84) (0.96) (0.29)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $10.44 $12.62 $15.23 $18.09
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 11.49%(5) 29.51% 28.44% 20.81%
Total Adjusted Investment Return at Net
Asset Value (3,4) 11.25%(5) 29.04% 27.87% 20.41%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $4,049 $20,008 $26,457 $37,953
Ratio of Expenses to Average Net Assets 0.60%(6) 0.36% 0.35% 0.35%
Ratio of Adjusted Expenses to Average
Net Assets (7) 1.31%(6) 0.83% 0.92% 0.75%
Ratio of Net Investment Income to
Average Net Assets 4.57%(6) 2.45% 1.44% 1.06%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 3.86%(6) 1.98% 0.87% 0.66%
Portfolio Turnover Rate -- 9% 47% 5%
Fee Reduction Per Share (2) $0.03 $0.06 $0.07 $0.07
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. INTERNATIONAL FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.23 $10.50 $12.18
------------ ------------ ------------ ------------
Net Investment Income (2) 0.07 0.05 0.07 0.07
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions 1.20 (0.13) 1.69 3.75
------------ ------------ ------------ ------------
Total from Investment Operations 1.27 (0.08) 1.76 3.82
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.04) (0.01) (0.07) (0.08)
Dividends in Excess of Net Investment
Income -- -- (0.01) (0.02)
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions -- (0.64) -- (0.45)
------------ ------------ ------------ ------------
Total Distributions (0.04) (0.65) (0.08) (0.55)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $11.23 $10.50 $12.18 $15.45
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 12.75%(5) (0.54%) 16.75% 31.55%
Total Adjusted Investment Return at Net
Asset Value (3,4) 12.07%(5) (1.43%) 14.77% 30.19%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,267 $3,792 $7,201 $9,375
Ratio of Expenses to Average Net Assets 1.15%(6) 1.15% 1.15% 1.15%
Ratio of Adjusted Expenses to Average
Net Assets (7) 3.13%(6) 2.04% 3.13% 2.51%
Ratio of Net Investment Income to
Average Net Assets 2.03%(6) 0.43% 0.59% 0.52%
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) 0.05%(6) (0.46%) (1.39%) (0.84%)
Portfolio Turnover Rate 14% 273% 89% 116%
Fee Reduction Per Share (2) $0.07 $0.10 $0.22 $0.17
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. LARGE CAP GROWTH FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.39 $10.73 $13.37
------------ ------------ ------------ ------------
Net Investment Loss (2) (0.01) (0.04) (0.00)(8) (0.04)
Net Realized and Unrealized Gain (Loss)
on Investments (0.60) 1.38 2.64 2.80
------------ ------------ ------------ ------------
Total from Investment Operations (0.61) 1.34 2.64 2.76
------------ ------------ ------------ ------------
Less Distributions:
Distributions from Net Realized Gain on
Investments Sold -- -- -- (0.36)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $9.39 $10.73 $13.37 $15.77
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) (6.10%)(5) 14.27% 24.60% 20.71%
Total Adjusted Investment Return at Net
Asset Value (3,4) (7.39%)(5) 12.90% 24.27% 20.69%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $994 $3,733 $10,372 $21,872
Ratio of Expenses to Average Net Assets 1.00%(6) 1.00% 1.00% 1.00%
Ratio of Adjusted Expenses to Average
Net Assets (7) 4.76%(6) 2.37% 1.33% 1.02%
Ratio of Net Investment Loss to Average
Net Assets (0.23%)(6) (0.39%) (0.00%) (0.25%)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (7) (3.99%)(6) (1.76%) (0.33%) (0.27%)
Portfolio Turnover Rate 68% 136% 176% 172%
Fee Reduction Per Share (2) $0.13 $0.13 $0.04 $0.00(8)
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------
V.A. MID CAP GROWTH FUND
---------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998(1) 1999
------------ ------------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.03
------------ ------------
Net Investment Income (Loss) (2) 0.01 (0.03)
Net Realized and Unrealized Gain on
Investments 1.03 6.23
------------ ------------
Total from Investment Operations 1.04 6.20
------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.01) --
Distributions from Net Realized Gain on
Investments Sold -- (0.02)
Tax Return of Capital (0.00)(8) --
------------ ------------
Total Distributions (0.01) (0.02)
------------ ------------
Net Asset Value, End of Period $11.03 $17.21
============ ============
Total Investment Return at Net Asset
Value (3) 10.35%(5) 56.18%
Total Adjusted Investment Return at Net
Asset Value (3,4) 7.17%(5) 54.82%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,779 $6,363
Ratio of Expenses to Average Net Assets 1.00%(6) 1.00%
Ratio of Adjusted Expenses to Average
Net Assets (7) 4.23%(6) 2.36%
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.06%(6) (0.23%)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (7) (3.17%)(6) (1.59%)
Portfolio Turnover Rate 103% 136%
Fee Reduction Per Share (2) $0.33 $0.17
(1) Commenced operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -------------------------------------------------------------------------
V.A. REGIONAL BANK FUND
----------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998(1) 1999
------------ ------------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.28
------------ -----------
Net Investment Income (2) 0.09 0.12
Net Realized and Unrealized Loss on
Investments (0.74) (0.57)
------------ -----------
Total from Investment Operations (0.65) (0.45)
------------ -----------
Less Distributions:
Dividends from Net Investment Income (0.07) (0.12)
Distributions from Net Realized Gain on
Investments Sold (0.00)(8) (0.15)
------------ -----------
Total Distributions (0.07) (0.27)
------------ -----------
Net Asset Value, End of Period $9.28 $8.56
============ ===========
Total Investment Return at Net Asset
Value (3) (6.43%)(5) (4.86%)
Total Adjusted Investment Return at Net
Asset Value (3,4) (6.49%)(5) --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $20,256 $20,295
Ratio of Expenses to Average Net Assets 1.05%(6) 1.00%
Ratio of Adjusted Expenses to Average
Net Assets (7) 1.14%(6) --
Ratio of Net Investment Income to
Average Net Assets 1.39%(6) 1.30%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 1.30%(6) --
Portfolio Turnover Rate 28% 49%
Fee Reduction Per Share (2) $0.01 --
(1) Commenced operations on May 1, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. SMALL CAP GROWTH FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.32 $10.35 $12.00
------------ ------------ ------------ ------------
Net Investment Income (Loss) (2) 0.02 (0.02) (0.06) (0.10)
Net Realized and Unrealized Gain (Loss)
on Investments (0.68) 1.05 1.71 8.29
------------ ------------ ------------ ------------
Total from Investment Operations (0.66) 1.03 1.65 8.19
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.00)(3) -- --
Distributions from Net Realized Gain on
Investments Sold -- -- (0.43)
------------ ------------ ------------ ------------
Total Distributions to Shareholders (0.02) (0.00) -- (0.43)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $9.32 $10.35 $12.00 $19.76
============ ============ ============ ============
Total Investment Return at Net Asset
Value (4) (6.62%)(6) 11.06% 15.94% 68.52%
Total Adjusted Investment Return at Net
Asset Value (4,5) (8.05%)(6) 9.34% 15.31% 68.14%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $975 $3,841 $8,232 $20,867
Ratio of Expenses to Average Net Assets 1.00%(7) 1.00% 1.00% 1.00%
Ratio of Adjusted Expenses to Average
Net Assets (8) 5.19%(7) 2.72% 1.63% 1.38%
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.62%(7) (0.16%) (0.59%) (0.76%)
Ratio of Adjusted Net Investment Loss
to Average Net Assets (8) (3.57%)(7) (1.88%) (1.22%) (1.14%)
Portfolio Turnover Rate 31% 79% 93% 120%
Fee Reduction Per Share (2) $0.14 $0.17 $0.07 $0.05
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. CORE EQUITY FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.11 $14.11 $17.74
------------ ------------ ------------ ------------
Net Investment Income (2) 0.06 0.16 0.10 0.09
Net Realized and Unrealized Gain on
Investments 1.12 3.23 3.90 2.36
------------ ------------ ------------ ------------
Total from Investment Operations 1.18 3.39 4.00 2.45
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.06) (0.14) (0.10) (0.09)
Distributions in Excess of Net
Investment Income -- -- -- (0.00)(8)
Distributions from Net Realized Gain on
Investments Sold (0.01) (0.25) (0.27) (0.40)
------------ ------------ ------------ ------------
Total Distributions (0.07) (0.39) (0.37) (0.49)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $11.11 $14.11 $17.74 $19.70
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 11.78%(5) 30.68% 28.42% 13.89%
Total Adjusted Investment Return at Net
Asset Value (3,4) 10.66%(5) 30.04% -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,149 $8,719 $26,691 $44,991
Ratio of Expenses to Average Net Assets 0.95%(6) 0.95% 0.95% 0.83%
Ratio of Adjusted Expenses to Average
Net Assets (7) 4.23%(6) 1.59% -- --
Ratio of Net Investment Income to
Average Net Assets 1.60%(6) 1.24% 0.65% 0.47%
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (1.68%)(6) 0.60% -- --
Portfolio Turnover Rate 24% 53% 55% 77%
Fee Reduction Per Share (2) $0.12 $0.08 -- --
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------
V.A. LARGE CAP VALUE FUND
---------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998(1) 1999
------------ ------------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $12.03
------------ ------------
Net Investment Income (2) 0.11 0.10
Net Realized and Unrealized Gain on
Investments, Financial Futures
Contracts and Foreign Currency
Transactions 2.02 6.65
------------ ------------
Total from Investment Operations 2.13 6.75
------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.10) (0.10)
Distributions from Net Realized Gain on
Investments Sold, Financial Futures
Contracts and Foreign Currency
Transactions -- (0.65)
------------ ------------
Total Distributions (0.10) (0.75)
------------ ------------
Net Asset Value, End of Period $12.03 $18.03
============ ============
Total Investment Return at Net Asset
Value (3) 21.39%(5) 56.65%
Total Adjusted Investment Return at Net
Asset Value (3,4) 21.21%(5) --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $17,368 $38,766
Ratio of Expenses to Average Net Assets 0.85%(6) 0.77%
Ratio of Adjusted Expenses to Average
Net Assets (7) 1.03%(6) --
Ratio of Net Investment Income to
Average Net Assets 1.17%(6) 0.66%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 0.99%(6) --
Portfolio Turnover Rate 242% 166%
Fee Reduction Per Share (2) $0.02 --
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.74 $13.59 $15.61
------------ ------------ ------------ ------------
Net Investment Income (2) 0.07 0.22 0.27 0.24
Net Realized and Unrealized Gain on
Investments 0.76 2.82 2.00 0.35
------------ ------------ ------------ ------------
Total from Investment Operations 0.83 3.04 2.27 0.59
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.07) (0.18) (0.25) (0.24)
Distributions in Excess of Net
Investment Income -- -- -- (0.00)(8)
Distributions from Net Realized Gain on
Investments Sold (0.02) (0.01) -- --
Tax Return of Capital -- -- -- (0.00)(8)
------------ ------------ ------------ ------------
Total Distributions (0.09) (0.19) (0.25) (0.24)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $10.74 $13.59 $15.61 $15.96
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 8.30%(5) 28.43% 16.88% 3.84%
Total Adjusted Investment Return at Net
Asset Value (3,4) 7.30%(5) 28.12% -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,111 $12,187 $34,170 $50,254
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.74% 0.70%
Ratio of Adjusted Expenses to Average
Net Assets (7) 3.78%(6) 1.16% -- --
Ratio of Net Investment Income to
Average Net Assets 1.90%(6) 1.81% 1.88% 1.57%
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (1.03%)(6) 1.50% -- --
Portfolio Turnover Rate 17% 11% 19% 26%
Fee Reduction Per Share (2) $0.11 $0.04 -- --
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. BOND FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.19 $10.36 $10.51
------------ ------------ ------------ ------------
Net Investment Income (2) 0.23 0.68 0.63 0.64
Net Realized and Unrealized Gain (Loss)
on Investments 0.21 0.24 0.32 (0.70)
------------ ------------ ------------ ------------
Total from Investment Operations 0.44 0.92 0.95 (0.06)
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.23) (0.68) (0.63) (0.64)
Distributions from Net Realized Gain on
Investments Sold (0.02) (0.07) (0.17) --
------------ ------------ ------------ ------------
Total Distributions (0.25) (0.75) (0.80) (0.64)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $10.19 $10.36 $10.51 $9.81
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 4.42%(5) 9.30% 9.41% (0.51%)
Total Adjusted Investment Return at Net
Asset Value (3,4) 3.25%(5) 7.52% 8.82% (0.77%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,056 $3,682 $10,669 $12,531
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.75% 0.75%
Ratio of Adjusted Expenses to Average
Net Assets (7) 4.15%(6) 2.53% 1.34% 1.01%
Ratio of Net Investment Income to
Average Net Assets 6.69%(6) 6.57% 5.93% 6.39%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 3.29%(6) 4.79% 5.34% 6.13%
Portfolio Turnover Rate 45% 193% 367% 307%
Fee Reduction Per Share (2) $0.12 $0.18 $0.06 $0.03
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------
V.A. HIGH YIELD BOND FUND
---------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998(1) 1999
------------ ------------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $8.22
------------ ------------
Net Investment Income (2) 0.90 0.88
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions (1.82) 0.16
------------ ------------
Total from Investment Operations (0.92) 1.04
------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.84) (0.88)
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions -- (0.07)
Tax Return of Capital (0.02) --
------------ ------------
Total Distributions (0.86) (0.95)
------------ ------------
Net Asset Value, End of Period $8.22 $8.31
============ ============
Total Investment Return at Net Asset
Value (3) (9.80%)(5) 13.12%
Total Adjusted Investment Return at Net
Asset Value (3,4) (10.10%)(5) 12.94%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $8,120 $9,287
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85%
Ratio of Adjusted Expenses to Average
Net Assets (7) 1.15%(6) 1.03%
Ratio of Net Investment Income to
Average Net Assets 9.85%(6) 10.56%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 9.55%(6) 10.38%
Portfolio Turnover Rate 102% 122%
Fee Reduction Per Share (2) $0.03 $0.02
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00
------------ ------------ ------------ ------------
Net Investment Income (2) 0.02 0.05 0.05 0.05
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.05) (0.05) (0.05)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 1.61%(5) 4.88% 4.87% 4.58%
Total Adjusted Investment Return at Net
Asset Value (3,4) (7.55%)(5) 4.36% -- --
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $207 $8,377 $16,519 $32,952
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.74% 0.66%
Ratio of Adjusted Expenses to Average
Net Assets (7) 27.48%(6) 1.27% -- --
Ratio of Net Investment Income to
Average Net Assets 4.68%(6) 4.86% 4.70% 4.55%
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (22.05%)(6) 4.34% -- --
Fee Reduction Per Share (2) $0.08 $0.00(8) -- --
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------
V.A. STRATEGIC INCOME FUND
---------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1996(1) 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.30 $10.47 $10.10
------------ ------------ ------------ ------------
Net Investment Income (2) 0.27 0.91 0.85 0.80
Net Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts
and Foreign Currency
Transactions 0.36 0.26 (0.35) (0.33)
------------ ------------ ------------ ------------
Total from Investment Operations 0.63 1.17 0.50 0.47
------------ ------------ ------------ ------------
Less Distributions:
Dividends from Net Investment Income (0.27) (0.91) (0.85) (0.80)
Distributions from Net Realized Gain on
Investments Sold, Financial Futures
Contracts and Foreign Currency
Transactions (0.06) (0.09) (0.02) --
------------ ------------ ------------ ------------
Total Distributions (0.33) (1.00) (0.87) (0.80)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $10.30 $10.47 $10.10 $9.77
============ ============ ============ ============
Total Investment Return at Net Asset
Value (3) 6.45%(5) 11.77% 4.92% 4.82%
Total Adjusted Investment Return at Net
Asset Value (3,4) 5.96%(5) 11.25% 4.84% 4.80%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,131 $5,540 $15,019 $22,282
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.85% 0.85%
Ratio of Adjusted Expenses to Average
Net Assets (7) 2.28%(6) 1.37% 0.93% 0.87%
Ratio of Net Investment Income to
Average Net Assets 7.89%(6) 8.77% 8.19% 8.06%
Ratio of Adjusted Net Investment Income
to Average Net Assets (7) 6.46%(6) 8.25% 8.11% 8.04%
Portfolio Turnover Rate 73% 110% 92% 53%(8)
Fee Reduction Per Share (2) $0.05 $0.05 $0.01 $0.00(9)
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Portfolio turnover rate excludes merger activity.
(9) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Financial Industries Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Financial
Industries Fund on December 31, 1999. It's divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Banks - Foreign (6.95%)
Bipop (Italy) 9,000 $792,469
ING Groep NV American Depository Receipt (ADR)
(Netherlands) 15,350 936,350
Lloyds TSB Group Plc (United Kingdom) 88,500 1,104,710
MeritaNordbanken Oyj* (Finland) 101,000 591,193
--------------
3,424,722
--------------
Banks - Midwest (4.79%)
Commerce Bancshares, Inc. 19,100 647,013
Fifth Third Bancorp 10,000 733,750
FirstMerit Corp. 4,500 103,500
Marshall & Ilsley Corp. 14,000 879,375
--------------
2,363,638
--------------
Banks - Money Center (3.85%)
Chase Manhattan Corp. 9,040 702,295
Citigroup, Inc. 21,500 1,194,594
--------------
1,896,889
--------------
Banks - Northeast (3.46%)
M & T Bank Corp. 1,600 662,800
U.S. Trust Corp. 13,000 1,042,437
--------------
1,705,237
--------------
Banks - Southeast (3.87%)
CCB Financial Corp. 22,500 980,156
First Tennessee National Corp. 32,500 926,250
--------------
1,906,406
--------------
Banks - Southwest (1.48%)
Cullen/Frost Bankers., Inc. 28,250 727,438
--------------
Banks - Superregional (4.58%)
FleetBoston Financial Corp. 22,536 784,535
Wells Fargo Co. 36,500 1,475,969
--------------
2,260,504
--------------
Banks - West (1.40%)
City National Corp. 20,900 688,394
--------------
Broker Services (11.03%)
Legg Mason, Inc. 51,000 1,848,750
Merrill Lynch & Co., Inc. 8,000 668,000
Morgan Stanley Dean Witter & Co. 12,000 1,713,000
Schwab (Charles) Corp. 31,500 1,208,812
--------------
5,438,562
--------------
Computer - Services (7.47%)
BISYS Group, Inc. (The)* 9,000 587,250
First Data Corp. 17,000 838,313
Fiserv, Inc.* 59,000 2,260,437
--------------
3,686,000
--------------
Computer - Software (1.94%)
Intuit, Inc.* 16,000 959,000
--------------
Finance - Consumer Loans (7.41%)
American Express Co. 14,000 2,327,500
MBNA Corp. 48,650 1,325,712
--------------
3,653,212
--------------
Finance - Investment Management (3.07%)
Price (T. Rowe) Associates, Inc. 41,000 1,514,437
--------------
Finance - SBIC & Commercial (1.38%)
Heller Financial, Inc. 34,000 682,125
--------------
Insurance (5.17%)
Financial Security Assurance
Holdings Ltd. 19,500 1,016,437
MBIA, Inc. 29,000 1,531,562
--------------
2,547,999
--------------
Insurance - Accident & Health (3.06%)
AFLAC, Inc. 32,000 1,510,000
--------------
Insurance - Brokers (4.52%)
Aon Corp. 15,000 600,000
Marsh & McLennan Cos., Inc. 17,000 1,626,687
--------------
2,226,687
--------------
Insurance - Diversified (2.13%)
AXA Financial, Inc. 31,000 1,050,125
--------------
Insurance - Life (9.92%)
American General Corp. 10,700 811,863
Axa (ADR) (France) 12,500 887,500
Lincoln National Corp. 17,400 696,000
Protective Life Corp. 48,000 1,527,000
Reinsurance Group of America, Inc. 26,500 735,375
ReliaStar Financial Corp. 6,000 235,125
--------------
4,892,863
--------------
Insurance - Multi Line (2.75%)
Allmerica Financial Corp. 11,100 617,438
Fortis (NL) NV (Netherlands) 20,627 739,113
--------------
1,356,551
--------------
Insurance - Property & Casualty (3.98%)
American International Group, Inc. 13,750 1,486,719
Travelers Property Casualty Corp.
(Class A) 13,900 476,075
--------------
1,962,794
--------------
Mortgage & Real Estate Services (1.62%)
Freddie Mac 17,000 800,063
--------------
TOTAL COMMON STOCKS
(Cost $40,561,767) (95.83%) 47,253,646
-------------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.20%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $1,578 $1,578,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 293
--------------
TOTAL SHORT-TERM INVESTMENTS (3.20%) 1,578,293
------- --------------
TOTAL INVESTMENTS (99.03%) 48,831,939
------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.97%) 480,501
------- --------------
TOTAL NET ASSETS (100.00%) $49,312,440
======= ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. 500 Index Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. 500 Index Fund on December 31, 1999. It is divided into two
main categories: common stocks and short-term investments. Common
stocks are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed
last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Advertising (0.27%)
Interpublic Group of Companies, Inc. (The) 861 $49,669
Omnicom Group, Inc. 545 54,500
--------------
104,169
--------------
Aerospace (0.85%)
Boeing Co. (The) 2,869 119,243
General Dynamics Corp. 617 32,547
Goodrich (B.F.) Co. (The) 338 9,295
Lockheed Martin Corp. 1,215 26,578
Northrop Grumman Corp. 213 11,515
Raytheon Co. (Class B) 1,039 27,598
United Technologies Corp. 1,470 95,550
--------------
322,326
--------------
Automobile/Trucks (1.11%)
Cummins Engine Co., Inc. 127 6,136
Dana Corp. 505 15,118
Delphi Automotive Systems Corp. 1,734 27,310
Eaton Corp. 226 16,413
Ford Motor Co. 3,708 198,146
General Motors Corp. 1,965 142,831
PACCAR, Inc. 240 10,635
Ryder System, Inc. 197 4,814
--------------
421,403
--------------
Banks - United States (4.96%)
AmSouth Bancorp. 1,200 23,175
Banc One Corp. 3,520 112,860
BankAmerica Corp. 5,240 262,982
Bank of New York Co., Inc. 2,260 90,400
BB&T Corp. 1,016 27,813
Chase Manhattan Corp. 2,532 196,705
Comerica, Inc. 480 22,410
Fifth Third Bancorp 948 69,559
First Union Corp. 3,032 99,487
Firstar Corp. 3,009 63,565
FleetBoston Financial Corp. 2,810 97,823
Huntington Bancshares, Inc. 705 16,832
KeyCorp. 1,373 30,378
Mellon Financial Corp. 1,561 53,172
Morgan (J.P.) & Co., Inc. 531 67,238
National City Corp. 1,893 44,840
Northern Trust Corp. 683 36,199
Old Kent Financial Corp. 361 12,770
PNC Bank Corp. 902 40,139
Regions Financial Corp. 671 16,859
Republic New York Corp. 322 23,184
SouthTrust Corp. 515 19,473
State Street Corp. 491 35,874
Summit Bancorp. 536 16,415
SunTrust Banks, Inc. 982 67,574
Synovus Financial Corp. 859 17,073
Union Planters Corp. 433 17,076
U.S. Bancorp. 2,234 53,197
Wachovia Corp. 622 42,296
Wells Fargo Co. 5,041 203,845
--------------
1,881,213
--------------
Beverages (2.12%)
Anheuser-Busch Cos., Inc. 1,428 101,209
Brown-Forman Corp. 210 12,022
Coca-Cola Co. (The) 7,582 441,651
Coca-Cola Enterprises, Inc. 1,306 26,283
Coors (Adolph) Co. (Class B) 113 5,932
PepsiCo, Inc. 4,468 157,497
Seagram Co. Ltd. (The) (Canada) 1,331 59,812
--------------
804,406
--------------
Broker Services (1.31%)
Bear Stearns Cos., Inc. 366 15,646
Lehman Brothers Holdings, Inc. 368 31,165
Merrill Lynch & Co., Inc. 1,138 95,023
Morgan Stanley Dean Witter & Co. 1,710 244,103
Paine Webber Group, Inc. 438 17,000
Schwab (Charles) Corp. 2,517 96,590
--------------
499,527
--------------
Building (0.62%)
Armstrong World Industries, Inc. 123 4,105
Black & Decker Corp. 267 13,951
Centex Corp. 182 4,492
Danaher Corp. 437 21,085
Fleetwood Enterprises, Inc. 100 2,062
Fluor Corp. 233 10,689
Georgia-Pacific Corp. 525 26,644
Kaufman & Broad Home Corp. 146 3,531
Louisiana-Pacific Corp. 327 4,660
Masco Corp. 1,372 34,815
Owens Corning 168 3,245
Pulte Corp. 133 2,993
Sherwin-Williams Co. 509 10,689
Snap-on, Inc. 180 4,781
Stanley Works (The) 274 8,254
Vulcan Materials Co. 307 12,261
Weyerhauser Co. 721 51,777
Willamette Industries, Inc. 342 15,882
--------------
235,917
--------------
Business Services - Misc. (0.33%)
Block, H & R, Inc. 300 13,125
Cendant Corp.* 2,183 57,986
Dun & Bradstreet Corp. 494 14,573
Equifax, Inc. 434 10,226
Paychex, Inc. 757 30,280
--------------
126,190
--------------
Chemicals (0.73%)
Air Products & Chemicals, Inc. 704 23,628
Dow Chemical Co. 673 89,930
Eastman Chemical Co. 240 11,445
Engelhard Corp. 386 7,286
FMC Corp.* 94 5,387
Grace (W. R.) & Co. 220 3,052
Great Lakes Chemical Corp. 177 6,759
Hercules, Inc. 326 9,087
PPG Industries, Inc. 533 33,346
Praxair, Inc. 488 24,553
Rohm & Haas Co. 672 27,342
Sigma-Aldrich Corp. 310 9,319
Union Carbide Corp. 411 27,434
--------------
278,568
--------------
Computers (18.94%)
3Com Corp.* 1,059 49,773
Adaptec, Inc.* 313 15,611
Adobe Systems, Inc. 369 24,815
America Online, Inc.* 6,862 517,652
Apple Computer, Inc.* 494 50,789
Autodesk, Inc. 187 6,311
Automatic Data Processing, Inc. 1,919 103,386
BMC Software, Inc.* 744 59,474
Cabletron Systems, Inc.* 554 14,404
Ceridian Corp.* 444 9,574
Cisco Systems, Inc.* 10,041 1,075,642
Citrix Systems, Inc.* 275 33,825
Compaq Computer Corp. 5,218 141,212
Computer Associates International, Inc. 1,655 115,747
Computer Sciences Corp.* 511 48,353
Compuware Corp.* 1,098 40,900
Dell Computer Corp.* 7,799 397,749
Electronic Data Systems Corp. 1,445 96,725
EMC Corp.* 3,123 341,188
First Data Corp. 1,286 63,416
Gateway 2000, Inc.* 972 70,045
Hewlett-Packard Co. 3,128 356,396
IMS Health, Inc. 945 25,692
International Business Machines Corp. 5,533 597,564
Lexmark International Group, Inc.
(Class A)* 392 35,476
Microsoft Corp.* 15,839 1,849,203
Network Appliance, Inc.* 458 38,043
Novell, Inc.* 1,022 40,816
Oracle Corp.* 4,370 489,713
Parametric Technology Corp.* 827 22,381
PeopleSoft, Inc.* 754 16,070
Seagate Technology, Inc.* 639 29,753
Shared Medical System Corp. 83 4,228
Silicon Graphics, Inc.* 564 5,534
Sun Microsystems, Inc.* 4,795 371,313
Unisys Corp.* 951 30,373
--------------
7,189,146
--------------
Consumer Products - Misc. (0.02%)
American Greetings Corp. (Class A) 198 4,678
Jostens, Inc. 102 2,480
--------------
7,158
--------------
Containers (0.13%)
Ball Corp. 93 3,662
Bemis Co., Inc. 161 5,615
Crown Cork & Seal Co., Inc. 374 8,368
Owens-Illinois, Inc.* 461 11,554
Pactiv Corp.* 526 5,589
Sealed Air Corp. * 256 13,264
--------------
48,052
--------------
Cosmetics & Personal Care (0.46%)
Alberto Culver Co. (Class B) 171 4,414
Avon Products, Inc. 744 24,552
Gillette Co. 3,293 135,630
International Flavors & Fragrances, Inc. 323 12,193
--------------
176,789
--------------
Diversified Operations (2.29%)
Crane Co. 202 4,015
Du Pont (E.I.) De Nemours & Co. 3,206 211,195
Fortune Brands, Inc. 504 16,663
Honeywell International, Inc. 2,430 140,181
IKON Office Solutions, Inc. 458 3,120
ITT Industries, Inc. 270 9,028
Johnson Controls, Inc. 262 14,901
Loews Corp. 326 19,784
Minnesota Mining & Manufacturing Co. 1,232 120,582
Monsanto Co. 1,948 69,398
NACCO Industries, Inc., (Class A) 25 1,389
National Service Industries, Inc. 125 3,688
Textron, Inc. 457 35,046
TRW, Inc. 373 19,373
Tyco International Ltd. 5,184 201,528
--------------
869,891
--------------
Electronics (9.64%)
Advanced Micro Devices, Inc.* 452 13,080
Analog Devices, Inc.* 536 49,848
Applied Materials, Inc.* 1,162 147,211
Emerson Electric Co. 1,334 76,538
General Electric Co. 10,071 1,558,487
Grainger (W.W.), Inc. 287 13,722
Intel Corp. 10,255 844,115
KLA-Tencor Corp.* 276 30,739
LSI Logic Corp.* 457 30,847
Micron Technology, Inc. 828 64,377
Molex, Inc. 481 27,267
Motorola, Inc. 1,870 275,358
National Semiconductor Corp.* 526 22,519
Parker-Hannifin Corp. 344 17,652
PE Corp-PE Biosystems Group 316 38,019
PerkinElmer, Inc. 142 5,920
Rockwell International Corp. 584 27,959
Solectron Corp.* 899 85,517
Tektronix, Inc. 145 5,637
Teradyne, Inc.* 525 34,650
Texas Instruments, Inc. 2,462 238,506
Thomas & Betts Corp. 177 5,642
Xilinx, Inc.* 978 44,468
--------------
3,658,078
--------------
Finance (3.17%)
American Express Co. 1,374 228,427
Associates First Capital Corp.
(Class A) 2,235 61,323
Capital One Financial Corp. 605 29,153
Citigroup, Inc. 10,350 575,072
Franklin Resources, Inc. 774 24,816
Golden West Financial Corp. 496 16,616
Household International, Inc. 1,443 53,752
Kansas City Southern Industries, Inc. 339 25,298
MBNA Corp. 2,461 67,062
Price (T. Rowe) Associates, Inc. 367 13,556
Providian Financial Corp. 436 39,703
SLM Holding Corp. 488 20,618
Washington Mutual, Inc. 1,772 46,072
--------------
1,201,468
--------------
Food (1.42%)
Archer-Daniels-Midland Co. 1,867 22,754
Bestfoods 856 44,993
Campbell Soup Co. 1,313 50,797
ConAgra, Inc. 1,511 34,092
General Mills, Inc. 933 33,355
Heinz (H.J.) Co. 1,100 43,794
Hershey Foods Corp. 425 20,187
Kellogg Co. 1,244 38,331
Nabisco Group Holdings Corp. 1,001 10,636
Quaker Oats Co. 411 26,972
Ralston Purina Group 993 27,680
Sara Lee Corp. 2,789 61,532
Unilever NV, American Depositary Receipts
(Netherlands) 1,754 95,483
Wrigley (WM) Jr. Co. 355 29,443
--------------
540,049
--------------
Funeral Services & Related (0.02%)
Service Corporation International 835 5,793
--------------
Furniture (0.03%)
Leggett & Platt, Inc. 603 12,927
--------------
Household (0.15%)
Maytag Corp. 259 12,432
Newell Rubbermaid, Inc. 866 25,114
Springs Industries, Inc. 55 2,197
Tupperware Corp. 177 2,998
Whirlpool Corp. 228 14,834
--------------
57,575
--------------
Instruments - Scientific (0.03%)
Millipore Corp. 139 5,369
Thermo Electron Corp.* 486 7,290
--------------
12,659
--------------
Insurance (2.93%)
Aetna, Inc. 459 25,618
AFLAC, Inc. 817 38,552
Allstate Corp. (The) 2,472 59,328
American General Corp. 759 57,589
American International Group, Inc. 4,752 513,810
Aon Corp. 788 31,520
Chubb Corp. (The) 540 30,409
CIGNA Corp. 571 46,001
Cincinnati Financial Corp. 504 15,718
Conseco, Inc. 1,004 17,946
Hartford Financial Services Group, Inc. (The) 680 32,215
Jefferson Pilot Corp 321 21,908
Lincoln National Corp. 600 24,000
Marsh & McLennan Cos., Inc. 819 78,368
MBIA, Inc. 306 16,161
MGIC Investment Corp. 324 19,501
Progressive Corp. 224 16,380
SAFECO Corp. 399 9,925
St. Paul Cos., Inc. 698 23,514
Torchmark Corp. 404 11,741
UnumProvident Corp. 737 23,630
--------------
1,113,834
--------------
Internet Services (0.92%)
Yahoo! Inc.* 808 349,612
--------------
Leisure (1.14%)
Brunswick Corp. 282 6,274
Carnival Corp. (Class A) 1,894 90,557
Disney (Walt) Co., (The) 6,330 185,152
Eastman Kodak Co. 969 64,196
Harrah's Entertainment, Inc.* 395 10,443
Hasbro, Inc. 595 11,342
Hilton Hotels Corp. 1,132 10,895
Marriott International, Inc. (Class A) 764 24,114
Mattel, Inc. 1,292 16,958
Mirage Resorts, Inc.* 593 9,080
Polaroid Corp. 137 2,577
--------------
431,588
--------------
Machinery (0.41%)
Briggs & Stratton Corp. 71 3,807
Caterpillar Tractor, Inc. 1,091 51,345
Cooper Industries, Inc. 289 11,686
Deere & Co. 717 31,100
Dover Corp. 625 28,359
Foster Wheeler Corp. 125 1,109
Ingersoll-Rand Co. 502 27,641
Milacron, Inc. 114 1,753
--------------
156,800
--------------
Media (2.66%)
CBS Corp. 2,340 149,614
Clear Channel Communications, Inc.* 1,039 92,731
Comcast Corp. 2,307 116,648
Dow Jones & Co., Inc. 275 18,700
Gannett Co., Inc. 856 69,817
Harcourt General, Inc. 218 8,774
Knight-Ridder, Inc. 258 15,351
McGraw-Hill Cos., Inc. (The) 602 37,098
Meredith Corp. 158 6,587
New York Times Co. (Class A) 526 25,840
Time Warner, Inc. 3,949 286,056
Times Mirror Co. (Class A) 184 12,328
Tribune Co. 729 40,141
Viacom, Inc. (Class B)* 2,139 129,276
--------------
1,008,961
--------------
Medical (9.09%)
Abbott Laboratories 4,719 171,359
Allergan, Inc. 404 20,099
ALZA Corp.* 313 10,838
American Home Products Corp. 4,008 158,065
Amgen, Inc.* 3,136 188,356
Bard (C.R.), Inc. 157 8,321
Bausch & Lomb, Inc. 177 12,113
Baxter International, Inc. 893 56,092
Becton, Dickinson & Co. 768 20,544
Biomet, Inc. 346 13,840
Boston Scientific Corp.* 1,273 27,847
Bristol-Myers Squibb Co. 6,089 390,838
Cardinal Health, Inc. 860 41,172
Columbia/HCA Healthcare Corp. 1,729 50,681
Guidant Corp. 943 44,321
HEALTHSOUTH Corp.* 1,186 6,375
Humana, Inc.* 514 4,208
Johnson & Johnson 4,268 397,457
Lilly (Eli) & Co. 3,347 222,575
Mallinckrodt, Inc. 214 6,808
Manor Care, Inc.* 316 5,056
McKesson HBOC, Inc. 864 19,494
Medtronic, Inc. 3,669 133,689
Merck & Co., Inc. 7,175 481,173
Pall Corp. 381 8,215
Pfizer, Inc. 11,883 385,455
Pharmacia & Upjohn, Inc. 1,592 71,640
Quintiles Transnational Corp.* 353 6,597
Schering-Plough Corp. 4,509 190,223
St. Jude Medical, Inc. * 258 7,917
Tenet Healthcare Corp.* 956 22,466
United Healthcare Corp. 521 27,678
Warner-Lambert Co. 2,636 215,987
Watson Pharmaceutical, Inc.* 295 10,565
Wellpoint Health Networks, Inc.* 195 12,858
--------------
3,450,922
--------------
Metal (0.80%)
Alcan Aluminium Ltd. (Canada) 673 27,719
Alcoa, Inc. 1,125 93,375
Barrick Gold Corp. (Canada) 1,210 21,402
Bethlehem Steel Corp.* 403 3,375
Freeport-McMoran Copper & Gold, Inc. (Class B) 502 10,605
Homestake Mining Co. 799 6,242
Illinois Tool Works, Inc. 922 62,293
Inco, Ltd. (Canada) 589 13,841
Newmont Mining Corp. 514 12,593
Phelps Dodge Corp. 249 16,714
Placer Dome, Inc. (Canada) 999 10,739
Reynolds Metals Co. 194 14,865
Timken Co. (The) 190 3,883
Worthington Industries, Inc. 274 4,538
--------------
302,184
--------------
Mortgage Banking (0.81%)
Countrywide Credit Industries, Inc. 347 8,762
Fannie Mae 3,146 196,428
Freddie Mac 2,134 100,431
--------------
305,621
--------------
Office (0.31%)
Avery Dennison Corp. 346 25,215
Deluxe Corp. 225 6,173
Pitney Bowes, Inc. 814 39,326
Xerox Corp. 2,039 46,260
--------------
116,974
--------------
Oil & Gas (5.89%)
Amerada Hess Corp. 278 15,776
Anadarko Petroleum Corp. 391 13,343
Apache Corp. 350 12,928
Ashland, Inc. 222 7,312
Atlantic Richfield Co. 991 85,721
Baker Hughes, Inc. 1,011 21,294
Burlington Resources, Inc. 668 22,086
Chevron Corp. 2,014 174,463
Coastal Corp. (The) 656 23,247
Columbia Energy Group 249 15,749
Conoco, Inc. (Class B) 1,922 47,810
El Paso Energy Corp. 701 27,208
Enron Corp. 2,197 97,492
Exxon Mobil Corp. 10,601 854,043
Halliburton Co. 1,356 54,579
Helmerich & Payne, Inc. 152 3,315
Kerr-McGee Corp. 265 16,430
McDermott International, Inc. 183 1,658
Occidental Petroleum Corp. 1,128 24,393
Phillips Petroleum Co. 777 36,519
Rowan Cos., Inc.* 256 5,552
Royal Dutch Petroleum Co.
(Netherlands) 6,582 397,800
Schlumberger, Ltd. 1,688 94,950
Sunoco, Inc. 277 6,510
Texaco, Inc. 1,698 92,223
Tosco Corp. 442 12,017
Transocean Sedco Forex, Inc. 326 10,982
Union Pacific Resources Group 774 9,869
Unocal Corp. 744 24,971
USX - Marathon Group 954 23,552
--------------
2,233,792
--------------
Paper & Paper Products (0.69%)
Boise Cascade Corp. 175 7,088
Champion International Corp. 295 18,272
Fort James Corp. 664 18,177
International Paper Co. 1,271 71,732
Kimberly-Clark Corp. 1,671 109,033
Mead Corp. (The) 315 13,683
Potlatch Corp. 89 3,972
Temple-Inland, Inc. 171 11,275
Westvaco Corp. 308 10,049
--------------
263,281
--------------
Pollution Control (0.10%)
Browning-Ferris Industries, Inc. 580 5,111
Waste Management, Inc. 1,902 32,691
--------------
37,802
--------------
Printing - Commercial (0.03%)
Donnelley (R.R.) & Sons 388 9,627
--------------
Retail (7.34%)
Albertson's, Inc. 1,300 41,925
AutoZone, Inc.* 443 14,314
Bed Bath & Beyond, Inc.* 429 14,908
Best Buy Co., Inc.* 630 31,618
Circuit City Stores-Circuit City Group 624 28,119
Consolidated Stores Corp.* 340 5,525
Costco Wholesale Corp. 681 62,141
CVS Corp. 1,203 48,045
Darden Restaurants, Inc. 403 7,304
Dayton Hudson Corp. 1,353 99,361
Dillards, Inc. 329 6,642
Dollar General Corp. 816 18,564
Federated Department Stores, Inc.* 644 32,562
Gap, Inc. (The) 2,628 120,888
Genuine Parts Co. 546 13,548
Great Atlantic & Pacific Tea Co., Inc. 118 3,289
Home Depot, Inc. (The) 7,068 484,600
Kmart Corp.* 1,515 15,245
Kohl's Corp.* 500 36,094
Kroger Co.* 2,554 48,207
Limited, Inc. (The) 659 28,543
Longs Drug Stores Corp. 121 3,123
Lowe's Cos., Inc. 1,173 70,087
May Department Stores 1,026 33,089
McDonald's Corp. 4,156 167,539
Nordstrom, Inc. 425 11,130
Office Depot, Inc.* 1,010 11,047
Penney (J. C.) Co., Inc. 799 15,930
Pep Boys - Manny, Moe & Jack (The) 162 1,478
Reebok International Ltd.* 173 1,416
Rite Aid Corp. 795 8,894
Safeway, Inc.* 1,562 55,549
Sears, Roebuck & Co. 1,160 35,308
Staples, Inc.* 1,426 29,590
SUPERVALU, INC. 429 8,580
SYSCO Corp. 1,011 39,998
Tandy Corp. 593 29,168
TJX Cos., Inc. 952 19,457
Toys "R" Us, Inc.* 751 10,749
Tricon Global Restaurants, Inc.* 471 18,192
Walgreen Co. 3,080 90,090
Wal-Mart Stores, Inc. 13,660 944,248
Wendy's International, Inc. 367 7,569
Winn-Dixie Stores, Inc. 456 10,916
--------------
2,784,589
--------------
Rubber - Tires & Misc. (0.05%)
Cooper Tire & Rubber Co. 233 3,626
Goodyear Tire & Rubber Co. (The) 480 13,530
--------------
17,156
--------------
Shoes & Related Apparel (0.11%)
Nike, Inc. (Class B) 860 42,624
--------------
Soap & Cleaning Preparations (1.61%)
Clorox Co. 726 36,572
Colgate-Palmolive Co. 1,788 116,220
Ecolab, Inc. 398 15,572
Procter & Gamble Co. (The) 4,034 441,975
--------------
610,339
--------------
Steel (0.08%)
Allegheny Teledyne, Inc. 287 6,440
Nucor Corp. 268 14,690
USX-U.S. Steel Group, Inc. 271 8,943
--------------
30,073
--------------
Telecommunications (10.20%)
ADC Telecommunications, Inc.* 459 33,306
Andrew Corp.* 252 4,772
AT&T Corp. 9,808 497,756
Bell Atlantic Corp. 4,766 293,407
CenturyTel, Inc. 429 20,324
Comverse Technology, Inc.* 219 31,700
Corning, Inc. 751 96,832
General Instrument Corp.* 534 45,390
Global Crossing Ltd.* (Bermuda) 2,329 116,450
Lucent Technologies, Inc. 9,617 719,472
MCI WorldCom, Inc.* 8,712 462,281
MediaOne Group, Inc.* 1,879 144,331
Nextel Communications, Inc. (Class A)* 1,116 115,088
Nortel Networks Corp. (Canada) 4,100 414,100
QUALCOMM, Inc.* 2,024 356,477
Scientific-Atlanta, Inc. 241 13,406
Sprint Corp. 2,675 180,061
Sprint PCS* 1,323 135,608
Tellabs, Inc.* 1,235 79,272
U.S. WEST, Inc. 1,551 111,672
--------------
3,871,705
--------------
Textile (0.05%)
Liz Claiborne, Inc. 181 6,810
Russell Corp. 103 1,725
VF Corp. 363 10,890
--------------
19,425
--------------
Tobacco (0.48%)
Philip Morris Cos., Inc. 7,263 168,411
UST, Inc. 525 13,223
--------------
181,634
--------------
Transportation (0.64%)
AMR Corp.* 455 30,485
Burlington Northern Santa Fe Corp. 1,403 34,023
CSX Corp. 670 21,021
Delta Air Lines, Inc. 408 20,323
FDX Corp.* 916 37,499
Navistar International Corp.* 195 9,238
Norfolk Southern Corp. 1,168 23,944
Southwest Airlines Co. 1,548 25,058
Union Pacific Corp. 763 33,286
US Airways Group, Inc.* 219 7,022
--------------
241,899
--------------
Utilities (4.66%)
AES Corp. 634 47,391
ALLTEL Corp. 964 79,711
Ameren Corp. 421 13,788
American Electric Power Co., Inc. 596 19,147
BellSouth Corp. 5,778 270,483
Carolina Power & Light Co. 490 14,914
Central & South West Corp. 653 13,060
Cinergy Corp. 488 11,773
CMS Energy Corp. 355 11,072
Consolidated Edison, Inc. 678 23,391
Consolidated Natural Gas Co. 294 19,092
Constellation Energy Group, Inc. 459 13,311
Dominion Resources, Inc. 586 23,000
DTE Energy Co. 445 13,962
Duke Energy Corp. 1,122 56,240
Eastern Enterprises 83 4,767
Edison International 1,066 27,916
Entergy Corp. 758 19,518
FirstEnergy Corp.* 715 16,222
Florida Progress Corp. 301 12,736
FPL Group, Inc. 550 23,547
GPU, Inc. 379 11,346
GTE Corp. 2,983 210,488
New Century Energies, Inc. 355 10,783
Niagara Mohawk Power Corp.* 575 8,014
NICOR, Inc. 144 4,680
Northern States Power Co. 475 9,263
ONEOK, Inc. 97 2,437
PECO Energy Co. 570 19,808
People's Energy Corp. 109 3,652
PG&E Corp. 1,179 24,170
Pinnacle West Capital Corp. 260 7,946
PP&L Resources, Inc. 441 10,088
Public Service Enterprise Group, Inc. 671 23,359
Reliant Energy, Inc. 908 20,771
SBC Communications, Inc. 10,472 510,510
Sempra Energy 738 12,823
Southern Co. 2,066 48,551
Texas Utilities Co. 848 30,157
Unicom Corp. 668 22,378
Williams Cos., Inc. (The) 1,334 40,770
--------------
1,767,035
--------------
TOTAL COMMON STOCKS
(Cost $26,691,135) (99.60%) 37,800,781
------------ --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- ------------ --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.38%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99, due 01-03-00 (Secured by
U.S. Treasury Notes, 4.000% due
10-31-00 and U.S. Treasury Bond,
7.625% due 11-15-22) - Note B 2.49% $145 $145,000
--------------
TOTAL SHORT-TERM INVESTMENTS (0.38%) 145,000
------- --------------
TOTAL INVESTMENTS (99.98%) 37,945,781
------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.02%) 7,435
------- --------------
TOTAL NET ASSETS (100.00%) $37,953,216
======= ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. International Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. International
Fund on December 31, 1999. It's divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Australia (2.05%)
Capral Aluminium, Ltd. (Metal) 9,459 $12,171
National Australia Bank, Ltd.
(Banks - Foreign) 1,416 21,660
National Foods, Ltd. (Food) 5,892 10,367
News Corp., Ltd. (The), American Depositary Receipt
(ADR) (Media) 2,177 83,270
Qantas Airways, Ltd. (Airlines) 5,712 14,250
Telstra Corp., Ltd.
(Telecommunications) 5,008 27,223
WMC, Ltd. (Metal) 4,196 23,139
--------------
192,080
--------------
Belgium (0.00%)
Fortis (B) (Diversified Financial
Services) 378 4
--------------
Canada (5.14%)
Barrick Gold Corp. (Mining) 2,950 52,178
Bombardier, Inc. (Diversified
Operations) 10,034 206,102
Nortel Networks Corp.
(Telecommunications) 1,192 120,439
Petro-Canada (Oil & Gas) 7,326 103,787
--------------
482,506
--------------
China (0.20%)
Yanzhou Coal Mining Co., Ltd.
(Metal) 69,000 19,084
--------------
19,084
--------------
Finland (3.00%)
Merita Plc (Banks - Foreign)* 3,342 19,661
Nokia AB (Telecommunications) 1,441 261,286
--------------
280,947
--------------
France (10.07%)
Alcatel SA (Telecommunications) 549 126,092
Axa SA (Insurance) 269 37,503
Bouygues SA (Building) 159 101,066
Carrefour SA (Retail) 704 129,850
France Telecom SA
(Telecommunications) 499 66,000
Legrand SA (Electronics) 65 15,472
L'Oreal SA (Cosmetics & Personal
Care) 29 23,268
Pinault-Printemps-Redoute SA
(Retail) 170 44,867
PSA Peugeot Citroen SA
(Automobile/Trucks) 183 41,551
Schneider Electric SA (Machinery) 274 21,515
Suez Lyonnaise des Eaux SA
(Diversified Operations) 416 66,672
Total Fina SA-B (Oil & Gas) 1,237 165,107
Valeo SA (Automobile/Trucks) 266 20,525
Vivendi SA (Diversified Operations) 941 84,981
--------------
944,469
--------------
Germany (6.68%)
Allianz AG (Insurance) 323 108,512
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign) 832 56,824
Bayerische Motoren Werke (BMW) AG
(Automobile/Trucks) 691 21,091
DaimlerChrysler AG
(Automobile/Trucks) 665 51,715
Deutsche Telekom AG
(Telecommunications) 636 45,296
Fresenius AG (Medical) 133 19,427
Mannesmann AG (Machinery) 743 179,256
SAP AG (Computers) 80 39,408
Siemens AG (Diversified Operations) 636 80,917
VEBA AG (Diversified Operations) 493 23,962
--------------
626,408
--------------
Hong Kong (2.23%)
Aeon Credit Service Co., Ltd.
(Finance) 34,000 13,996
Cable & Wireless HKT, Ltd.
(Telecommunications) 7,126 20,580
Cheung Kong Holdings, Ltd. (Real
Estate Operations) 4,000 50,685
China Resources Enterprises, Ltd.
(Real Estate Operations) 16,000 25,626
Guoco Group, Ltd. (Finance) 7,000 21,342
HSBC Holdings Plc (Banks - Foreign) 2,981 41,800
JCG Holdings, Ltd. (Diversified
Financial Services) 40,000 22,512
Shandong International Power Development Co. Ltd.
(Electric-Generation)* 90,000 12,736
--------------
209,277
--------------
Indonesia (0.18%)
PT Bank Internasional Indonesia
(Banks - Foreign) 712,500 15,295
PT Bank Negara Indonesia (Banks - Foreign) 28,000 1,202
--------------
16,497
--------------
Ireland (1.65%)
Allied Irish Banks Plc (ADR) (Banks - Foreign) 3,774 79,726
CRH Plc (Building) 3,452 74,590
--------------
154,316
--------------
Italy (2.25%)
Assicurazioni Generali SpA
(Insurance) 897 29,638
ENI SpA (Oil & Gas) 3,500 19,250
Telecom Italia Mobile SpA
(Telecommunications) 11,593 129,511
Telecom Italia SpA
(Telecommunications) 1,727 24,356
UniCredito Italiano SpA (Banks - Foreign) 1,571 7,723
--------------
210,478
--------------
Japan (27.32%)
AIFUL Corp. (Finance) 200 24,469
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) 10,000 139,376
Daiwa House Industry Co., Ltd.
(Building) 3,000 22,316
Denso Corp. (Automobile/Trucks) 2,000 47,764
Fuji Heavy Industries, Ltd.
(Automobile/Trucks) 4,000 27,405
Fujitsu, Ltd. (Computers) 4,000 182,441
Fujitsu Systems Construction, Ltd.
(Engineering/R&D Services) 4,000 66,556
Ito-Yokado Co., Ltd. (Retail) 1,000 108,642
Marubeni Corp.
(Distribution-Wholesale) 29,000 121,768
NEC Corp. (Electronics) 6,000 142,997
Nikko Securities Co., Ltd. (The)
(Broker Services) 17,000 215,141
Nintendo Co. Ltd. (Toys) 300 49,858
Nippon Telegraph & Telephone Corp.
(Telecommunications) 10 171,283
Nomura Securities Co., Ltd. (Broker
Services) 7,000 126,407
NTT Mobile Communication Network, Inc.
(Telecommunications) 5 192,327
Orix Corp. (Leasing Companies) 500 112,655
Sakura Bank, Ltd. (The) (Banks - Foreign) 7,000 40,560
Sekisui House, Ltd. (Building) 4,000 35,431
Sony Corp. (Electronics) 1,600 474,503
Takeda Chemical Industries, Ltd.
(Medical) 3,000 148,282
Takefuji Corp. (Finance) 500 62,592
Toyota Motor Corp.
(Automobile/Trucks) 1,000 48,449
--------------
2,561,222
--------------
Mexico (1.05%)
Grupo Televisa SA, Global Depositary Receipt (GDR)
(Media)* 399 27,232
Telefonos de Mexico SA (ADR)
(Telecommunications) 630 70,875
--------------
98,107
--------------
Netherlands (4.55%)
AEGON NV (Insurance) 533 51,490
Akzo Nobel NV (Chemicals) 1,064 53,377
Dordtsche Petroleum-Industrie Maatschappij NV
(Diversified Operations) 2,079 107,437
Fortis (NL) NV (Diversified
Financial Services) 1,602 57,692
ING Groep NV (Banks - Foreign) 1,050 63,400
Koninklijke Numico NV (Food) 411 15,335
Randstad Holding NV
(Business Services - Human
Resources) 353 16,997
VNU NV (Publishing-Newspapers) 488 25,651
Wolters Kluwer NV
(Publishing-Periodicals) 1,027 34,761
--------------
426,140
--------------
Norway (0.22%)
Tomra Systems ASA (Recycling)* 1,238 21,026
--------------
South Korea (2.01%)
Hanvit Bank (Banks - Foreign) 2,500 8,454
Kookmin Bank (Banks - Foreign) 690 10,816
Korea Telecom Corp.
(Telecommunications) 400 63,056
Samsung Electronics Co.
(Electronics) 400 93,703
Shinhan Bank (Banks - Foreign) 1,120 12,132
--------------
188,161
--------------
Spain (2.81%)
Banco Santander Central Hispano, SA
(Banks - Foreign) 5,224 59,149
Centros Comerciales Pryca, SA
(Retail) 867 13,625
Endesa SA (Utilities) 1,823 36,195
Telefonica SA (Telecommunications)* 6,178 154,340
--------------
263,309
--------------
Sweden (1.08%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 786 50,528
Skandia Forsakrings AB (Insurance) 1,691 51,074
--------------
101,602
--------------
Switzerland (4.46%)
Adecco SA (Business Services - Misc.) 114 88,777
Credit Suisse Group (Banks - Foreign) 91 18,088
Nestle SA (Food) 38 69,614
Novartis AG (Medical) 70 102,782
Roche Holding AG (Medical) 6 71,218
Zurich Allied AG (Insurance) 119 67,859
--------------
418,338
--------------
Taiwan (1.29%)
China Steel Corp. (GDR) (Steel) 1,423 21,309
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR)
(Electronics)* 2,217 99,765
--------------
121,074
--------------
Thailand (0.28%)
Golden Land Property Development Pcl
(Real Estate Operations)* 60,000 21,904
Land & Houses Public Co., Ltd
(Real Estate Development) 4,900 4,651
--------------
26,555
--------------
United Kingdom (14.34%)
Bank of Scotland (Banks - Foreign)* 2,992 34,749
Barclay's Plc (Banks - Foreign) 2,146 61,668
BP Amoco Plc (Oil & Gas) 19,959 201,473
British Telecommunications Plc
(Telecommunications) 6,771 164,058
Cadbury Schweppes Plc (Food) 4,336 26,125
Carlton Communications Plc
(Television) 6,963 67,821
Compass Group Plc (Food) 3,737 51,309
Dixons Group Plc (Retail) 1,921 46,235
Glaxo Wellcome Plc (Medical) 2,703 76,582
Invensys Plc (Diversified
Operations) 7,200 38,067
Kingfisher Plc (Retail) 5,675 62,976
Lloyds TSB Group Plc (Banks - Foreign) 9,507 118,093
Misys Plc (Computers) 1,835 28,485
Pearson Plc (Media) 1,619 52,696
SEMA Group Plc (Computers) 1,309 23,470
SmithKline Beecham Plc (Medical) 8,203 104,015
Smiths Industries Plc
(Manufacturing) 2,444 36,517
Unilever Plc (Food) 8,660 63,648
Vodafone Group Plc
(Telecommunications) 17,269 86,080
--------------
1,344,067
--------------
TOTAL COMMON STOCKS
(Cost $6,322,532) (92.86%) 8,705,667
-------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.09%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99, due 01-03-00 (Secured by
U.S. Treasury Notes, 4.000%, due
10-31-00 and U.S. Treasury Bond,
7.625%, due 11-15-22) - Note B 2.49% $477 477,000
--------------
Cash Equivalents (3.57%)
Navigator Securities Lending Prime Portfolio** 335 334,763
--------------
TOTAL SHORT-TERM INVESTMENTS (8.66%) 811,763
------- --------------
TOTAL INVESTMENTS (101.52%) 9,517,430
------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.52%) (142,817)
------- --------------
TOTAL NET ASSETS (100.00%) $9,374,613
======= ==============
* Non-income producing security.
** Represents investment of security lending collateral - Note B.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
</TABLE>
Industry Diversification (Unaudited)
- -------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration
of investments by country for individual securities held by the Fund is
shown in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table
below shows the percentages of the Fund's investments at December 31,
1999 assigned to the various investment categories.
MARKET VALUE AS A %
INVESTMENT CATEGORIES OF FUND NET ASSETS
- --------------------- ------------------
Airlines 0.15%
Automobile/Trucks 2.75
Banks - Foreign 8.64
Broker Services 3.64
Building 2.49
Business Services - Human Resources 0.95
Business Services - Misc. 0.18
Chemicals 0.57
Computers 2.92
Cosmetics & Personal Care 0.25
Distribution - Wholesale 1.30
Diversified Financial Services 0.86
Diversified Operations 6.49
Electric - Generation 0.14
Electronics 8.82
Engineering/R&D Services 0.71
Finance 1.31
Food 2.52
Insurance 3.69
Leasing Companies 1.20
Machinery 2.14
Manufacturing 0.39
Media 1.74
Medical 5.57
Metal 0.58
Mining 0.56
Oil & Gas 5.22
Publishing - Newspapers 0.27
Publishing - Periodicals 0.37
Real Estate Development 0.05
Real Estate Operations 1.05
Recycling 0.22
Retail 4.33
Steel 0.23
Telecommunications 18.92
Television 0.72
Toys 0.53
Utilities 0.39
Short-Term Investments 8.66
------
TOTAL INVESTMENTS 101.52%
======
See notes to financial statements.
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Large Cap Growth Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Large Cap
Growth Fund on December 31, 1999. It's divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Advertising (1.85%)
Interpublic Group of Companies, Inc. (The) 7,000 $403,813
--------------
Business Services - Misc. (1.21%)
Cendant Corp.* 10,000 265,625
--------------
Computers (24.36%)
America Online, Inc.* 6,200 467,713
BMC Software, Inc.* 7,500 599,531
Cisco Systems, Inc.* 7,100 760,588
Computer Associates International, Inc. 9,000 629,438
EMC Corp.* 4,000 437,000
Gateway, Inc.* 3,000 216,187
Hewlett-Packard Co. 1,500 170,906
International Business Machines Corp. 7,000 756,000
Microsoft Corp.* 8,500 992,375
Parametric Technology Corp.* 11,000 297,687
--------------
5,327,425
--------------
Cosmetics & Personal Care (1.33%)
Dial Corp. (The) 12,000 291,750
--------------
Diversified Operations (4.51%)
Honeywell International, Inc. 9,000 519,188
Tyco International Ltd. 12,000 466,500
--------------
985,688
--------------
Electronics (12.84%)
Applied Materials, Inc.* 5,500 696,781
General Electric Co. 5,000 773,750
Intel Corp. 8,500 699,656
Motorola, Inc. 2,400 353,400
Solectron Corp.* 3,000 285,375
--------------
2,808,962
--------------
Finance (3.35%)
Citigroup, Inc. 5,850 325,041
MBNA Corp. 15,000 408,750
--------------
733,791
--------------
Food (1.53%)
Ralston Purina Group 12,000 334,500
--------------
Insurance (2.43%)
American General Corp. 7,000 531,125
--------------
Leisure (1.92%)
Royal Caribbean Cruises Ltd. 8,500 419,156
--------------
Media (8.32%)
AMFM, Inc.* 8,000 626,000
AT&T Corp. - Liberty Media Group* 8,000 454,000
Cablevision Systems Corp. (Class A)* 5,000 377,500
Infinity Broadcasting Corp. (Class A)* 10,000 361,875
--------------
1,819,375
--------------
Medical (4.02%)
Johnson & Johnson 3,000 $279,375
Merck & Co., Inc. 4,000 268,250
Schering-Plough Corp. 3,000 126,562
Warner-Lambert Co. 2,500 204,844
--------------
879,031
--------------
Office (2.21%)
Pitney Bowes, Inc. 10,000 483,125
--------------
Retail (14.10%)
Amazon.com, Inc.* 3,000 228,375
Best Buy Co., Inc.* 8,000 401,500
CVS Corp. 10,000 399,375
Home Depot, Inc. (The) 6,750 462,797
Kroger Co.* 25,000 471,875
McDonald's Corp. 6,000 241,875
Safeway, Inc.* 15,000 533,437
Staples, Inc.* 10,000 207,500
Wal-Mart Stores, Inc. 2,000 138,250
--------------
3,084,984
--------------
Soap & Cleaning Preparations (2.15%)
Procter & Gamble Co. (The) 4,300 471,119
--------------
Telecommunications (13.12%)
ANTEC Corp.* 10,000 365,000
Bell Atlantic Corp. 7,500 461,719
Corning, Inc. 3,000 386,812
Lucent Technologies, Inc. 8,000 598,500
MCI WorldCom, Inc.* 3,000 159,188
Sprint Corp. (PCS Group)* 5,000 512,500
Tellabs, Inc.* 6,000 385,125
--------------
2,868,844
--------------
TOTAL COMMON STOCKS
(Cost $17,686,521) (99.25%) 21,708,313
-------------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.31%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $286 $286,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 691
--------------
TOTAL SHORT-TERM INVESTMENTS (1.31%) 286,691
------- --------------
TOTAL INVESTMENTS (100.56%) 21,995,004
------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.56%) (123,072)
------- --------------
TOTAL NET ASSETS (100.00%) $21,871,932
======= ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Mid Cap Growth Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Mid Cap Growth
Fund on December 31, 1999. It's divided into three main categories: common stocks, rights and
short-term investments. Common stocks and rights are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Advertising (2.31%)
DoubleClick, Inc.* 290 $73,388
Interpublic Group of Cos., Inc.
(The) 580 33,459
Omnicom Group, Inc. 400 40,000
--------------
146,847
--------------
Banks - United States (1.80%)
Comerica, Inc. 340 15,874
First Security Corp. 700 17,872
First Tennessee National Corp. 610 17,385
Northern Trust Corp. 1,200 63,600
--------------
114,731
--------------
Chemicals (0.46%)
Rohm & Haas Co. 720 29,295
--------------
Computers (20.23%)
Active Software, Inc.* 320 29,440
Akamai Technologies, Inc.* 70 22,934
BMC Software, Inc.* 460 36,771
Cambridge Technology Partners, Inc.* 750 19,687
CMGI, Inc.* 415 114,903
Computer Sciences Corp.* 580 54,882
DST Systems, Inc.* 420 32,051
Edwards (J.D.) & Co.* 1,720 51,385
Electronics for Imaging, Inc.* 510 29,644
EMC Corp.* 320 34,960
Exodus Communications, Inc.* 690 61,281
Fiserv, Inc.* 1,315 50,381
Foundry Networks, Inc.* 85 25,643
FreeMarkets, Inc.* 25 8,533
Gateway, Inc.* 520 37,473
i2 Technologies, Inc.* 590 115,050
Informix Corp.* 1,100 12,581
Lexmark International Group, Inc.
(Class A)* 680 61,540
Media Metrix, Inc.* 690 24,667
Mercury Interactive Corp.* 240 25,905
Network Appliance, Inc.* 540 44,854
OpenTV Corp.* 50 4,013
Parametric Technology Corp.* 1,690 45,736
PSINet, Inc.* 450 27,788
RealNetworks, Inc.* 100 12,031
Rhythms NetConnections, Inc.* 550 17,050
S1 Corp.* 760 59,375
Unisys Corp.* 1,155 36,888
VA Linux Systems, Inc.* 50 10,331
VERITAS Software Corp.* 485 69,416
VerticalNet, Inc.* 440 72,160
Viant Corp.* 100 9,900
Whittman-Hart, Inc.* 370 19,841
Williams Communications Group, Inc.* 270 7,813
--------------
1,286,907
--------------
Cosmetics & Personal Care (1.05%)
Dial Corp. (The) 1,640 39,873
Estee Lauder Cos., Inc. (The)
(Class A) 540 27,236
--------------
67,109
--------------
Diversified Operations (0.77%)
Mitsubishi Corp., American Depositary Receipts
(ADR) (Japan) 3,172 48,902
--------------
Electronics (16.76%)
Altera Corp.* 785 38,907
Amphenol Corp. (Class A)* 520 34,612
Analog Devices, Inc.* 440 40,920
Applied Materials, Inc.* 255 32,305
ASM Lithography Holding N.V.
(Netherlands)* 470 53,463
Atmel Corp.* 1,320 39,022
Broadcom Corp. (Class A)* 210 57,199
Conexant Systems, Inc.* 830 55,091
Flextronics International Ltd.* 740 34,040
Jabil Circuit, Inc.* 740 54,020
KLA-Tencor Corp.* 450 50,119
Linear Technology Corp. 640 45,800
Maxim Integrated Products, Inc.* 1,080 50,963
Novellus Systems, Inc.* 275 33,696
Oak Industries, Inc.* 920 97,635
Sanmina Corp.* 325 32,459
Solectron Corp.* 320 30,440
STMicroelectronics N.V.
(Netherlands) 390 59,061
Teradyne, Inc.* 950 62,700
Vitesse Semiconductor Corp.* 860 45,096
Waters Corp.* 1,280 67,840
Xilinx, Inc.* 1,120 50,925
--------------
1,066,313
--------------
Fiber Optics (0.31%)
Sycamore Networks, Inc.* 65 20,020
--------------
Finance (1.46%)
Capital One Financial Corp. 510 24,576
Concord EFS, Inc.* 1,470 37,853
NextCard, Inc.* 450 12,994
Providian Financial Corp. 190 17,302
--------------
92,725
--------------
Insurance (2.49%)
Ace, Ltd. (Bermuda) 1,625 27,117
AFLAC, Inc. 470 22,178
Lincoln National Corp. 350 14,000
MBIA, Inc. 350 18,484
Protective Life Corp. 500 15,906
Reinsurance Group of America, Inc. 1,332 36,963
ReliaStar Financial Corp. 610 23,904
--------------
158,552
--------------
Linen Supply & Related (0.35%)
Cintas Corp. 420 22,312
--------------
Machinery (0.43%)
SPX Corp.* 340 27,476
--------------
Media (9.66%)
Adelphia Communications Corp.
(Class A)* 480 31,500
AMFM, Inc.* 590 46,167
Charter Communications, Inc. (Class A)* 600 13,125
Cox Radio, Inc. (Class A)* 660 65,835
Cumulus Media, Inc. (Class A)* 610 30,957
Emmis Communications Corp. (Class A)* 260 32,407
Entercom Communications Corp.* 935 61,710
Hispanic Broadcasting Corp.* 390 35,965
Infinity Broadcasting Corp. (Class A)* 1,521 55,041
Insight Communications Co., Inc.* 630 18,664
Radio One, Inc.* 770 70,840
Spanish Broadcasting System, Inc.
(Class A)* 1,050 42,263
Telewest Communications Plc (ADR)
(United Kingdom)* 844 46,631
Univision Communications, Inc.
(Class A)* 290 29,634
Wink Communications, Inc.* 560 33,635
--------------
614,374
--------------
Medical (3.44%)
Allergan, Inc. 480 23,880
Biogen, Inc.* 580 49,010
Express Scripts, Inc. (Class A)* 405 25,920
Forest Laboratories, Inc.* 360 22,118
Genzyme Corp.* 445 20,025
Health Management Associates, Inc.
(Class A)* 1,800 24,075
Immunex Corp.* 270 29,565
Wellpoint Health Networks, Inc.* 370 24,397
--------------
218,990
--------------
Office (0.47%)
Avery Dennison Corp. 410 29,879
--------------
Oil & Gas (1.55%)
Apache Corp. 480 17,730
BJ Services Co.* 610 25,506
Burlington Resources, Inc. 320 10,580
Cooper Cameron Corp.* 280 13,702
Noble Affiliates, Inc. 420 9,004
R&B Falcon Corp.* 1,670 22,128
--------------
98,650
--------------
Paper & Paper Products (1.14%)
Bowater, Inc. 500 27,156
Fort James Corp. 1,660 45,442
--------------
72,598
--------------
Retail (3.47%)
Amazon.com, Inc.* 280 21,315
Best Buy Co., Inc.* 570 28,607
Circuit City Stores-Circuit City
Group 1,225 55,202
Kohl's Corp.* 300 21,656
SYSCO Corp. 440 17,408
Tandy Corp. 1,400 68,863
TJX Cos., Inc. 370 7,562
--------------
220,613
--------------
Steel (0.56%)
Nucor Corp. 650 35,628
--------------
Telecommunications (21.30%)
Adelphia Business Solutions, Inc.* 450 21,600
Allegiance Telecom, Inc.* 630 58,117
American Tower Corp. (Class A)* 960 29,340
ANTEC Corp.* 2,080 75,920
COLT Telecom Group Plc (ADR)
(United Kingdom)* 360 73,440
Comverse Technology, Inc.* 540 78,165
Crown Castle International Corp.* 1,100 35,337
Global Crossing Ltd. (Bermuda)* 1,863 93,150
Global TeleSystems Group, Inc.* 1,180 40,857
i-CABLE Communications Ltd. (ADR)
(Hong Kong)* 1,250 31,328
ICG Communications, Inc.* 1,025 19,219
Intermedia Communications, Inc.* 560 21,735
Jazztel Plc (ADR) (United Kingdom)* 24 1,563
McLeodUSA Inc. (Class A)* 1,660 97,732
Metromedia Fiber Network, Inc.
(Class A)* 710 34,036
Nextel Communications, Inc. (Class A)* 660 68,063
NEXTLINK Communications, Inc.
(Class A)* 930 77,248
NTL, Inc.* 250 31,187
Omnipoint Corp.* 970 117,006
QUALCOMM, Inc.* 400 70,450
RCN Corp.* 520 25,220
Scientific-Atlanta, Inc. 370 20,581
TALK.com, Inc.* 1,470 26,093
TeleCorp PCS, Inc.* 100 3,800
Teligent, Inc. (Class A)* 170 10,498
Time Warner Telecom, Inc. (Class A)* 300 14,981
Tritel, Inc.* 230 7,288
UnitedGlobalCom, Inc. (Class A)* 880 62,150
Versatel Telecom International N.V. (ADR)
(Netherlands)* 700 24,456
VoiceStream Wireless Corp.* 380 54,079
WinStar Communications, Inc.* 410 30,853
--------------
1,355,492
--------------
Utilities (0.38%)
Montana Power Co. 670 24,162
--------------
TOTAL COMMON STOCKS
(Cost $3,914,727) (90.39%) 5,751,575
-------------- --------------
RIGHTS
Telecommunications (0.00%)
TALK.com, Inc.* 33 --
--------------
TOTAL RIGHTS
(Cost $0) (0.00%) --
-------------- --------------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $3,914,727) (90.39%) 5,751,575
-------------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.75%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond, 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $620 $620,000
--------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 832
--------------
TOTAL SHORT-TERM INVESTMENTS (9.76%) 620,832
------- --------------
TOTAL INVESTMENTS (100.15%) 6,372,407
------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.15%) (9,607)
------- --------------
TOTAL NET ASSETS (100.00%) $6,362,800
======= ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
</TABLE>
Portfolio Concentration
December 31, 1999 (Unaudited)
- -----------------------------------------------------------------------
The V.A. Mid Cap Growth Fund invests primarily in common stocks of U.S.
and foreign issuers. The performance of the Fund is closely tied to the
economic and financial conditions within the countries in which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's
investments at December 31, 1999 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Bermuda 1.89%
Hong Kong 0.49
Japan 0.77
Netherlands 2.15
United Kingdom 1.91
------
TOTAL INVESTMENTS 100.15%
======
See notes to financial statements.
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Regional Bank Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Regional Bank
Fund on December 31, 1999. It's divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Superregional Banks (3.78%)
Mellon Financial Corp. (PA) 6,000 $204,375
PNC Bank Corp. (PA) 5,000 222,500
U.S. Bancorp (MN) 10,000 238,125
Wells Fargo Co. (CA) 2,500 101,094
--------------
766,094
--------------
Banks - United States (88.26%)
BancFirst Corp. (OK) 9,400 319,012
BancorpSouth, Inc. (MS) 12,450 203,091
BancWest Corp. (HI) 33,300 649,350
Bank of the Ozarks, Inc. (AR) 15,350 299,325
Cascade Bancorp (OR) 35,260 440,750
CCB Financial Corp. (NC) 7,700 335,431
Centennial Bancorp.* (OR) 25,375 272,781
Centura Banks, Inc. (NC) 8,325 367,341
Chittenden Corp. (VT) 11,000 325,875
Citizens Banking Corp. (MI) 14,621 327,145
City National Corp. (CA) 16,200 533,588
Colonial BancGroup, Inc. (AL) 15,000 155,625
Columbia Bancorp. (OR) 13,500 96,187
Comerica, Inc. (MI) 13,400 625,612
Commerce Bancshares, Inc. (MO) 22,762 771,063
Community First Bankshares, Inc. (ND) 11,450 180,337
Compass Bancshares, Inc. (AL) 8,000 178,500
Cullen/Frost Bankers., Inc. (TX) 27,150 699,112
Eldorado Bancshares, Inc.* (CA) 37,000 397,750
Fifth Third Bancorp (OH) 6,895 505,921
Financial Institutions, Inc.* (NY) 34,750 421,344
First Security Corp. (UT) 11,000 280,844
First Tennessee National Corp. (TN) 15,000 427,500
First Virginia Banks, Inc. (VA) 2,750 118,250
FirstMerit Corp. (OH) 25,300 581,900
Independent Bank Corp. (MI) 21,750 318,094
Lamar Capital Corp. (MS) 21,000 233,625
M & T Bank Corp. (NY) 1,800 745,650
Marshall & Ilsley Corp. (WI) 4,000 251,250
Mercantile Bankshares Corp. (MD) 14,000 447,125
Mid-State Bancshares (CA) 25,000 796,875
Mississippi Valley Bancshares, Inc. (MO) 9,850 265,950
National Commerce Bancorp. (TN) 18,000 408,375
North Fork Bancorp., Inc. (NY) 8,750 153,125
Northrim Bank (AK) 15,900 158,006
Pacific Capital Bancorp. (CA) 15,000 461,250
Prosperity Banchares, Inc. (TX) 26,000 416,000
Security Bank Holding Co. (OR) 12,862 72,349
Sky Financial Group, Inc. (OH) 16,369 329,426
Southwest Bancorp. of Texas, Inc.* (TX) 12,000 237,750
Sterling Bancshares, Inc. (TX) 19,300 215,919
Summit Bancshares, Inc. (TX) 14,800 273,800
TCF Financial Corp. (MN) 4,500 111,937
Texas Regional Bancshares, Inc.
(Class A) (TX) 8,500 246,500
Umpqua Holdings Corp. (OR) 20,000 185,000
UnionBanCal Corp. (CA) 5,500 216,906
Vail Banks, Inc.* (CO) 21,850 215,769
Valley National Bancorp. (NJ) 28,000 784,000
Whitney Holding Corp. (LA) 4,800 177,900
Wilmington Trust Corp. (DE) 8,000 386,000
Yardville National Bancorp. (NJ) 25,000 290,625
--------------
17,912,840
--------------
Thrifts (4.14%)
Charter One Financial, Inc. (OH) 16,279 311,336
First Financial Holdings, Inc. (SC) 14,800 236,800
InterWest Bancorp., Inc. (WA) 6,387 122,950
Warren Bancorp., Inc. (MA) 22,500 168,750
--------------
839,836
--------------
TOTAL COMMON STOCKS
(Cost $21,491,150) (96.18%) 19,518,770
-------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.56%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $926 $926,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 750
--------------
TOTAL SHORT-TERM INVESTMENTS (4.56%) 926,750
------- --------------
TOTAL INVESTMENTS (100.74%) 20,445,520
------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.74%) (150,425)
------- --------------
TOTAL NET ASSETS (100.00%) $20,295,095
======= ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Small Cap Growth Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Small Cap
Growth Fund on December 31, 1999. It's divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Advertising (2.53%)
24/7 Media, Inc.* 1,500 $84,375
Catalina Marketing Corp.* 800 92,600
Cybergold, Inc.* 8,550 151,228
Getty Images, Inc.* 4,100 200,387
--------------
528,590
--------------
Automobile/Trucks (0.94%)
Gentex Corp.* 2,800 77,700
Monaco Coach Corp.* 4,600 117,588
--------------
195,288
--------------
Banks - United States (0.61%)
Greater Bay Bancorp. 2,950 126,481
--------------
Beverages (0.31%)
Beringer Wine Estates Holdings, Inc. (Class B)* 1,600 63,800
--------------
Broker Services (0.69%)
Raymond James Financial, Inc. 2,150 40,178
Web Street, Inc.* 8,350 103,331
--------------
143,509
--------------
Business Services - Misc. (7.51%)
Charles River Associates, Inc.* 3,550 118,925
Chemdex Corp.* 1,350 149,850
Corporate Executive Board Co.
(The)* 2,550 142,481
FactSet Research Systems, Inc. 1,550 123,419
Forrester Research, Inc.* 3,000 206,625
InsWeb Corp.* 4,250 108,641
Interim Services, Inc.* 4,200 103,950
Jupiter Communications, Inc.* 3,050 92,263
Management Network Group, Inc.
(The)* 400 13,050
MedQuist, Inc.* 1,050 27,103
META Group, Inc.* 5,450 103,550
Modem Media.Poppe Tyson, Inc.* 1,950 137,231
On Assignment, Inc.* 2,900 86,638
Profit Recovery Group
International, Inc. (The)* 1,800 47,813
Quanta Services, Inc.* 3,750 105,938
--------------
1,567,477
--------------
Computer Service (6.47%)
Advent Software, Inc.* 1,450 93,434
Dendrite International, Inc.* 3,375 114,328
Digital Impact, Inc.* 50 2,506
IntraNet Solutions, Inc.* 3,250 120,250
Lifeminders.com, Inc.* 1,850 106,838
Media Metrix, Inc.* 3,050 109,037
Mediaplex, Inc.* 2,700 169,425
Multex.com, Inc.* 3,750 141,094
NetRatings, Inc.* 1,550 74,594
Official Payments Corp.* 2,750 143,000
SportsLine USA, Inc.* 2,450 122,806
TheStreet.com, Inc.* 5,350 102,653
VerticalNet, Inc.* 300 49,200
--------------
1,349,165
--------------
Computer Software (21.03%)
Accrue Software, Inc.* 3,300 178,612
Aspect Development, Inc.* 1,950 133,575
Aspen Technology, Inc.* 8,400 222,075
Be Free, Inc.* 2,850 204,844
BindView Development Corp.* 4,450 221,109
Broadbase Software, Inc.* 1,850 208,125
BSQUARE Corp.* 2,250 94,359
C-bridge Internet Solutions, Inc.* 50 2,431
Clarus Corp.* 2,900 191,400
Cognizant Technology Solutions Corp.* 2,250 245,953
Commtouch Software, Ltd. (Israel)* 3,050 148,116
Data Return Corp.* 4,650 248,775
Digex, Inc.* 2,600 178,750
Digimarc Corp.* 250 12,500
Diversinet Corp. (Canada)* 7,550 166,100
Fundtech Ltd. (Israel)* 4,650 95,325
iManage, Inc.* 2,650 85,131
Insight Enterprises, Inc.* 2,900 117,812
Interwoven, Inc.* 500 60,813
JDA Software Group, Inc.* 5,600 91,700
Level 8 Systems, Inc.* 2,100 72,581
Micromuse, Inc.* 1,000 170,000
Net Perceptions, Inc.* 3,600 151,200
Packeteer, Inc.* 2,100 149,100
pcOrder.com, Inc.* 2,100 107,100
Predictive Systems, Inc.* 2,000 131,000
Prodigy Communications Corp.* 4,950 95,906
ScanSource, Inc.* 3,400 137,913
Secure Computing Corp.* 9,250 116,203
WebTrends Corp.* 1,700 137,700
Whittman-Hart, Inc.* 2,200 117,975
Wind River Systems, Inc.* 2,550 93,394
--------------
4,387,577
--------------
Electronics (13.82%)
Alpha Industries, Inc. 1,300 74,506
Apex, Inc.* 5,000 161,250
ATMI, Inc.* 3,100 102,494
Caliper Technologies Corp.* 200 13,350
Concord Communications, Inc.* 1,950 86,531
Credence Systems Corp.* 1,850 160,025
CVC, Inc.* 7,700 74,113
DuPont Photomasks, Inc.* 2,350 113,387
GlobeSpan, Inc.* 550 35,819
Immersion Corp.* 3,150 120,881
JNI Corp.* 650 42,900
Maxtor Corp.* 13,300 96,425
Metalink Ltd. (Israel)* 2,700 55,013
Micrel, Inc.* 1,050 59,784
National Computer Systems, Inc. 3,200 120,400
National Instruments Corp.* 2,450 93,713
Novellus Systems, Inc.* 650 79,645
Orckit Communications Ltd.
(Israel)* 3,650 125,241
Paradyne Networks, Inc.* 3,100 84,475
PLX Technology, Inc.* 8,350 158,128
Powerwave Technologies, Inc.* 2,450 143,019
PRI Automation, Inc.* 1,950 130,894
Qlogic Corp.* 700 111,912
Quantum Corp., Hard Disk Drive
Group* 8,700 60,356
Rudolph Technologies, Inc.* 900 30,150
Sage, Inc.* 3,400 65,875
SCM Microsystems, Inc.* 1,500 95,906
Semtech Corp.* 2,900 151,162
Vicor Corp.* 3,900 157,950
Virata Corp.* 400 11,950
Visual Networks, Inc.* 850 67,363
--------------
2,884,617
--------------
Engineering/R&D Services (0.09%)
Symyx Technologies, Inc.* 600 18,000
--------------
Finance (1.80%)
Affiliated Managers Group, Inc.* 2,050 82,897
Medallion Financial Corp. 3,500 62,781
Metris Cos., Inc. 2,650 94,572
NextCard, Inc.* 2,950 85,181
S1 Corp.* 650 50,781
--------------
376,212
--------------
Food (0.50%)
American Italian Pasta Co. (Class A)* 3,400 104,550
--------------
Leisure (1.80%)
Cinar Films, Inc. (Class B)
(Canada)* 6,100 149,450
Imax Corp. (Canada)* 5,600 153,300
Premier Parks, Inc.* 2,500 72,188
--------------
374,938
--------------
Machinery (0.38%)
Terex Corp.* 2,900 80,475
--------------
Media (10.51%)
Ackerley Group, Inc. (The) 5,500 99,688
Acme Communications, Inc.* 3,700 123,025
Citadel Communications Corp.* 2,500 162,187
Classic Communications, Inc. (Class A)* 2,750 100,547
Cumulus Media, Inc. (Class A)* 3,400 172,550
Entercom Communications Corp.* 1,500 99,000
Hispanic Broadcasting Corp.* 500 46,109
Martha Stewart Living Omnimedia, Inc. (Class A)* 3,050 73,200
Network Event Theater, Inc.* 5,900 175,525
Pegasus Communications Corp.* 2,500 244,375
Radio One, Inc.* 2,000 184,000
Radio Unica Corp.* 4,100 118,387
TiVo, Inc.* 3,250 109,687
Westwood One, Inc.* 2,250 171,000
Wink Communications, Inc.* 2,850 171,178
XM Satellite Radio Holdings, Inc.
(Class A)* 3,750 142,969
--------------
2,193,427
--------------
Medical (6.80%)
Alkermes, Inc.* 3,100 152,287
Alpharma, Inc. (Class A) 3,300 101,475
CV Therapeutics, Inc.* 6,200 161,588
Cytyc Corp.* 2,750 167,922
Human Genome Sciences, Inc.* 800 122,100
IDEC Pharmaceuticals Corp.* 1,100 108,075
Interpore International, Inc.* 15,250 120,094
King Pharmaceuticals, Inc.* 3,300 185,006
Pharmacopeia, Inc.* 2,900 65,613
Pharmacyclics, Inc.* 2,850 117,562
Triangle Pharmaceuticals, Inc.* 5,550 71,109
Tularik, Inc.* 1,450 46,944
--------------
1,419,775
--------------
Metal (0.88%)
Maverick Tube Corp.* 7,450 183,922
--------------
Oil & Gas (2.60%)
Core Laboratories N.V.
(Netherlands)* 4,300 86,269
Dril-Quip, Inc.* 2,600 78,975
Marine Drilling Cos., Inc.* 6,300 141,356
Newfield Exploration Co.* 3,650 97,638
Pride International, Inc.* 4,600 67,275
Stone Energy Corp.* 2,000 71,250
--------------
542,763
--------------
Retail (7.89%)
99 Cents Only Stores* 3,593 137,432
Applebee's International, Inc. 3,550 104,725
Brightpoint, Inc.* 14,450 189,656
Cost Plus, Inc.* 3,350 119,344
CSK Auto Corp.* 4,150 72,625
Duane Reade, Inc.* 4,850 133,678
Ethan Allen Interiors, Inc. 1,800 57,713
Linens 'N Things, Inc.* 4,050 119,981
O'Reilly Automotive, Inc.* 4,600 98,900
Pacific Sunwear of California, Inc.* 3,725 119,898
RARE Hospitality International, Inc.* 3,250 70,332
RoweCom, Inc.* 2,450 111,169
Tech Data Corp.* 2,300 62,388
Whole Foods Market, Inc.* 2,150 99,706
Wild Oats Markets, Inc.* 6,750 149,766
--------------
1,647,313
--------------
Schools/Education (0.35%)
ITT Educational Services, Inc.* 4,750 73,328
--------------
Steel (0.70%)
Lone Star Technologies, Inc.* 5,250 146,344
--------------
Telecommunications (7.85%)
AirGate PCS, Inc.* 2,950 155,612
Airnet Communications Corp.* 50 1,819
CoreComm Ltd.* 2,250 133,594
Crown Castle International Corp.* 2,800 89,950
Deltathree.com, Inc. (Class A)* 1,450 37,338
Efficient Networks, Inc.* 1,850 125,800
Global TeleSystems Group, Inc.* 1,400 48,475
Illuminet Holdings, Inc.* 1,850 101,750
Latitude Communications, Inc.* 4,250 111,031
Pinnacle Holdings, Inc.* 4,250 180,094
Powertel, Inc.* 1,550 155,581
Rural Cellular Corp. (Class A)* 1,900 171,950
Terayon Communication Systems, Inc.* 1,750 109,922
US LEC Corp. (Class A)* 3,750 120,937
WinStar Communications, Inc.* 1,250 94,063
--------------
1,637,916
--------------
Textile (0.32%)
Cutter & Buck, Inc.* 4,400 66,550
--------------
Transportation (2.26%)
Circle International Group, Inc. 4,850 107,912
Eagle USA Airfreight, Inc.* 2,100 90,563
Expeditors International of
Washington, Inc. 2,650 116,103
Forward Air Corp.* 3,600 156,150
--------------
470,728
--------------
Waste Disposal Service & Equip. (0.21%)
Waste Connections, Inc.* 3,000 43,313
--------------
TOTAL COMMON STOCKS
(Cost $13,700,474) (98.85%) 20,626,058
-------------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.26%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond, 10.625% due
08-15-15 and U.S. Treasury Notes,
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $263 $263,000
-------------- --------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 350
--------------
TOTAL SHORT-TERM INVESTMENTS (1.26%) 263,350
-------------- --------------
TOTAL INVESTMENTS (100.11%) 20,889,408
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.11%) (22,798)
-------------- --------------
TOTAL NET ASSETS (100.00%) $20,866,610
============== ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Core Equity Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Core Equity
Fund on December 31, 1999. It is divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Aerospace (4.52%)
General Dynamics Corp. 6,700 $353,425
Goodrich (B.F.) Co. (The) 5,600 154,000
Honeywell International, Inc. 14,500 836,469
United Technologies Corp. 10,600 689,000
--------------
2,032,894
--------------
Automobile/Trucks (1.82%)
Borg-Warner Automotive, Inc. 2,900 117,450
Ford Motor Co. 8,500 454,219
Lear Corp.* 4,000 128,000
Meritor Automotive, Inc. 6,200 120,125
--------------
819,794
--------------
Banks - United States (3.60%)
Bank of America Corp. 6,800 341,275
Chase Manhattan Corp. 3,300 256,369
Comerica, Inc. 3,400 158,737
Fifth Third Bancorp 2,400 176,100
First Union Corp. 2,400 78,750
FleetBoston Financial Corp. 9,700 337,681
Wells Fargo Co. 6,700 270,931
--------------
1,619,843
--------------
Beverages (1.16%)
Anheuser-Busch Cos., Inc. 5,900 418,163
PepsiCo, Inc. 3,000 105,750
--------------
523,913
--------------
Building (2.72%)
Black & Decker Corp. (The) 8,500 444,125
Centex Corp. 5,500 135,781
Danaher Corp. 5,700 275,025
Georgia-Pacific Group 3,800 192,850
Willamette Industries, Inc. 3,800 176,463
--------------
1,224,244
--------------
Chemicals (0.27%)
Dow Chemical Co. 900 120,262
--------------
Computers (17.82%)
America Online, Inc.* 12,100 912,794
Cisco Systems, Inc.* 14,100 1,510,462
Compaq Computer Corp. 4,200 113,662
Computer Associates International, Inc. 9,600 671,400
Dell Computer Corp.* 9,400 479,400
EMC Corp.* 1,300 142,025
First Data Corp. 5,400 266,287
Hewlett-Packard Co. 1,000 113,937
International Business Machines Corp. 7,000 756,000
Microsoft Corp.* 18,300 2,136,525
Oracle Corp.* 4,300 481,869
Yahoo! Inc.* 1,000 432,687
--------------
8,017,048
--------------
Cosmetics & Personal Care (0.26%)
Avon Products, Inc. 3,500 115,500
--------------
Diversified Operations (2.50%)
Monsanto Co. 14,600 520,125
Textron, Inc. 1,200 92,025
Tyco International Ltd. 13,200 513,150
--------------
1,125,300
--------------
Electronics (9.48%)
Altera Corp.* 2,100 104,081
General Electric Co. 10,100 1,562,975
Intel Corp. 11,900 979,519
Linear Technology Corp. 1,500 107,344
Maxim Intergrated Products, Inc.* 5,800 273,687
SCI Systems, Inc* 2,200 180,812
Teradyne, Inc.* 2,300 151,800
Texas Instruments, Inc. 6,100 590,937
Thomas & Betts Corp. 1,900 60,562
Xilinx, Inc.* 5,600 254,625
--------------
4,266,342
--------------
Finance (3.99%)
Associates First Capital Corp.
(Class A) 4,800 131,700
Citigroup, Inc. 25,200 1,400,175
MBNA Corp. 9,600 261,600
--------------
1,793,475
--------------
Food (0.51%)
Kellogg Co. 4,200 129,412
Quaker Oats Co. 1,500 98,437
--------------
227,849
--------------
Insurance (3.25%)
American General Corp. 3,500 265,562
American International Group, Inc. 1,800 194,625
AXA Financial, Inc. 12,800 433,600
Marsh & McLennan Cos., Inc. 2,700 258,356
XL Capital Ltd. (Class A) 6,000 311,250
--------------
1,463,393
--------------
Machinery (0.93%)
Ingersoll-Rand Co. 7,600 418,475
--------------
Media (5.01%)
CBS Corp. 6,600 421,987
Clear Channel Communications, Inc.* 10,100 901,425
Time Warner, Inc. 11,000 796,813
Viacom, Inc. (Class B)* 2,200 132,963
--------------
2,253,188
--------------
Medical (9.24%)
American Home Products Corp. 2,300 90,706
Baxter International, Inc. 4,700 295,219
Bristol-Myers Squibb Co. 10,500 673,969
Genentech, Inc.* 1,600 215,200
Johnson & Johnson 8,000 745,000
Lilly (Eli) & Co. 2,900 192,850
Merck & Co., Inc. 6,400 429,200
Pfizer, Inc. 6,400 207,600
Schering-Plough Corp. 14,700 620,156
Warner-Lambert Co. 8,400 688,275
--------------
4,158,175
--------------
Metal (0.57%)
Illinois Tool Works, Inc. 3,798 256,602
--------------
Mortgage Banking (1.15%)
Fannie Mae 8,300 518,231
--------------
Office (0.67%)
Avery Dennison Corp. 1,800 131,175
Reynolds & Reynolds Co. (The)
(Class A) 7,600 171,000
--------------
302,175
--------------
Oil & Gas (5.12%)
Atlantic Richfield Co. 2,700 233,550
Chevron Corp. 5,800 502,425
El Paso Energy Corp. 3,300 128,081
Exxon Mobil Corp. 7,212 581,017
Kerr-McGee Corp. 2,400 148,800
Royal Dutch Petroleum Co., American Depositary
Receipts (ADR) (Netherlands) 9,200 556,025
USX - Marathon Group 6,300 155,531
--------------
2,305,429
--------------
Paper & Paper Products (1.15%)
Champion International Corp. 1,800 111,488
International Paper Co. 2,700 152,381
Kimberly-Clark Corp. 1,900 123,975
Smurfit-Stone Container Corp.* 5,300 129,850
--------------
517,694
--------------
Retail (6.58%)
Dayton Hudson Corp. 2,400 176,250
Federated Department Stores, Inc.* 2,800 141,575
Gap, Inc. (The) 5,600 257,600
Home Depot, Inc. (The) 10,050 689,053
Limited, Inc. (The) 5,000 216,563
Lowe's Cos., Inc. 4,300 256,925
Tandy Corp. 2,000 98,375
TJX Cos., Inc. 7,400 151,238
Wal-Mart Stores, Inc. 14,100 974,663
--------------
2,962,242
--------------
Soap & Cleaning Preparations (0.27%)
Colgate-Palmolive Co. 1,900 123,500
--------------
Telecommunications (6.33%)
AT&T Corp. 7,900 400,925
Bell Atlantic Corp. 2,000 123,125
Lucent Technologies, Inc. 10,400 778,050
MCI WorldCom, Inc.* 19,050 1,010,841
Sprint Corp. 2,000 134,625
Tellabs, Inc.* 6,200 397,963
--------------
2,845,529
--------------
Textile (0.26%)
Tommy Hilfiger Corp.* 5,000 116,563
--------------
Tobacco (0.79%)
Philip Morris Cos., Inc. 8,600 199,413
UST, Inc. 6,200 156,163
--------------
355,576
--------------
Transportation (1.07%)
Alaska Air Group, Inc.* 3,300 115,913
Burlington Northern Santa Fe Corp. 5,400 130,950
UAL Corp.* 3,000 232,688
--------------
479,551
--------------
Utilities (4.67%)
Ameren Corp. 6,800 222,700
BellSouth Corp. 9,000 421,313
Edison International 10,300 269,731
Florida Progress Corp. 6,200 262,338
GTE Corp. 4,700 331,644
PECO Energy Co. 5,700 198,075
Reliant Energy, Inc. 6,400 146,400
Southern Co. (The) 10,500 246,750
--------------
2,098,951
--------------
TOTAL COMMON STOCKS
(Cost $35,516,045) (95.71%) 43,061,738
-------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.94%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% $1,770 1,770,000
-------------- --------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 914
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (3.94%) 1,770,914
-------------- --------------
TOTAL INVESTMENTS (99.65%) 44,832,652
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.35%) 158,665
-------------- --------------
TOTAL NET ASSETS (100.00%) $44,991,317
============== ==============
* Non-income producing security.
The percentage shown for each investment category is the total of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Large Cap Value Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Large Cap
Value Fund on December 31, 1999. It's divided into three main categories: common stocks,
preferred stocks and bonds. Common and preferred stocks and bonds are further broken down by
industry groups.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
<S> <C> <C>
COMMON STOCKS
Automobile/Trucks (0.07%)
Tenneco Automotive, Inc. 2,800 $26,075
--------------
Banks - United States (1.03%)
PNC Bank Corp. 5,000 222,500
TCF Financial Corp. 7,150 177,856
--------------
400,356
--------------
Business Services - Misc. (5.19%)
Cendant Corp.* 10,000 265,625
Iron Mountain, Inc.* 32,000 1,258,000
Sensormatic Electronics Corp.* 28,000 488,250
--------------
2,011,875
--------------
Computers (15.86%)
Comdisco, Inc. 10,000 372,500
Computer Associates International, Inc. 17,750 1,241,391
Etec Systems, Inc.* 9,000 403,875
i2 Technologies, Inc.* 850 165,750
Integrated Systems, Inc.* 10,000 335,625
Parametric Technology Corp.* 58,000 1,569,625
Seagate Technology, Inc.* 20,000 931,250
Sterling Software, Inc. 7,000 220,500
SunGard Data Systems, Inc.* 10,100 239,875
Wind River Systems, Inc.* 18,250 668,406
--------------
6,148,797
--------------
Containers (0.49%)
Pactiv Corp.* 18,000 191,250
--------------
Electronics (24.55%)
Amphenol Corp. (Class A)* 30,600 2,036,813
Arrow Electronics, Inc. 12,000 304,500
Conexant Systems, Inc.* 15,000 995,625
Oak Industries, Inc. 33,500 3,555,187
SCI Systems, Inc.* 6,070 498,878
Sony Corp. (Japan) 2,400 710,468
Tektronix, Inc. 6,000 233,250
Vicor Corp.* 29,200 1,182,600
--------------
9,517,321
--------------
Energy (1.53%)
Calpine Corp.* 2,600 166,400
Citizens Utilities Co. (Class B) 30,000 425,625
--------------
592,025
--------------
Finance (1.06%)
Citigroup, Inc. 7,381 410,107
--------------
Instruments - Scientific (3.15%)
Millipore Corp. 10,000 386,250
PerkinElmer, Inc. 20,000 833,750
--------------
1,220,000
--------------
Insurance (9.71%)
Ace, Ltd. (Bermuda) 91,300 1,523,569
Ambac Financial Group, Inc. 7,200 375,750
Financial Security Assurance
Holdings, Ltd. 12,860 670,327
Radian Group, Inc. 10,000 477,500
Reinsurance Group of America, Inc. 14,550 403,762
XL Capital, Ltd., (Class A) 6,032 312,910
--------------
3,763,818
--------------
Leisure (2.29%)
Ascent Entertainment Group, Inc.* 35,000 444,063
Galileo International, Inc. 14,885 445,620
--------------
889,683
--------------
Media (3.67%)
AT&T Corp. - Liberty Media Group
(Class A)* 21,872 1,241,236
Central Newspapers, Inc. (Class A) 4,600 181,125
--------------
1,422,361
--------------
Mortgage Banking (0.19%)
Fannie Mae 201 12,550
Freddie Mac 1,267 59,628
--------------
72,178
--------------
Office (3.96%)
Danka Business Systems Plc, American Depository
Receipt (ADR) (United Kingdom) 120,946 1,534,502
--------------
Oil & Gas (1.27%)
Alberta Energy Co. Ltd. (Canada) 392 12,275
Alberta Energy Co. Ltd. (Canada) 1,389 43,068
EOG Resources, Inc. 25,000 439,063
--------------
494,406
--------------
Paper & Paper Products (1.48%)
Fort James Corp. 21,000 574,875
--------------
Telecommunications (14.85%)
ANTEC Corp.* 79,750 2,910,875
Commonwealth Telephone Enterprises, Inc. 15,000 793,125
Intermedia Communications, Inc.* 3,850 149,428
QUALCOMM, Inc.* 10,400 1,831,700
TeleCorp PCS, Inc.* 700 26,600
Time Warner Telecom, Inc. (Class A)* 900 44,944
--------------
5,756,672
--------------
Transport (1.32%)
Air Canada (Canada)* 23,766 178,492
Northwest Airlines Corp.* 15,000 333,750
--------------
512,242
--------------
Utilities (2.34%)
Independent Energy Holdings Plc (ADR)
(United Kingdom)* 27,220 906,766
--------------
TOTAL COMMON STOCKS
(Cost $27,369,628) (94.01%) 36,445,309
-------------- --------------
PREFERRED STOCKS
Office (1.05%)
Danka Business Systems Plc 500,000 408,125
--------------
TOTAL PREFERRED STOCKS
(Cost $323,092) (1.05%) 408,125
-------------- --------------
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
-------------- -------------- --------------
BONDS
Retail (3.64%)
Brightpoint, Inc.
Conv. Bond 03-11-18 Zero B $4,000 1,410,000
--------------
TOTAL BONDS
(Cost $959,984) (3.64%) 1,410,000
-------------- --------------
TOTAL INVESTMENTS (98.70%) 38,263,434
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.30%) 502,670
-------------- --------------
TOTAL NET ASSETS (100.00%) $38,766,104
============== ==============
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.
where Standard & Poor's ratings are not available.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, the
security is U.S. dollar denominated.
The percentage shown for each investment category is the total of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Sovereign Investors Fund
Schedule of Investments
December 31, 1999
Per share earnings and dividends and their compound growth rates are shown for the most recently reported ten year
periods on common stocks, as well as price/earnings ratios, and are unaudited.
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Sovereign Investors Fund on
December 31, 1999. It is divided into three main categories: common stocks, U.S. government and agencies obligations
and short-term investments. Common stocks are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
COMPOUND
NUMBER GROWTH MARKET
OF SHARES RATE VALUE
- -------------- -------- -------------
<S> <C> <C> <C>
COMMON STOCKS (90.07%)
Advertising (3.81%)
33,200 Interpublic Group of Companies, Inc. (The) @ 57 11/16 $1,915,225
One of the largest advertising agencies in the world ------------
Earnings P/S $0.40, 0.44, 0.39, 0.56, 0.29, 0.51, 0.80, 0.75, 1.11, 1.30 14.0%
Dividends P/S $0.13, 0.14, 0.15, 0.17, 0.19, 0.21, 0.23, 0.25, 0.29, 0.34 11.3%
Price/Earnings Ratio 44.4
Banks (6.13%)
24,763 Bank of America Corp. @ 50 3/16 1,242,793
Holding company for Bank of America
and NationsBank
Earnings P/S $0.40, 1.20, 1.98, 2.46, 2.54, 2.98, 3.36, 3.61, 2.90, 4.69 12.8%
Dividends P/S $0.57, 0.62, 0.64, 0.69, 0.94, 1.04, 1.20, 1.37, 1.59, 1.85 14.0%
Price/Earnings Ratio 10.7
19,000 First Tennessee National Corp. @ 28 1/2 541,500
Tennessee-based bank holding company
Earnings P/S $0.45, 0.57, 0.72, 0.81, 1.08, 1.21, 1.34, 1.50, 1.72, 1.91 17.4%
Dividends P/S $0.28, 0.29, 0.32, 0.38, 0.44, 0.49, 0.55, 0.62, 0.69, 0.79 12.2%
Price/Earnings Ratio 14.9
15,000 SunTrust Banks, Inc. @ 68 13/16 1,032,187
Holding company for SunTrust Banks operating
through 700 offices in Florida, Georgia,
Tennessee and Alabama
Earnings P/S $1.30, 1.26, 1.46, 1.90, 2.22, 2.38, 2.59, 3.04, 3.04, 3.93 13.1%
Dividends P/S $0.46, 0.47, 0.49, 0.58, 0.66, 0.74, 0.83, 0.93, 1.00, 1.38 13.0%
Price/Earnings Ratio 17.5
6,500 Wells Fargo Co. @ 40 7/16 262,844
Diversified financial services company
providing banking, insurance, investments
and consumer finance
Earnings P/S $0.79, 0.36, 0.53, 0.98, 1.36, 1.62, 1.36, 1.48, 1.17, 2.24 12.3%
Dividends P/S $0.21, 0.24, 0.27, 0.32, 0.39, 0.45, 0.53, 0.62, 0.70, 0.79 15.9%
Price/Earnings Ratio 18.1
------------
3,079,324
------------
Beverages (1.19%)
17,000 PepsiCo, Inc. @ 35 1/4 599,250
Second largest soft drink company ------------
Earnings P/S $0.68, 0.68, 0.23, 0.98, 1.09, 1.00, 0.72, 1.36, 1.31, 1.21 6.6%
Dividends P/S $0.19, 0.23, 0.26, 0.31, 0.35, 0.39, 0.45, 0.49, 0.52, 0.54 12.3%
Price/Earnings Ratio 29.1
Building (1.71%)
33,800 Masco Corp. @ 25 3/8 857,675
Manufactures buildings, home improvement ------------
and consumer products
Earnings P/S $0.46, 0.15, 0.61, 0.73, 0.61, (1.39) 0.92, 1.15, 1.39, 1.59 14.8%
Dividends P/S $0.27, 0.29, 0.31, 0.33, 0.35, 0.37, 0.39, 0.41, 0.44, 0.46 6.1%
Price/Earnings Ratio 16.0
Chemicals (0.55%)
27,000 RPM, Inc. @ 10 3/16 275,063
Manufacturer of specialty chemicals ------------
and coatings to waterproof and rustproof
structures
Earnings P/S $0.40, 0.46, 0.46, 0.46, 0.56, 0.65, 0.69, 0.76, 0.84, 0.86 8.9%
Dividends P/S $0.23, 0.26, 0.28, 0.30, 0.33, 0.35, 0.38, 0.41, 0.44, 0.48 8.5%
Price/Earnings Ratio 11.8
Computers (1.76%)
8,000 Automatic Data Processing, Inc. @ 53 7/8 431,000
Largest independent computing services firm
in the U.S.
Earnings P/S $0.36, 0.41, 0.46, 0.52, 0.59, 0.67, 0.76, 0.85, 0.98, 1.10 13.2%
Dividends P/S $0.08, 0.09, 0.11, 0.12, 0.14, 0.16, 0.20, 0.23, 0.26, 0.32 16.7%
Price/Earnings Ratio 49.0
4,000 Hewlett-Packard Co. @ 113 15/16 455,750
Manufactures and services electronic
measurement, analysis and computation
instruments
Earnings P/S $0.77, 0.76, 0.55, 1.17, 1.54, 2.32, 2.46, 2.95, 2.77, 3.24 17.3%
Dividends P/S $0.11, 0.12, 0.19, 0.23, 0.28, 0.35, 0.44, 0.52, 0.60, 0.64 21.6%
Price/Earnings Ratio 35.1
------------
886,750
------------
Containers (1.44%)
20,700 Bemis Co., Inc. @ 34 7/8 721,912
Producer of a broad range of flexible ------------
packaging and equipment and pressure-sensitive
materials
Earnings P/S $0.99, 1.03, 1.10, 0.86, 1.40, 1.63, 1.90, 2.00, 2.09, 2.16 9.1%
Dividends P/S $0.36, 0.42, 0.46, 0.50, 0.54, 0.64, 0.72, 0.80, 0.88, 0.92 11.0%
Price/Earnings Ratio 16.1
Diversified Operations (4.99%)
7,300 DuPont (E.I.) De Nemours & Co. @ 65 7/8 480,888
Nation's largest chemical manufacturer
Earnings P/S $1.70, 1.04, (2.92) 0.41, 1.98, 2.77, 3.18, 2.08, 3.90, 2.42 4.0%
Dividends P/S $0.81, 0.84, 0.87, 0.88, 0.91, 1.01, 1.12, 1.23, 1.37, 1.40 6.3%
Price/Earnings Ratio 27.2
15,000 Honeywell International, Inc. @ 57 11/16 865,312
Diversified technology and manufacturing leader,
serving customers worldwide with aerospace products
and services; control technologies for buildings, homes
and industry; automotive products; power generation
systems; specialty chemicals; fibers; plastics; and
electronic and advanced materials
Earnings P/S $1.01, 0.07, (0.56) 0.88, 1.27, 1.47, 1.73, 2.00, 2.34, 2.62 11.2%
Dividends P/S $0.23, 0.24, 0.25, 0.29, 0.34, 0.39, 0.45, 0.52, 0.60, 0.68 12.8%
Price/Earnings Ratio 22.0
9,800 Johnson Controls, Inc. @ 56 7/8 557,375
Manufactures automotive systems and building
controls
Earnings P/S $1.02, 1.06, 1.37, 0.08, 1.80, 2.13, 2.55, 3.12, 3.63, 4.27 17.2%
Dividends P/S $0.60, 0.62, 0.64, 0.68, 0.72, 0.78, 0.82, 0.86, 0.92, 1.03 6.2%
Price/Earnings Ratio 13.3
6,200 Minnesota Mining & Manufacturing Co. @ 97 7/8 606,825
Manufactures industrial, commercial
and health-care products
Earnings P/S $2.96, 2.63, 2.81, 2.91, 3.13, 2.31, 3.62, 5.06, 2.88, 4.14 3.8%
Dividends P/S $1.46, 1.56, 1.60, 1.66, 1.76, 1.88, 1.92, 2.12, 2.20, 2.24 4.9%
Price/Earnings Ratio 23.6
------------
2,510,400
------------
Electronics (4.83%)
17,700 Emerson Electric Co. @ 57 3/8 1,015,537
Produces and sells electrical/electronic
products and systems
Earnings P/S $1.38, 1.42, 1.48, 1.58, 1.76, 2.03, 2.28, 2.50, 2.77, 3.06 9.3%
Dividends P/S $0.63, 0.66, 0.69, 0.72, 0.78, 0.89, 0.98, 1.08, 1.18, 1.33 8.7%
Price/Earnings Ratio 18.8
6,600 General Electric Co. @ 154 3/4 1,021,350
Dominant force in home appliances, electrical
power and financial services
Earnings P/S $1.21, 0.76, 1.38, 1.26, 1.39, 1.93, 2.16, 2.46, 2.80, 3.23 11.5%
Dividends P/S $0.48, 0.52, 0.58, 0.66, 0.75, 0.85, 0.95, 1.08, 1.25, 1.46 13.2%
Price/Earnings Ratio 47.9
8,200 Grainger (W.W.), Inc. @ 47 13/16 392,063
Leading distributor of electrical equipment
Earnings P/S $1.16, 1.19, 1.29, 1.43, 1.25, 1.82, 2.02, 2.27, 2.44, 2.16 7.2%
Dividends P/S $0.28, 0.31, 0.33, 0.36, 0.39, 0.45, 0.49, 0.53, 0.59, 0.63 9.4%
Price/Earnings Ratio 22.1
------------
2,428,950
------------
Finance (4.75%)
26,125 Citigroup, Inc. @ 55 9/16 1,451,570
Diversified global financial services company
offering commercial/consumer banking, investment
banking, brokerage services and insurance to
consumer and corporate customers around the world
Earnings P/S $0.37, 0.11, 0.62, 1.13, 1.12, 1.50, 1.81, 1.83, 1.62, 2.82 25.3%
Dividends P/S $0.04, 0.05, 0.08, 0.11, 0.13, 0.18, 0.20, 0.27, 0.37, 0.54 33.5%
Price/Earnings Ratio 19.7
15,000 Fannie Mae @ 62 7/16 936,563
Largest U.S. investor in home mortgage loans
providing funds to the mortgage market by purchasing
mortgage loans from various nationwide lenders
Earnings P/S $1.12, 1.25, 1.48, 1.71, 1.94, 1.95, 2.48, 2.83, 3.23, 3.66 14.1%
Dividends P/S $0.18, 0.26, 0.35, 0.46, 0.60, 0.68, 0.76, 0.84, 0.96, 1.08 22.0%
Price/Earnings Ratio 17.1
------------
2,388,133
------------
Food (1.57%)
15,000 Bestfoods, Inc. @ 52 9/16 788,437
Manufactures consumer food and baking products ------------
in 62 countries
Earnings P/S $0.88, 0.92, 0.40, 1.14, 0.69, 1.68, 1.93, 1.15, 2.09, 2.47 12.2%
Dividends P/S $0.50, 0.55, 0.60, 0.64, 0.69, 0.74, 0.79, 0.86, 0.94, 1.02 8.2%
Price/Earnings Ratio 21.3
Furniture (1.24%)
29,000 Leggett & Platt, Inc. @ 21 7/16 621,687
Produces intermediate products for the home ------------
furnishings industry
Earnings P/S $0.21, 0.27, 0.41, 0.52, 0.68, 0.75, 0.77, 1.08, 1.24, 1.45 24.0%
Dividends P/S $0.11, 0.22, 0.12, 0.14, 0.16, 0.19, 0.23, 0.27, 0.32, 0.36 14.1%
Price/Earnings Ratio 14.8
Insurance (5.11%)
7,400 AFLAC, Inc. @ 47 3/16 349,187
Global specialty insurer
Earnings P/S $0.39, 0.49, 0.60, 0.81, 0.95, 1.17, 1.37, 2.08, 1.76, 1.99 19.9%
Dividends P/S $0.09, 0.10, 0.12, 0.13, 0.15, 0.17, 0.20, 0.23, 0.25, 0.29 13.9%
Price/Earnings Ratio 23.7
10,000 American General Corp. @ 75 7/8 758,750
Provides retirement services, life insurance
and consumer loans to more than 12 million
customers through various operating subsidiaries
Earnings P/S $2.30, 2.13, 2.24, 1.20, 2.46, 2.66, 2.63, 2.19, 2.96, 4.59 8.0%
Dividends P/S $0.79, 1.00, 1.04, 1.10, 1.16, 1.24, 1.30, 1.40, 1.50, 1.60 8.2%
Price/Earnings Ratio 16.5
8,062 American International Group, Inc. @ 108 1/8 871,704
Broadly based property-casualty insurance
organization
Earnings P/S $1.25, 1.34, 1.38, 1.62, 1.62, 1.88, 2.18, 2.52, 2.86, 3.19 11.0%
Dividends P/S $0.06, 0.07, 0.08, 0.09, 0.10, 0.11, 0.14, 0.15, 0.17, 0.19 12.3%
Price/Earnings Ratio 33.9
15,000 ReliaStar Financial Corp. @ 39 3/16 587,813
Financial services company engaged
in life/health insurance and consumer finance
Earnings P/S $1.00, 0.80, 0.95, 0.95, 1.50, 1.98, 2.37, 2.55, 2.56, 2.87 12.4%
Dividends P/S $0.33, 0.35, 0.37, 0.40, 0.44, 0.49, 0.55, 0.61, 0.71, 0.80 10.3%
Price/Earnings Ratio 13.7
------------
2,567,454
------------
Leisure (0.51%)
13,500 Hasbro, Inc. @ 19 1/16 257,344
Designs, manufactures and markets toys, games ------------
and interactive software
Earnings P/S $0.46, 0.42, 0.89, 0.99, 0.87, 0.77, 0.98, 0.68, 1.00, 1.41 18.3%
Dividends P/S $0.06, 0.07, 0.09, 0.11, 0.13, 0.14, 0.18, 0.20, 0.21, 0.24 16.7%
Price/Earnings Ratio 13.4
Machinery (4.14%)
23,500 Dover Corp. @ 45 3/8 1,066,312
Manufactures a variety of specialized
industrial products
Earnings P/S $0.64, 0.54, 0.56, 0.70, 0.89, 1.22, 1.69, 1.79, 1.69, 1.88 12.7%
Dividends P/S $0.19, 0.21, 0.22, 0.23, 0.25, 0.28, 0.32, 0.36, 0.40, 0.44 9.8%
Price/Earnings Ratio 24.1
26,300 Pentair, Inc. @ 38 1/2 1,012,550
Manufactures enclosures for electrical,
electronic, woodworking and power tool
equipment
Earnings P/S $0.81, 1.00, (0.18) 1.10, 1.26, 1.81, 1.73, 2.11, 2.46, 2.85 15.0%
Dividends P/S $0.30, 0.31, 0.33, 0.34, 0.36, 0.40, 0.50, 0.54, 0.60, 0.64 8.8%
Price/Earnings Ratio 13.5
------------
2,078,862
------------
Media (2.73%)
11,400 Gannett Co., Inc. @ 81 9/16 929,812
News and information company that publishes
newspapers, operates broadcasting stations and cable
television systems, and is engaged in marketing,
commercial printing, newswire service, data services
and news programming
Earnings P/S $1.18, 1.00, 0.70, 1.36, 1.62, 1.71, 3.35, 2.50, 3.50, 3.29 12.1%
Dividends P/S $0.61, 0.62, 0.63, 0.65, 0.67, 0.69, 0.71, 0.74, 0.78, 0.82 3.3%
Price/Earnings Ratio 24.8
7,200 McGraw-Hill Cos., Inc. @ 61 5/8 443,700
Provides informational products and services
for business and industry
Earnings P/S $0.89, 0.76, 0.15, 0.06, 1.03, 1.14, 2.48, 1.46, 1.67, 1.95 9.1%
Dividends P/S $0.54, 0.55, 0.56, 0.57, 0.58, 0.60, 0.66, 0.72, 0.78, 0.86 5.3%
Price/Earnings Ratio 31.6
------------
1,373,512
------------
Medical (10.94%)
18,000 Abbott Laboratories @ 36 5/16 653,625
Major pharmaceutical and healthcare firm
Earnings P/S $0.56, 0.64, 0.74, 0.85, 0.94, 1.05, 1.19, 1.34, 1.51, 1.66 12.8%
Dividends P/S $0.21, 0.25, 0.30, 0.34, 0.38, 0.42, 0.48, 0.54, 0.60, 0.68 14.0%
Price/Earnings Ratio 21.9
10,000 American Home Products Corp. @ 39 7/16 394,375
Discovers, develops, manufactures and markets
prescription drugs and over-the-counter medications
as well as vaccines, biotechnology, agricultural
products and animal health-care items
Earnings P/S $0.98, 1.09, 1.17, 1.19, 1.25, 1.35, 1.46, 1.56, 1.85, 1.76 13.6%
Dividends P/S $0.54, 0.60, 0.67, 0.72, 0.74, 0.76, 0.79, 0.83, 0.87, 0.91 6.0%
Price/Earnings Ratio 22.3
14,100 Baxter International, Inc. @ 62 13/16 885,656
The company operates four divisions: renal,
biotech, cardiovascular and intravenous
systems and international distribution
Earnings P/S ($0.05) 2.03, 1.56, (0.72) 2.13, 2.31, 2.41, 1.06, 1.09, 2.86 56.8%
Dividends P/S $0.64, 0.74, 0.86, 1.00, 1.03, 1.11, 1.12, 1.13, 1.14, 1.16 6.8%
Price/Earnings Ratio 22.0
15,000 Bristol-Myers Squibb Co. @ 64 3/16 962,812
Produces pharmaceuticals, medical devices,
non-prescription health products
Earnings P/S $0.84, 0.99, 0.95, 0.95, 0.91, 0.89, 1.40, 1.57, 1.55, 2.05 10.4%
Dividends P/S $0.53, 0.60, 0.69, 0.72, 0.73, 0.74, 0.75, 0.76, 0.78, 0.89 5.9%
Price/Earnings Ratio 31.3
6,000 Johnson & Johnson @ 93 1/8 558,750
Major producer of prescription
and non-prescription drugs, toiletries,
medical instruments and supplies
Earnings P/S $0.86, 1.10, 0.78, 1.37, 1.56, 1.86, 2.17, 2.41, 2.23, 3.01 14.9%
Dividends P/S $0.33, 0.39, 0.45, 0.51, 0.56, 0.64, 0.74, 0.85, 0.97, 1.09 14.2%
Price/Earnings Ratio 31.0
15,000 Merck & Co., Inc. @ 67 1/16 1,005,938
World's largest ethical drug manufacturer
Earnings P/S $0.75, 0.91, 0.86, 0.93, 1.17, 1.32, 1.56, 1.87, 2.15, 2.45 14.1%
Dividends P/S $0.34, 0.40, 0.48, 0.52, 0.57, 0.62, 0.71, 0.85, 0.95, 1.12 14.2%
Price/Earnings Ratio 27.4
11,000 Schering-Plough Corp. @ 42 3/16 464,062
Discovers, develops, manufactures and markets
pharmaceutical and health-care products
worldwide
Earnings P/S $0.32, 0.38, 0.45, 0.47, 0.61, 0.60, 0.82, 0.98, 1.18, 1.41 17.9%
Dividends P/S $0.14, 0.16, 0.19, 0.22, 0.25, 0.28, 0.32, 0.37, 0.43, 0.49 14.9%
Price/Earnings Ratio 30.1
7,000 Warner-Lambert Co. @ 81 15/16 573,563
Major producer of consumer health-care,
pharmaceutical and confectionery products
Earnings P/S $0.60, 0.04, 0.80, 0.41, 0.86, 0.90, 0.95, 1.04, 1.48, 1.95 14.0%
Dividends P/S $0.25, 0.29, 0.34, 0.38, 0.41, 0.43, 0.46, 0.51, 0.64, 0.80 13.8%
Price/Earnings Ratio 42.0
------------
5,498,781
------------
Metal Products (2.02%)
15,000 Illinois Tool Works, Inc. @ 67 9/16 1,013,438
Designs and manufacturers fasteners and ------------
components, equipment and consumable systems
and a variety of specialty products and equipment
Earnings P/S $0.84, 0.82, 0.86, 0.92, 1.23, 1.65, 1.95, 2.33, 2.67, 2.99 15.2%
Dividends P/S $0.18, 0.20, 0.23, 0.25, 0.27, 0.31, 0.35, 0.43, 0.51, 0.66 15.5%
Price/Earnings Ratio 22.6
Office (4.55%)
18,150 Avery Dennison Corp. @ 72 7/8 1,322,681
Develops, manufactures and markets innovative
self-adhesive solutions for consumer products
and label systems
Earnings P/S $0.05, 0.51, 0.67, 0.73, 0.99, 1.32, 1.63, 1.93, 2.15, 2.51 54.5%
Dividends P/S $0.32, 0.38, 0.41, 0.45, 0.50, 0.56, 0.62, 0.72, 0.87, 0.99 13.4%
Price/Earnings Ratio 29.0
20,000 Pitney Bowes, Inc. @ 48 5/16 966,250
Manufactures office automation equipment
Earnings P/S $0.67, 0.93, 0.32, 1.11, 0.87, 1.92, 1.56, 1.80, 2.06, 2.32 14.8%
Dividends P/S $0.30, 0.34, 0.39, 0.45, 0.52, 0.60, 0.69, 0.80, 0.90, 1.02 14.6%
Price/Earnings Ratio 20.8
------------
2,288,931
------------
Oil & Gas (6.68%)
20,200 Chevron Corp. @ 86 5/8 1,749,825
One of the largest integrated, international
oil companies with interest in petrochemicals
Earnings P/S $3.05, 1.85, 2.32, 1.95, 2.60, 1.43, 3.99, 4.95, 2.04, 3.48 1.5%
Dividends P/S $1.48, 1.63, 1.65, 1.75, 1.85, 1.93, 2.08, 2.28, 2.44, 2.48 5.9%
Price/Earnings Ratio 24.9
13,184 Exxon Mobil Corp. @ 80 9/16 1,062,136
Worldwide leader in the petroleum
and petrochemicals business
Earnings P/S $1.94, 2.12, 1.59, 2.06, 1.73, 2.48, 2.91, 3.28, 2.28, 2.39 2.3%
Dividends P/S $1.19, 1.30, 1.36, 1.38, 1.41, 1.46, 1.54, 1.62, 1.64, 1.67 3.8%
Price/Earnings Ratio 33.7
9,000 Royal Dutch Petroleum Co., American Depository
Receipt (Netherlands) @ 60 7/16 543,938
Owns 60% of the Royal Dutch/Shell Group of
companies. Operations include production,
transportation, refining and sales of oil/natural gas
Earnings P/S $1.95, 1.26, 1.30, 1.24, 1.78, 1.90, 2.69, 2.20, 0.13, 1.45 NMF
Dividends P/S $1.06, 1.11, 1.22, 1.18, 1.33, 1.40, 1.45, 1.53, 1.61, 1.58 4.5%
Price/Earnings Ratio 41.8
------------
3,355,899
------------
Paper & Paper Products (2.47%)
19,000 Kimberly-Clark Corp. @ 65 1/4 1,239,750
Leading producer of consumer and personal care products ------------
Earnings P/S $1.05, 0.79, 0.27, 0.42, 1.36, 0.06, 2.48, 1.61, 2.11, 2.95 12.2%
Dividends P/S $0.68, 0.73, 0.82, 0.85, 0.88, 0.90, 0.92, 0.95, 1.00, 1.04 4.8%
Price/Earnings Ratio 22.2
Retail (8.70%)
15,000 Dayton Hudson Corp. @ 73 7/16 1,101,562
General merchandiser selling through Target
and Marvyn stores
Earnings P/S $0.87, 0.62, 0.81, 0.80, 0.92, 0.65, 0.98, 1.59, 1.98, 2.51 12.5%
Dividends P/S $0.20, 0.23, 0.25, 0.26, 0.27, 0.28, 0.30, 0.32, 0.33, 0.40 8.0%
Price/Earnings Ratio 29.3
9,000 Home Depot, Inc. (The) @ 68 9/16 617,063
Operates a chain of retail building
supply/home improvement warehouse stores
Earnings P/S $0.11, 0.13, 0.18, 0.23, 0.30, 0.35, 0.44, 0.53, 0.71, 1.10 29.2%
Dividends P/S $0.01, 0.01, 0.02, 0.02, 0.03, 0.04, 0.05, 0.06, 0.08, 0.11 33.8%
Price/Earnings Ratio 62.5
13,000 Lowe's Cos., Inc. @ 59 3/4 776,750
Retail distributes building materials
and supplies through stores in the United States
Earnings P/S $0.23, 0.03, 0.29, 0.44, 0.63, 0.66, 0.86, 1.05, 1.38, 1.77 25.5%
Dividends P/S $0.07, 0.07, 0.07, 0.08, 0.09, 0.09, 0.10, 0.11, 0.12, 0.13 8.0%
Price/Earnings Ratio 33.8
14,000 McDonald's Corp. @ 40 5/16 564,375
Develops, operates, franchises and services a
worldwide system of restaurants
Earnings P/S $0.55, 0.59, 0.65, 0.73, 0.84, 0.98, 1.08, 1.15, 1.10, 1.41 11.0%
Dividends P/S $0.08, 0.09, 0.10, 0.11, 0.12, 0.13, 0.14, 0.16, 0.18, 0.20 10.7%
Price/Earnings Ratio 28.6
33,200 SYSCO Corp. @ 39 9/16 1,313,475
Largest distributor of food service products
Earnings P/S $0.37, 0.42, 0.47, 0.54, 0.59, 0.69, 0.76, 0.86, 0.86, 1.08 12.6%
Dividends P/S $0.05, 0.06, 0.09, 0.13, 0.16, 0.20, 0.24, 0.28, 0.33, 0.42 26.7%
Price/Earnings Ratio 36.6
------------
4,373,225
------------
Steel Producers (1.64%)
15,000 Nucor Corp. @ 54 13/16 822,188
Manufactures steel products ------------
Earnings P/S $0.88, 0.75, 0.92, 1.42, 2.60, 3.14, 2.83, 3.35, 3.00, 2.57 12.7%
Dividends P/S $0.12, 0.13, 0.14, 0.16, 0.18, 0.28, 0.32, 0.40, 0.48, 0.52 17.7%
Price/Earnings Ratio 21.3
Tobacco (0.69%)
15,000 Philip Morris Cos., Inc. @ 23 3/16 347,813
Global tobacco, brewing and food company ------------
Earnings P/S $1.28, 1.08, 1.82, 1.17, 1.82, 2.16, 2.56, 2.58, 2.20, 3.19 10.7%
Dividends P/S $0.52, 0.64, 0.78, 0.87, 1.01, 1.22, 1.47, 1.60, 1.68, 1.84 15.1%
Price/Earnings Ratio 7.2
Utilities (5.92%)
6,000 ALLTEL Corp. @ 82 11/16 496,125
Provides wireline and wireless communications
and information services
Earnings P/S $0.67, 0.65, 0.75, 0.76, 0.91, 1.27, 1.26, 2.11, 1.89, 2.58 16.2%
Dividends P/S $0.44, 0.48, 0.50, 0.82, 0.90, 0.98, 1.06, 1.12, 1.18, 1.24 12.2%
Price/Earnings Ratio 32.1
25,000 CenturyTel, Inc. @ 47 3/8 1,184,375
Louisiana-based telecommunications company
Earnings P/S $0.29, 0.35, 0.41, 0.59, 0.80, 0.87, 0.95, 1.87, 1.64, 1.68 21.6%
Dividends P/S $0.12, 0.13, 0.13, 0.14, 0.14, 0.15, 0.16, 0.16, 0.17, 0.18 4.2%
Price/Earnings Ratio 28.2
15,400 Questar Corp. @ 15 231,000
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S $0.73, 0.82, 1.01, 1.02, 1.08, 1.03, 1.20, 1.27, 0.93, 1.33 6.9%
Dividends P/S $0.49, 0.51, 0.52, 0.55, 0.57, 0.58, 0.60, 0.62, 0.65, 0.67 3.5%
Price/Earnings Ratio 11.3
21,844 SBC Communications, Inc. @ 48 3/4 1,064,895
Provides telephone service throughout
the United States and internationally
Earnings P/S $0.92, 0.90, 1.09, (1.37) 1.54, (1.82) 1.77, 0.85, 2.03, 2.26 10.5%
Dividends P/S $0.69, 0.71, 0.73, 0.76, 0.79, 0.83, 0.86, 0.90, 0.94, 0.97 3.9%
Price/Earnings Ratio 21.6
------------
2,976,395
------------
TOTAL COMMON STOCKS
(Cost $39,421,747) 45,266,398
------------
PAR VALUE
(000s OMITTED)
- -------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (4.35%)
$1,500 United States Treasury, Bond 10.75%, 08-15-05 @ 119.266 1,788,990
400 United States Treasury, Note 5.875%, 09-30-02 @ 98.984 395,936
------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $2,343,102) 2,184,926
------------
INTEREST
RATE
---------
SHORT-TERM INVESTMENTS (6.76%)
3,398 Joint Repurchase Agreement (6.76%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 12-31-99
due 01-03-00 (Secured by U.S.
Treasury Bond 10.625% due
08-15-15 and U. S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.49% 3,398,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 381
-----------
TOTAL SHORT-TERM INVESTMENTS (6.76%) 3,398,381
---------- -----------
TOTAL INVESTMENTS (101.18%) 50,849,705
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.18%) (595,508)
---------- -----------
TOTAL NET ASSETS (100.00%) $50,254,197
========== ===========
NMF = No Meaningful Figure
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Bond Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Bond Fund on December 31, 1999.
It is divided into three main categories: bonds, warrants and short-term investments. Bonds and warrants are
further broken down by industry group. Short-term investments, which represent the Fund's "cash" position, are
listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
BONDS
Automobile/Trucks (1.57%)
Chrysler Financial Co. LLC,
Medium Term Note Ser S 11-15-01 5.690% A+ $55 $53,862
ERAC USA Finance Co.,
Gtd Med Term Note 06-15-00 (R) 7.000 BBB+ 50 50,106
Note 02-15-05 (R) 6.625 BBB+ 49 46,516
Ford Motor Co.,
Deb 02-01-29 6.375 A+ 55 46,176
--------------
196,660
--------------
Banks - Foreign (1.04%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom)
10-15-04 (Y) 8.200 AA- 30 30,940
Scotland International Finance No. 2,
B.V., Gtd Sub Note (Netherlands)
11-01-06 (R) (Y) 8.850 A+ 95 99,687
--------------
130,627
--------------
Banks - United States (1.56%)
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 50 45,748
First Union National Bank,
Sub Note 12-01-28 6.500 A 40 33,296
FleetBoston Financial Corp.,
Sub Note 12-01-05 6.625 A- 35 33,491
National Westminster Bank Plc -
New York Branch,
Sub Note 05-01-01 9.450 AA- 5 5,155
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 20 19,700
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 15 16,401
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 40 41,739
--------------
195,530
--------------
Beverages (0.45%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 30 29,850
J Seagram & Sons, Inc.,
Gtd Deb 09-15-11 8.875 BBB- 25 26,463
--------------
56,313
--------------
Broker Services (0.35%)
Goldman Sachs Group, Inc.,
Note 10-01-09 7.350 A+ 45 43,929
--------------
Chemicals (0.85%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A 45 42,806
DuPont (E.I.) de Nemours & Co.,
Note 10-15-09 6.875 AA- 25 24,214
Equistar Chemicals L.P.,
Sr Note 02-15-04 (R) 8.500 BBB- 40 39,700
--------------
106,720
--------------
Computers (1.24%)
Ceridian Corp.,
Sr Note 06-01-04 (R) 7.250 BBB 30 28,939
Exodus Communications, Inc.,
Sr Note 12-15-09 (R) 10.750 B- 15 15,262
International Business Machines Corp.,
Med Term Note 09-22-03 5.370 A+ 35 33,231
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 25 26,250
Sr Note 08-01-09 11.000 B- 15 15,450
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 15 15,150
Sr Note 11-15-09 (R) 10.625 B- 20 20,500
--------------
154,782
--------------
Energy (0.56%)
MidAmerican Energy Holdings Co.,
Sr Bond 09-15-28 8.480 BBB- 40 41,249
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 30 29,175
--------------
70,424
--------------
Finance (5.78%)
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 A- 30 29,259
CIT Group Holdings, Inc.,
Note 10-15-01 5.500 A+ 35 34,218
Commercial Credit Co.,
Note 07-01-02 6.450 AA- 45 44,365
EES Coke Battery Co., Inc.,
Sr Sec Note 04-15-02 (R) 7.125 BBB 5 5,284
Finova Capital Corp.,
Note 11-01-02 6.250 A- 60 58,204
Ford Capital B.V.,
Gtd Deb (Netherlands)
05-15-02 (Y) 9.875 A+ 50 52,914
Ford Motor Credit Co.,
Note 04-28-03 6.125 A+ 35 33,957
Note 10-28-09 7.375 A+ 45 44,426
General Motors Acceptance Corp.,
Note 12-01-01 6.375 A 45 44,502
Household Finance Corp.,
Note 11-01-02 5.875 A 70 67,421
Sr Note 09-25-04 5.875 A 55 51,900
JCP Master Credit Card Trust,
Pass Thru Ctf Ser C Class A
06-15-00 9.625 AA+ 95 96,158
Marlin Water Trust & Marlin Water
Capital Corp., Sr Sec Note
12-15-01 (R) 7.090 BBB 30 29,493
Midland Funding Corp. I,
Deb Ser C-94 07-23-02 10.330 BBB- 10 9,932
Sec Deb Ser C-91 07-23-02 10.330 BBB- 13 13,836
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 40 43,194
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 65 62,390
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A
06-15-04 (R) 8.400 BBB- 4 3,243
--------------
724,696
--------------
Government - Foreign (0.17%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 A- 20 20,885
--------------
Government - U.S. (29.15%)
United States Treasury,
Bond 08-15-17 8.875 AAA 557 673,185
Bond 02-15-23 7.125 AAA 1,380 1,436,704
Note 05-15-01 8.000 AAA 85 86,965
Note 05-15-02 7.500 AAA 369 378,801
Note 08-15-03 5.750 AAA 190 186,111
Note 02-15-05 7.500 AAA 725 756,153
Note 07-15-06 7.000 AAA 132 135,197
--------------
3,653,116
--------------
Government - U.S. Agencies (14.22%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 12-01-12 6.500 AAA 36 35,169
30 Yr Pass Thru Ctf 06-01-29 6.000 AAA 20 18,004
Bond 05-15-29 6.250 AAA 165 146,850
Note 04-15-03 5.750 AAA 310 301,087
Note 05-14-04 5.625 AAA 50 47,781
Note 08-15-04 6.500 AAA 110 108,625
Note 09-15-09 6.625 AAA 260 252,525
Pass Thru Ctf Ser 1997-M8
Class A-1 01-25-22 6.940 AAA 3 2,668
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 07-15-26 8.000 AAA 25 25,433
30 Yr Pass Thru Ctf 02-15-28 6.500 AAA 42 39,359
30 Yr Pass Thru Ctf 04-15-28 6.500 AAA 244 230,200
30 Yr Pass Thru Ctf 06-15-28
to 04-15-29 7.000 AAA 564 545,033
30 Yr Pass Thru Ctf 01-01-29 7.500 AAA 30 29,662
--------------
1,782,396
--------------
Insurance (1.01%)
Conseco, Inc.,
Note 10-15-06 9.000 BBB+ 35 35,787
Equitable Life Assurance Society
of the United States,
Surplus Note 12-01-05 (R) 6.950 AA 15 14,545
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26 (Y) 8.300 BBB+ 15 13,300
Liberty Mutual Insurance Co.,
Surplus Note 10-15-26 (R) 7.875 A 10 9,246
Massachusetts Mutual Life
Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 5 4,889
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 5 4,575
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 18,718
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 25 25,226
--------------
126,286
--------------
Leasing Companies (0.15%)
United Rentals, Inc.,
Sr Sub Note Ser B 04-01-09 9.000 BB- 20 18,800
--------------
Leisure (0.72%)
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 7.500 BBB- 35 32,680
HMH Properties, Inc.,
Sr Gtd Sec Note Ser A 08-01-05 7.875 BB 20 18,450
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 20 19,900
Trump Hotels & Casino Resorts
Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 15.500 B- 5 4,138
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 15 15,000
--------------
90,168
--------------
Media (4.44%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 17 17,106
Sr Note Ser B 07-15-03 8.125 B+ 15 14,325
AMFM, Inc.,
Sr Sub Note 10-01-08 9.000 B 25 26,000
Charter Communications Holdings, LLC,
Sr Note 04-01-09 8.625 B+ 30 27,937
Comcast Cable Communications, Inc.,
Note 11-15-08 6.200 BBB 45 40,696
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB 60 62,132
Sr Sub Deb 05-15-16 10.500 BB- 20 22,100
CSC Holdings, Inc.,
Sr Note Ser B 07-15-09 8.125 BB+ 35 35,350
Echostar DBS Corp.,
Sr Note 02-01-09 9.375 B 25 25,063
Falcon Holdings Group L.P.,
Sr Deb Ser B 04-15-10 8.375 B 15 15,112
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 (R) 8.625 B+ 45 41,175
Sr Sub Note Ser B 10-01-09 8.750 B+ 7 6,580
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BB 35 33,521
Liberty Media Group,
Note 07-15-29 (R) 8.500 BBB- 30 30,565
Mediacom LLC/Mediacom Capital
Corp., Sr Note Ser B 04-15-08 8.500 B+ 20 18,650
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 33 33,014
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 40 40,220
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 38 41,616
TV Guide, Inc.,
Sr Sub Note Ser B 03-01-09 8.125 B+ 25 24,938
--------------
556,100
--------------
Medical (0.72%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 37 35,890
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security
02-01-08 7.875 B+ 10 9,300
IASIS Healthcare Corp.,
Sr Sub Note 10-15-09 (R) 13.000 B- 20 20,600
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 23 24,150
--------------
89,940
--------------
Metal (0.13%)
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 15 15,750
--------------
Mortgage Banking (3.15%)
Citibank Credit Card Master Trust I,
Pass Thru Ctf Ser 1997-7 Class A
08-15-02 6.350 AAA 45 44,919
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1
08-15-08 6.790 Aaa 49 47,678
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5
08-15-25 8.100 AAA 10 10,078
Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mtg
Pass Thru Ctf Ser 1998-C1 Class A-1A
12-17-07 6.260 AAA 22 21,249
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9
02-15-29 6.570 AAA 50 47,686
GMAC Commercial Mortgage Securities,
Inc., Pass Thru Ctf Ser 1997-C2
Class A-3 11-15-07 6.566 Aaa 25 23,437
HomeSide Lending, Inc.,
Medium Term Sr Note 05-15-03 6.200 A+ 65 62,767
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4
03-20-25 6.600 AAA 15 14,372
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7
12-15-38 6.485 AAA 16 15,590
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1
10-15-06 (R) 6.830 AAA 92 90,861
Salomon Brothers Mortgage Securities
VII, Inc., Mtg Pass Thru Ctf
Ser 1997-HUD2 Class A-2 07-25-24 6.750 Aaa 6 5,927
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8
06-15-28 7.220 AAA 10 9,956
--------------
394,520
--------------
Oil & Gas (1.59%)
Amerada Hess Corp.,
Bond 10-01-29 7.875 BBB 40 39,012
Apache Finance Canada Corp.,
Note (Canada) 12-15-29 (Y) 7.750 BBB+ 25 24,187
CMS Panhandle Holding Co.,
Sr Note 07-15-29 (R) 7.000 BBB- 20 17,664
Lyondell Chemical Co.,
Sr Sec Note Ser A 05-01-07 9.625 BB 20 20,450
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07 8.875 BB- 15 14,888
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 30 27,737
Snyder Oil Corp.,
Sr Sub Note 06-15-07 8.750 BB- 20 20,000
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 BB- 35 35,263
--------------
199,201
--------------
Paper & Paper Products (0.59%)
Abitibi-Consolidated, Inc.,
Deb (Canada) 08-01-29 (Y) 8.500 BBB- 25 24,100
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB 5 4,901
Packaging Corp. of America,
Sr Sub Note Ser B 04-01-09 (R) 9.625 B 15 15,338
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 12.000 B+ 28 29,260
--------------
73,599
--------------
Real Estate Investment Trust (1.10%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 20 17,719
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 25 24,007
Camden Property Trust,
Sr Note 04-15-04 7.000 BBB 30 28,945
Liberty Property L.P.,
Medium Term Note 06-05-02 6.600 BBB- 40 38,780
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 25 23,844
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BB 5 4,835
--------------
138,130
--------------
Retail (0.97%)
Dillard's, Inc.,
Note 08-01-18 7.130 BBB 30 25,711
Great Atlantic & Pacific Tea Co., Inc.
(The) Note 04-15-07 7.750 BBB- 20 18,738
Kmart Corp.,
Sr Note 12-01-04 8.375 BB+ 15 14,954
Meyer (Fred), Inc.,
Note 03-01-08 7.450 BBB- 35 34,083
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 40 14,000
Safeway, Inc.,
Sr Note 11-15-01 5.875 BBB 15 14,650
--------------
122,136
--------------
Revenue Bonds (0.44%)
Massachusetts Bay Transportation Auth,
Gen Trans Sys Ser 1998B 03-01-28 5.000 AAA 20 16,751
Metropolitan Transportation Auth,
Dedicated Tax Fund Rev Ser 1998A
04-01-23 5.000 AAA 45 38,540
--------------
55,291
--------------
Soap & Cleaning Preparations (0.43%)
Procter & Gamble Co. (The),
Note 09-15-09 6.875 AA 55 53,727
--------------
Steel (0.62%)
National Steel Corp.,
1st Mtg Ser D 03-01-09 9.875 B+ 25 25,688
UCAR Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 12.000 B 50 52,250
--------------
77,938
--------------
Telecommunications (6.33%)
AXIA, Inc.,
Sr Sub Note 07-15-08 10.750 B- 17 15,597
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%,
05-01-04) (Canada) 05-01-09 (A) (Y) Zero B 50 30,375
Sr Disc Note, Step Coupon (14.75%,
12-15-00) (Canada) 12-15-05 (A) (Y) Zero B3 15 14,700
Colt Telecom Group Plc,
Sr Note (Euro) 12-15-09 (R) # 7.625 B 30 30,224
Crown Castle International Corp.,
Sr Note 05-15-11 9.000 B 35 34,475
Global Crossing Holdings Ltd.,
Sr Note 11-15-06 (R) 9.125 BB 15 14,812
Sr Note 11-15-09 (R) 9.500 BB 30 29,662
Hermes Europe Railtel BV,
Sr Note (Netherlands) 08-15-07 (Y) 11.500 B 25 25,625
Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 10 9,900
Jazztel Plc,
Sr Note (Euro) 12-15-09 (R) # 13.250 CCC+ 30 30,375
LCI International, Inc.,
Sr Note 06-15-07 7.250 BB+ 30 28,844
Level 3 Communications, Inc.,
Sr Note 05-01-08 9.125 B 20 18,900
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 30 30,075
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B+ 35 35,788
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 15 17,400
Nextel Communications, Inc.,
Sr Disc Note, Step Coupon (9.95%,
02-15-03) 02-15-08 (A) Zero B 30 21,075
Sr Note 11-15-09 (R) 9.375 B 25 24,563
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 35 36,050
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 35 37,800
Omnipoint Corp.,
Sr Note 09-15-09 (R) 11.500 CCC+ 20 21,600
Orange Plc,
Sr Note (United Kingdom)
08-01-08 (Y) 8.000 BBB 25 25,438
RCN Corp.,
Sr Note 10-15-07 10.000 B- 20 19,900
Sprint Capital Corp.,
Gtd Note 05-01-04 5.875 BBB+ 65 61,304
Gtd Note 05-01-19 6.900 BBB+ 40 36,379
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon
(11.625%, 04-15-04) 04-15-09 (A) Zero B3 25 15,750
Tritel PCS, Inc.,
Sr Disc Note, Step Coupon (12.75%,
05-15-04) 05-15-09 (A) (R) Zero B3 10 6,300
Triton PCS, Inc.,
Gtd Sr Sub Disc Note, Step Coupon
(11.00%, 05-01-03) 05-01-08 (A) Zero CCC+ 20 14,150
United Pan-Europe Communications N.V.,
Sr Note (Netherlands) 11-01-09
(R) (Y) 11.250 B 15 15,375
WorldCom, Inc.,
Sr Note 08-15-01 6.125 A- 60 59,351
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (R) (Y) 12.500 B+ 30 31,350
--------------
793,137
--------------
Transportation (2.54%)
America West Airlines,
Pass Thru Ctf Ser B 01-02-08 6.930 A- 4 3,510
Continental Airlines,
Pass Thru Ctf Ser 1999-1A 08-02-20 6.545 AA+ 60 54,508
Pass Thru Ctf Ser 1997-2C 06-30-04 7.206 BBB 17 16,904
Note 12-15-05 8.000 BB- 25 23,062
Delta Air Lines, Inc.,
Deb 12-15-29 (R) 8.300 BBB- 25 24,307
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 B 15 12,750
Lockheed Martin Corp.,
Bond 12-01-29 8.500 BBB- 30 30,105
Northwest Airlines, Inc.,
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 5 4,725
Gtd Note 03-15-04 8.375 BB 25 23,649
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 39 40,188
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1989-A2 01-01-13 9.820 BB 40 38,200
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB 38 39,409
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 8 7,324
--------------
318,641
--------------
Utilities (7.73%)
AES Corp.,
Sr Sub Note 07-15-06 10.250 BB 10 10,150
AES Eastern Energy,
Pass Thru Ctf 01-02-17 (R) 9.000 BBB- 25 23,516
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02
(R) (Y) 6.730 A- 40 39,008
Beaver Valley Funding Corp,
Deb 06-01-07 8.625 BB- 60 60,078
Sec Lease Oblig Bond 06-01-17 9.000 BB- 23 23,057
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 5 5,062
Calpine Corp.,
Sr Note 04-01-08 7.875 BB+ 15 14,287
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 45 46,462
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 18,968
CMS Energy Corp.,
Sr Note 01-15-04 6.750 BB 55 52,535
Sr Note 05-15-02 8.125 BB 25 24,746
Sr Note 01-15-09 7.500 BB 35 32,200
Connecticut Light & Power Co.,
1st Mtg Bond Ser C 06-01-02 7.750 BBB- 45 45,552
East Coast Power LLC,
Sr Sec Note 03-31-08 (R) 6.737 BBB- 47 44,923
Sr Sec Note 03-31-12 (R) 7.066 BBB- 50 45,000
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 39 41,296
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 26 24,839
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 AA- 75 66,466
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 30 34,795
Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 20 21,218
Iberdrola International B.V.,
Note 10-01-02 7.500 AA- 35 35,222
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 40 39,900
Niagara Mohawk Power Corp.,
Deb 01-01-18 8.770 BBB 45 45,950
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB+ 8 8,108
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB+ 4 3,569
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A
Class A-6 03-01-09 6.050 AAA 35 32,834
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 30 30,938
U.S. WEST Capital Funding, Inc.,
Gtd Bond 07-15-28 6.875 A- 40 34,990
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 8.090 BBB- 66 63,283
--------------
968,952
--------------
TOTAL BONDS
(Cost $11,694,423) (89.60%) 11,228,394
-------- --------------
NUMBER OF
SHARES
---------
WARRANTS
Telecommunications (0.01%)
MetroNet Communications Corp.
(Canada) (R) (Y) 5 675
-------- --------------
TOTAL WARRANTS
(Cost $51) (0.01%) 675
-------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.55%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99, due 01-03-00 (Secured by
U.S. Treasury Bond, 10.625% due
08-15-15, and U.S. Treasury Notes,
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.490% $1,196 1,196,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 441
-----------
TOTAL SHORT-TERM INVESTMENTS (9.55%) 1,196,441
---------- -----------
TOTAL INVESTMENTS (99.16%) 12,425,510
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.84%) 105,078
---------- -----------
TOTAL NET ASSETS (100.00%) $12,530,588
========== ===========
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
# Par value of foreign bonds is expressed in local currency, as shown
parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of
the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $1,146,635 or 9.15% of
net assets as of December 31, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S. dollar denominated.
The percentage shown for each investment category is the total value
of that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. High Yield Bond Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. High Yield Bond Fund on
December 31, 1999. It is divided into four main categories: bonds, common stocks, preferred stocks and warrants,
and short-term investments. Bonds are further broken down by industry group. Short-term investments, which represent
the Fund's "cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
BONDS
Aerospace (0.15%)
Compass Aerospace Corp.,
Sr Sub Note Ser C 04-15-05 (R) 10.125% B- $25 $13,812
--------------
Agricultural Operations (0.05%)
Iowa Select Farms L.P./ISF Finance, Inc.,
Sr Sub Note 12-01-05 (R) 10.750 CCC+ 10 4,750
--------------
Automobile/Trucks (0.26%)
J.B. Poindexter & Co., Inc.,
Sr Note 05-15-04 12.500 B 25 23,875
--------------
Building (0.77%)
Amatek Industries Property Ltd.,
Sr Sub Note (Australia) 02-15-08 (Y) 12.000 B 25 24,000
Nortek, Inc.,
Sr Note 08-01-08 8.875 B+ 50 47,500
--------------
71,500
--------------
Chemicals (2.88%)
General Chemical Industrial
Products, Inc.,
Sr Sub Note 05-01-09 10.625 B+ 50 49,500
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 (R) 10.125 B+ 100 102,500
Huntsman ICI Holdings LLC,
Sr Disc Note 12-31-09 (R) Zero B+ 100 30,125
Trikem S.A.,
Bond (Brazil) 07-24-07 (R) (Y) 10.625 B+ 125 85,000
--------------
267,125
--------------
Computers (3.73%)
ENTEX Information Services, Inc.,
Sr Sub Note 08-01-06 12.500 B- 25 11,250
Exodus Communications, Inc.,
Sr Note 07-01-08 11.250 B- 75 77,813
Sr Note 12-15-09 (R) 10.750 B- 50 50,875
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 25 26,250
Sr Note Ser B 02-15-05 10.000 B- 130 129,025
Verio, Inc.,
Sr Note 11-15-09 (R) 10.625 B- 50 51,250
--------------
346,463
--------------
Consumer Products - Misc. (1.31%)
Diamond Brands Operating Corp.,
Sr Sub Note 04-15-08 10.125 CCC+ 100 77,000
Indesco International, Inc.,
Sr Sub Note 04-15-08 9.750 B- 100 45,000
--------------
122,000
--------------
Containers (2.92%)
Gaylord Container Corp.,
Sr Note Ser B 06-15-07 9.375 B- 15 13,912
Sr Sub Note Ser B 02-15-08 9.875 CCC+ 100 86,000
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 10.875 CCC+ 20 19,600
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental
Int Cert) 04-01-02 12.250 B- 150 151,875
--------------
271,387
--------------
Cosmetics & Personal Care (1.09%)
Carson, Inc.,
Gtd Sr Sub Note Ser B 11-01-07 10.375 CCC+ 65 52,000
Global Health Sciences, Inc.,
Gtd Sr Note 05-01-08 11.000 B+ 75 45,750
Styling Technology Corp.,
Gtd Sr Sub Note 07-01-08 10.875 D 10 3,500
--------------
101,250
--------------
Diversified Operations (0.86%)
Diamond Holdings Plc,
Bond (British Pound Sterling)
02-01-08 # 10.000 B- 50 79,928
--------------
Electronics (0.14%)
Pacific Aerospace & Electronics, Inc.,
Gtd Sr Sub Note 08-01-05 11.250 CCC+ 25 13,000
--------------
Energy (1.61%)
AEI Resources, Inc./AEI Resources
Holdings, Inc.,
Gtd Note 12-15-05 (R) 10.500 CCC- 75 52,500
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 100 97,250
--------------
149,750
--------------
Fiber Optics (0.85%)
Williams Communications Group, Inc.,
Sr Note 10-01-09 10.875 BB- 75 78,469
--------------
Finance (0.86%)
ASAT Finance LLC,
Unit (Sr Note & Warrant)
11-01-06 (R) 12.500 B 50 54,250
PTC International Finance II S.A.,
Gtd Sr Sub Note (Euro)
12-01-09 # (R) 11.250 B+ 25 25,942
--------------
80,192
--------------
Food (2.19%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 100 100,500
Mastellone Hermanos S.A.,
Sr Note (Argentina) 04-01-08 (Y) 11.750 B+ 125 102,500
--------------
203,000
--------------
Insurance (0.45%)
Willis Corroon Corp.,
Gtd Sr Sub Note 02-01-09 9.000 B+ 50 41,625
--------------
Leisure (5.73%)
Claridge Hotel & Casino Corp.,
1st Mtg Note 02-01-02 11.750 D 50 28,875
Fitzgerald's Gaming Corp.,
Gtd Sr Sec Note Ser B 12-15-04 12.250 D 50 26,875
Hollywood Casino Shreveport,
1st Mtg Bond 08-01-06 (R) 13.000 B 50 53,500
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 75 74,625
Production Resource Group LLC,
Sr Sub Note 01-15-08 11.500 B- 25 22,250
Regal Cinemas, Inc.,
Sr Sub Note 06-01-08 9.500 B- 25 19,000
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 30 27,900
SFX Entertainment, Inc.,
Sr Sub Note 02-01-08 9.125 B- 100 94,000
Six Flags Entertainment Corp.,
Gtd Sr Note 04-01-06 8.875 B- 100 97,750
Venetian Casino Resort LLC/Las Vegas
Sands, Inc.,
1st Mtg Note 11-15-04 12.250 B- 100 87,250
--------------
532,025
--------------
Machinery (0.19%)
Glasstech, Inc.,
Sr Note Ser B 07-01-04 12.750 B3 25 17,375
--------------
Manufacturing (1.72%)
AP Holdings, Inc.,
Sr Disc Note, Step Coupon (11.25%,
03-15-03) 03-15-08 (A) Zero B- 200 80,000
Coyne International Enterprises Corp.,
Sr Sub Note 06-01-08 11.250 B- 75 67,125
ICON Health & Fitness, Inc.,
Gtd Note 09-27-05 12.000 B 22 12,210
--------------
159,335
--------------
Media (1.63%)
CD Radio, Inc.,
Sr Disc Note, Step Coupon (15.00%,
12-01-02) 12-01-07 (A) Zero CCC+ 110 57,200
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon
(12.625%, 03-01-03) 03-01-08 (A) Zero B- 25 9,125
Regional Independent Media Group Plc,
Sr Disc Note, Step Coupon (12.875%,
07-01-03) (United Kingdom)
07-01-08 # (A) Zero B3 20 20,668
Sr Note (United Kingdom)
07-01-08 (Y) 10.500 B- 5 4,900
Supercanal Holdings S.A./Supercanal
S.A., Sr Note (Argentina) 05-15-05 (R) (Y) 11.500 D 24 12,360
United International Holdings, Inc.,
Sr Disc Note, Step Coupon (10.75%,
02-15-03) 02-15-08 (A) Zero B- 75 47,438
--------------
151,691
--------------
Medical (0.33%)
Total Renal Care Holdings, Inc.,
Conv Sub Note 05-15-09 (R) 7.000 B 50 30,500
--------------
Metal (4.03%)
ALatief Freeport Finance Co. B.V. (P.T.),
Sr Note 04-15-01 9.750 CCC+ 50 43,750
Doe Run Resources Corp.,
Gtd Sr Note Ser B 03-15-03 12.231 B- 25 23,000
Gtd Sr Note Ser B 03-15-05 11.250 B- 10 9,200
Freeport-McMoRan Copper & Gold, Inc.,
Sr Note 11-15-06 7.500 CCC 75 54,375
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 25 26,250
Kappa Beheer B.V.,
Sr Sub Note (Netherlands)
07-15-09 (R) (Y) 10.625 B 75 78,375
Sr Sub Note, Step Coupon
(12.50%, 07-15-04) (Euro)
07-15-09 # (A) Zero B 100 63,469
TVX Gold, Inc.,
Conv Sub Note (Canada)
03-28-02 (Y) 5.000 B- 100 76,000
--------------
374,419
--------------
Oil & Gas (6.98%)
Comstock Resources, Inc.,
Gtd Sr Note 05-01-07 11.250 B 75 76,875
Frontier Oil Corp.,
Sr Note 11-15-09 11.750 B+ 50 49,250
Gothic Energy Corp.,
Sr Disc Note, Step Coupon
(14.125%, 05-01-02) 05-01-06 (A) Zero CCC- 10 3,500
Gothic Production Corp.,
Sr Sec Note Ser B 05-01-05 11.125 CCC+ 25 21,000
Great Lakes Acquisition Corp.,
Sr Disc Deb, Step Coupon
(13.125%, 05-15-03) 05-15-09 (A) Zero B- 200 106,000
Key Energy Services, Inc.,
Conv Sub Note 09-15-04 (R) 5.000 B 80 56,400
Conv Sub Note 09-15-04 5.000 Caa2 143 100,815
Sr Sub Note Ser B 01-15-09 14.000 B- 100 109,000
Mariner Energy, Inc.,
Sr Sub Note Ser B 08-01-06 10.500 B- 10 8,975
Ocean Rig Norway A.S.,
Gtd Sr Sec Note (Norway)
06-01-08 (Y) 10.250 B- 55 45,650
PANACO, Inc.,
Gtd Sr Sub Note Ser B 10-01-04 10.625 CCC 10 7,000
R&B Falcon Corp.,
Gtd Sr Note 12-15-03 9.125 B+ 60 57,000
Universal Compression, Inc.,
Sr Disc Note, Step Coupon
(9.875%, 02-15-03) 02-15-08 (A) Zero B 10 6,300
--------------
647,765
--------------
Paper & Paper Products (5.41%)
Advance Agro Capital B.V.,
Gtd Sr Note (Thailand) 11-15-07 (Y) 13.000 CC 50 36,500
APP Finance (VII) Mauritius Ltd.,
Gtd Note (Indonesia) 04-30-03 (R) (Y) 3.500 CCC+ 10 7,200
APP International Finance Co. B.V.,
Gtd Sec Note (Indonesia)
10-01-05 (Y) 11.750 CCC+ 150 126,000
Grupo Industrial Durango, S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 125 124,375
Packaging Corp. of America,
Sr Sub Note Ser B 04-01-09 9.625 B 150 153,375
Repap New Brunswick, Inc.,
Sr Sec 2nd Priority Note (Canada)
04-15-05 (Y) 10.625 CCC+ 50 46,250
Sappi BVI Finance Ltd.,
Gtd Conv Bond (South Africa)
08-01-02 (R) (Y) 7.500 BB- 10 9,000
--------------
502,700
--------------
Real Estate Operations (0.23%)
Signature Resorts, Inc.,
Conv Sub Note 01-15-07 5.750 B 35 21,394
--------------
REIT (0.25%)
Host Marriott L.P.,
Gtd Sr Note 02-15-06 8.375 BB 25 23,500
--------------
Retail (1.67%)
Ames Department Stores, Inc.,
Gtd Sr Note 04-15-06 10.000 B+ 50 49,250
Imperial Home Decor Group, Inc.,
Gtd Sr Sub Note 03-15-08 11.000 D 125 23,750
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 55 19,250
RAB Holdings, Inc.,
Sr Note 05-01-08 (R) 13.000 CCC 120 57,600
SpinCycle, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 05-01-01)
05-01-05 (A) Zero CCC+ 25 5,500
--------------
155,350
--------------
Steel (2.90%)
Gulf States Steel, Inc. of Alabama,
1st Mtg Bond 04-15-03 13.500 Caa3 100 10,000
Metallurg, Inc.,
Gtd Sr Note Ser B 12-01-07 11.000 B- 30 26,700
Metallurg Holdings, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 07-15-03) 07-15-08 (A) Zero CCC+ 50 16,000
NSM Steel, Inc./NSM Steel Ltd.,
Gtd Sr Sub Mtg Note Ser B
02-01-08 (R) 12.250 D 75 750
Oregon Steel CF&I,
Note 03-31-03 (r) 9.500 B 75 72,463
Renco Steel Holdings,
Sr Sec Note Ser B 02-01-05 10.875 B- 25 22,313
Weirton Steel Corp.,
Sr Note 07-01-04 11.375 B 125 120,625
--------------
268,851
--------------
Telecommunications (22.52%)
AMSC Acquisition Co., Inc.,
Sr Note Ser B 04-01-08 12.250 B- 40 32,800
COLT Telecom Group Plc,
Sr Note (Germany) 07-31-08 # 7.625 B 200 103,535
Crown Castle International Corp.,
Sr Disc Note, Step Coupon
(10.625%, 11-15-02) 11-15-07 (A) Zero B 10 7,475
Sr Note 05-15-11 9.000 B 25 24,625
CTI Holdings S.A.,
Sr Note, Step Coupon (11.25%,
04-15-03) (Argentina) 04-15-08 (A) (Y) Zero B 75 43,950
Dolphin Telecom Plc,
Sr Disc Note Ser B, Step Coupon
(14.00%, 05-15-04)
(United Kingdom) 05-15-09 (A) (Y) Zero CCC+ 50 22,500
Sr Disc Note, Step Coupon
(11.50%, 06-01-03)
(United Kingdom) 06-01-08 (A) (Y) Zero B- 60 27,450
Esprit Telecom Group Plc,
Sr Note (Germany) 06-15-08 # 11.000 BB- 60 30,983
Global TeleSystems Group, Inc.,
Sr Note 02-15-05 9.875 B- 50 45,750
Hermes Europe Railtel BV,
Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 50 49,500
International Wireless Communications,
Inc., Sr Sec Disc Note 08-15-01 Zero B- 50 4,500
ITC DeltaCom, Inc.,
Sr Note 11-15-08 9.750 B 100 101,000
Jazztel Plc,
Sr Note (Euro) 12-15-09 # (R) 13.250 CCC+ 50 50,624
KMC Telecom Holdings, Inc.,
Sr Note 05-15-09 (R) 13.500 B- 100 99,000
McLeodUSA, Inc.,
Sr Disc Note, Step Coupon
(10.50%, 03-01-02)
03-01-07 (A) Zero B+ 20 16,200
Sr Note 03-15-08 8.375 B+ 35 33,250
Sr Note 11-01-08 9.500 B+ 100 100,250
Metromedia Fiber Network, Inc.,
Sr Note 12-15-09 10.000 B+ 75 76,688
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 25 16,375
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 75 77,250
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 50 54,000
Sr Note, Step Coupon
(12.375%, 10-01-03)
10-01-08 (A) Zero B- 100 69,750
Nuevo Grupo Iusacell S.A. de C.V.,
Sr Note (Mexico) 12-01-06 (R) 14.250 B+ 35 36,225
Omnipoint Corp.,
Sr Note 09-15-09 (R) 11.500 CCC+ 25 27,000
ONO Finance Plc,
Sr Sub Note (United Kingdom)
05-01-09 (Y) 13.000 CCC+ 50 52,000
Pac-West Telecomm, Inc.,
Sr Note 02-01-09 13.500 B 50 51,750
Pegasus Communications Corp.,
Sr Sub Note 08-01-07 (R) 12.500 CCC+ 35 37,713
Primus Telecommunications Group, Inc.,
Sr Note 10-15-09 (R) 12.750 B- 50 51,750
Spectrasite Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 04-15-04)
04-15-09 (A) Zero B- 100 53,500
Tele1 Europe B.V.,
Sr Note (Euro) 12-01-09 # (R) 11.875 B- 50 50,876
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.875%, 04-15-04) (United
Kingdom) 04-15-09 # (A) (R) Zero B+ 25 25,633
Teligent, Inc.,
Sr Note 12-01-07 11.500 CCC 16 15,600
United Pan-Europe Communications N.V.,
Sr Disc Note, Step Coupon
(13.375%, 11-01-04) (Euro)
11-01-09 # (A) (R) Zero B- 50 27,957
Sr Note (Euro) 11-01-07 # (R) 10.875 B- 50 51,632
Sr Note (Euro) 11-01-09 # (R) 11.250 B- 25 25,816
VersaTel Telecom International N.V.,
Sr Note (Netherlands) 05-15-08 (Y) 13.250 B- 125 133,125
Sr Note (Netherlands) 07-15-09 (Y) 11.875 B- 25 25,500
Viatel, Inc.,
Sr Note (Germany) 04-15-08 # 11.150 Caa1 170 87,567
Sr Sec Note 04-15-08 11.250 B- 75 74,625
WinStar Communications, Inc.,
Sr Sub Def Int Note (11.00%,
03-15-03) 03-15-08 (A) Zero CCC 34 32,640
World Access, Inc.,
Sr Note 01-15-08 13.250 CCC 100 91,000
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (Y) 12.500 B+ 50 52,250
--------------
2,091,614
--------------
Textile (1.37%)
Polymer Group, Inc.,
Sr Sub Note 03-01-08 8.750 B 35 33,600
Steel Heddle Group, Inc.,
Sr Disc Deb, Step Coupon
(13.75%, 06-01-03)
06-01-09 (A) Zero CCC+ 200 26,000
Steel Heddle Manufacturing Co.,
Gtd Sr Sub Note Ser B 06-01-08 10.625 CCC+ 50 20,000
Tropical Sportswear International Corp.,
Sr Sub Note Ser A 06-15-08 11.000 B- 50 48,000
--------------
127,600
--------------
Transportation (5.75%)
Cenargo International Plc,
1st Mtg Note (United Kingdom)
06-15-08 (Y) 9.750 B+ 20 16,650
Continental Airlines,
Sr Note 12-15-05 8.000 BB- 25 23,063
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 B 100 85,000
North American Van Lines, Inc.,
Sr Sub Note 12-01-09 (R) 13.375 B- 75 75,000
Northwest Airlines Corp.,
Gtd Note 03-15-07 8.700 BB 100 92,495
Pacer International, Inc.,
Sr Sub Note 06-01-07 11.750 B- 50 50,750
Pacific & Atlantic Holdings, Inc.,
1st Mtg Note (Greece) 05-30-08 (Y) 11.500 CC 50 19,000
US Airways, Inc.,
Pass Thru Ctf Ser 1993-A3
03-01-13 10.375 BB 50 48,000
Sr Note 02-01-01 9.625 B 75 74,625
Worldwide Flight Services, Inc.,
Unit (Sr Note & Warrant)
08-15-07 (R) 12.250 B 50 49,750
--------------
534,333
--------------
Waste Disposal Service & Equip. (1.58%)
Waste Systems International, Inc.,
Gtd Sr Note 01-15-06 11.500 B 15 14,531
Sub Note 05-13-05 (R) 7.000 CCC+ 159 132,321
--------------
146,852
--------------
TOTAL BONDS
(Cost $8,816,927) (82.41%) 7,653,430
-------- --------------
NUMBER OF
SHARES
OR WARRANTS
---------
COMMON STOCKS
Abitibi-Consolidated, Inc. (Canada) 12,500 148,438
American Pacific Corp.** 5,000 42,500
Continental Airlines, Inc. (Class B)** 800 35,500
Gaylord Container Corp. (Class A) 6,000 40,875
Grey Wolf, Inc.** 23,800 68,425
Key Energy Services, Inc.** 25,000 129,688
KLM Royal Dutch Airlines
(Netherlands) # 78 1,945
Northwest Airlines Corp. 3,250 72,313
Repap Enterprises, Inc. (Canada)** # 150,000 8,265
Star Gas Partners, L.P. 3,300 43,725
Viatel, Inc.** 423 22,683
Waste Systems International, Inc.** 8,715 41,396
World Access, Inc. 314 6,044
--------------
TOTAL COMMON STOCKS
(Cost $752,020) (7.13%) 661,797
-------- --------------
PREFERRED STOCKS AND WARRANTS
American Mobile Satellite Corp.,
Warrant (R)** 40 --
Cumulus Media, Inc., 13.75%, Ser A,
Preferred Stock 22 24,640
DIVA Systems Corp., Warrant** 75 150
Gothic Energy Corp., Warrant** 79 --
HF Holdings, Inc., Warrant** 212 318
Hills Stores Co., Warrant** 35,000 --
Key Energy Services, Inc., Warrant (R)** 100 2,500
Nakornthai Strip Mill Plc, Warrant
(Thailand) (R)** 63,309 63
Nextel Communications, Inc., 11.125%, Ser E,
Payment-In-Kind, Preferred Stock 179 179,000
ONO Finance Plc, Warrant (United
Kingdom) (R)** 50 5,000
Packaging Corp. of America, 12.375%,
Payment-In-Kind, Preferred Stock 2,116 231,702
R&B Falcon Corp., Warrant (R)** 50 12,500
R&B Falcon Corp., 13.875%,
Preferred Stock 52 54,860
Sirius Satellite Radio, Inc., Conv, 10.50%, Ser C,
Preferred Stock 200 36,000
SpinCycle, Inc., Warrant (R)** 25 --
Stone Container Corp., $1.75, Ser E,
Preferred Stock 3,000 70,500
VersaTel Telecom International
N.V., Warrant (R)** 125 50,000
Waste Systems International, Inc.,
Warrant (R)** 225 169
--------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $592,934) (7.19%) 667,402
-------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.52%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.490% $48 48,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 519
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $48,000) (0.52%) 48,519
---------- -----------
TOTAL INVESTMENTS (97.25%) 9,031,148
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (2.75%) 255,384
---------- -----------
TOTAL NET ASSETS (100.00%) $9,286,532
========== ===========
NOTES TO SCHEDULE OF INVESTMENTS
* Credit ratings are unaudited and rated by Moody's Investors Service
or John Hancock Advisers, Inc. where Standard and Poor's ratings are
not available.
** Non-income producing security.
*** Represents rate in effect on December 31, 1999.
# Par value of foreign bonds and common stocks is expressed in local
currency, as shown parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of
the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $1,588,218 or 17.10% of
net assets as of December 31, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S. dollar denominated.
(r) Direct placement securities are restricted as to resale. They have
been valued in accordance with procedures approved by the Trustees
after after consideration of restrictions as to resale, financial
condition and prospects of the issuer, general market conditions and
pertinent information in accordance with the Fund's By-Laws and the
Investment Company Act of 1940, as amended. The Fund has limited rights
to registration under the Securities Act of 1933 with respect to these
restricted securities.
Additional information on these securities is as follows:
MARKET MARKET
VALUE AS A VALUE AT
ACQUISITION ACQUISITION % OF FUND DECEMBER 31,
ISSUER, DESCRIPTION DATE COST NET ASSETS 1999
------------------- ----------- ----------- ---------- -----------
Oregon Steel CF&I 05-14-98 $72,374 0.78% $72,463
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
Portfolio Concentration
December 31, 1999 (Unaudited)
- -------------------------------------------------------------------------
The V.A. High Yield Bond Fund invests primarily in securities issued
in the United States of America. The performance of this Fund is closely
tied to the economic and financial conditions of the countries within
which it invests. The concentration of investments by industry category
for individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's investments
at December 31, 1999 assigned to country categories.
MARKET VALUE
AS A % OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
Argentina 1.73%
Australia 0.26
Brazil 0.92
Canada 3.60
Finland 0.69
Greece 0.21
Indonesia 1.45
Luxembourg 0.28
Mexico 1.35
Netherlands 4.84
Norway 0.50
South Africa 0.10
Thailand 0.40
United Kingdom 4.78
United States 76.14
-------
TOTAL INVESTMENTS 97.25%
=======
Additionally, the concentration of investments can be aggregated by the
quality rating for each debt security.
QUALITY DISTRIBUTION
- --------------------
BB 4.91%
B 59.81
CCC 16.06
CC 0.60
D 1.03
-------
TOTAL BONDS 82.41%
=======
See notes to financial statements.
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Money Market Fund
Schedule of Investments
December 31, 1999
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Money Market Fund on
December 31, 1999.
INTEREST QUALITY PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- ------------------- ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automotive (0.83%)
Ford Motor Credit Co.,
01-13-00 6.400% Tier 1 $275 $274,413
--------------
Banking (3.01%)
Bank of America FSB,
02-22-00 5.120 Tier 1 1,000 992,604
--------------
Beverages (4.24%)
Coca-Cola Co.,
01-18-00 5.730 Tier 1 1,400 1,396,212
--------------
Broker Services (7.19%)
Goldman Sachs Group, L.P.,
04-28-00 6.000 Tier 1 1,400 1,372,467
Merrill Lynch & Co., Inc.,
01-21-00 6.330 Tier 1 1,000 996,483
--------------
2,368,950
--------------
Chemicals (4.23%)
DuPont (E.I.) de Nemours & Co.,
01-21-00 6.060 Tier 1 1,400 1,395,287
--------------
Finance (4.01%)
General Electric Corp.,
01-27-00 6.450 Tier 1 330 328,463
International Lease Finance,
02-11-00 5.740 Tier 1 1,000 993,463
--------------
1,321,926
--------------
Oil & Gas (4.23%)
Chevron USA, Inc.,
01-26-00 6.400 Tier 1 1,400 1,393,778
--------------
Utilities (4.24%)
Bell Atlantic Network Funding,
01-21-00 5.820 Tier 1 1,400 1,395,473
--------------
TOTAL COMMERCIAL PAPER
(Cost $10,538,643) (31.98%) 10,538,643
-------- --------------
CORPORATE INTEREST BEARING OBLIGATIONS
Automotive (4.09%)
General Motors Acceptance Corp.,
08-07-00 5.800 Tier 1 1,350 1,347,391
--------------
Finance (5.22%)
CIT Group Holdings, Inc.,
01-28-00 6.400 Tier 1 720 720,378
General Electric Capital Corp.,
05-15-00 5.890 Tier 1 999,634
--------------
1,720,012
--------------
Mortgage Banking (3.04%)
Countrywide Home Loans,
01-13-00 5.250 Tier 1 1,000 999,647
--------------
Utilities (4.26%)
Duke Power Co.,
06-01-00 7.000 Tier 1 1,400 1,404,801
--------------
TOTAL CORPORATE INTEREST BEARING OBLIGATIONS
(Cost $5,471,851) (16.61%) 5,471,851
-------- --------------
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (31.77%)
Federal Home Loan Bank.,
03-08-00 5.160 Tier 1 5,000 4,994,646
Federal Home Loan Mortgage Corp.,
01-20-00 5.200 Tier 1 1,650 1,645,472
01-31-00 4.750 Tier 1 3,500 3,486,146
06-23-00 5.600 Tier 1 353 343,445
--------------
10,469,709
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $10,469,709) (31.77%) 10,469,709
-------- --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $26,480,203) (80.36%) 26,480,203
-------- --------------
INTEREST
RATE
----------
JOINT REPURCHASE AGREEMENT (18.13%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99, due 01-03-00 (Secured by
U.S. Treasury Bond 7.625% due 11-15-22
and U.S. Treasury Note 4.000% due
10-31-00) - Note B 2.490% 5,973 5,973,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT (18.13%) 5,973,000
---------- -----------
TOTAL INVESTMENTS (98.49%) 32,453,203
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.51%) 498,304
---------- -----------
TOTAL NET ASSETS (100.00%) $32,951,507
========== ===========
* Quality ratings indicate the categories of eligible securities, as
defined by Rule 2a-7 of the Investment Company Act of 1940, owned by
the Fund.
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
John Hancock Funds - Declaration Trust - V.A. Strategic Income Fund
Schedule of Investments
December 31, 1999
- -----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the V.A. Strategic Income Fund
on December 31, 1999. It is divided into four main categories: bonds, common stocks, preferred stocks and
warrants, and short-term investments. Bonds are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BONDS
Advertising (0.94%)
Go Outdoor Systems Holding S.A.,
Sr Sub Note (France)
07-15-09 (E) (R) 10.500% B- $100 $106,286
Outdoor Systems, Inc.,
Sr Sub Note 10-15-06 9.375 B 100 102,750
--------------
209,036
--------------
Beverages (1.31%)
Canandaigua Brands, Inc.,
Sr Sub Note 03-01-09 8.500 B+ 200 190,000
National Wine & Spirits, Inc.,
Sr Note 01-15-09 10.125 B 100 101,750
--------------
291,750
--------------
Building (0.41%)
Standard Pacific Corp.,
Sr Note 04-01-09 8.500 BB 100 92,500
--------------
Business Services - Misc. (0.42%)
United Rentals, Inc.,
Sr Sub Note Ser B 08-15-08 8.800 BB- 100 93,250
--------------
Chemicals (0.90%)
General Chemical Industrial
Products, Inc.,
Sr Sub Note 05-01-09 10.625 B+ 100 99,000
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 (R) 10.125 B+ 100 102,500
--------------
201,500
--------------
Computers (1.05%)
Exodus Communications, Inc.,
Sr Note (United States)
12-15-09 (E) (R) 10.750 B- 200 205,520
Unisys Corp.,
Sr Note 10-15-04 11.750 BB+ 25 27,500
--------------
233,020
--------------
Containers (0.92%)
Berry Plastics Corp.,
Sr Sub Note 04-15-04 12.250 B- 100 102,500
Consolidated Container Co. LLC/
Cons. Container Capital, Inc.,
Sr Sub Note 07-15-09 (R) 10.125 B 100 101,750
--------------
204,250
--------------
Diversified Operations (0.46%)
Tenneco, Inc.,
Sr Sub Note 10-15-09 (R) 11.625 B+ 100 102,000
--------------
Electronics (0.37%)
Communications Instruments, Inc.,
Sr Sub Note Ser B 09-15-04 10.000 B- 100 83,000
--------------
Energy (0.75%)
AEI Resources, Inc./
AEI Resources Holdings, Inc.,
Note 12-15-05 (R) 10.500 CCC- 100 70,000
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 100 97,250
--------------
167,250
--------------
Finance (1.60%)
PTC International Finance II S.A.,
Sr Sub Note (Luxembourg)
12-01-09 (E) (R) 11.250 B+ 100 103,767
Sovereign Bancorp, Inc.,
Sr Note 11-15-06 10.500 BB+ 150 153,000
Sr Note 07-01-00 6.750 BB+ 100 99,730
--------------
356,497
--------------
Food (0.45%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 100 100,500
--------------
Government - Foreign (4.09%)
Canada, Government of,
Government Bond (Canada)
03-01-01 # 7.500 AAA 400 281,311
Government Bond (Canada)
09-01-02 # 5.500 AAA 150 102,025
Government Bond (Canada)
12-01-05 # 8.750 AAA 165 127,640
United Kingdom of Great Britain
Treasury Gilts, Government Bond
(United Kingdom) 11-06-01 # 7.000 AAA 50 81,559
Government Bond (United Kingdom)
06-07-02 # 7.000 AAA 70 114,555
Government Bond (United Kingdom)
06-10-03 # 8.000 AAA 120 203,627
--------------
910,717
--------------
Government - U.S. (22.61%)
United States Treasury,
Bond 08-15-05 6.500 AAA 400 400,000
Bond 08-15-05 10.750 AAA 100 119,266
Bond 02-15-16 9.250 AAA 415 512,330
Bond 08-15-19 8.125 AAA 1,140 1,299,064
Bond 08-15-23 6.250 AAA 800 754,248
Bond 02-15-27 6.625 AAA 500 495,545
Bond 11-15-28 5.250 AAA 250 205,937
Note 08-31-02 6.250 AAA 570 569,111
Note 08-15-04 7.250 AAA 340 350,625
Note 08-15-07 6.125 AAA 340 331,500
--------------
5,037,626
--------------
Leisure (5.07%)
Cinemark USA, Inc.,
Sr Sub Note Ser D 08-01-08 9.625 B 100 92,000
Harrah's Operating Co., Inc.,
Sr Sub Note 12-15-05 7.875 BB+ 100 96,250
HMH Properties, Inc.,
Sr Note Ser B 08-01-08 7.875 BB 100 89,000
Hollywood Casino Shreveport,
1st Mtg Bond 08-01-06 (R) 13.000 B 100 107,000
Isle of Capri Casinos, Inc.,
Sr Sub Note 04-15-09 8.750 B 100 92,250
Jupiters Ltd.,
Sr Note (Australia) 03-01-06 (Y) 8.500 BB+ 150 145,500
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 150 149,250
Regal Cinemas, Inc.,
Sr Sub Deb 12-15-10 8.875 B- 100 73,500
SFX Entertainment, Inc.,
Sr Sub Note Ser B 02-01-08 9.125 B- 100 94,000
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas)
12-15-07 (Y) 8.625 B+ 100 94,000
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 97 97,000
--------------
1,129,750
--------------
Machinery (0.39%)
Columbus McKinnon Corp.,
Sr Sub Note 04-01-08 8.500 B 100 86,000
--------------
Media (6.67%)
Adelphia Communications Corp.,
Sr Note 11-15-09 9.375 B+ 100 98,250
American Media Operations, Inc.,
Sr Sub Note 05-01-09 10.250 B- 150 150,375
AMFM Operating, Inc.,
Sr Sub Deb 10-31-06 12.625 B- 64 76,440
Chancellor Media Corp.,
Sr Sub Note 01-15-07 10.500 B 100 109,000
Citadel Broadcasting Co.,
Sr Sub Note 11-15-08 9.250 B- 100 100,000
Diamond Holdings Plc,
Bond (United Kingdom)
02-01-08 # 10.000 B- 50 79,928
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon
(12.625%, 03-01-03)
03-01-08 (A) Zero B- 250 91,250
Emmis Communications Corp.,
Sr Sub Note, Ser B 03-15-09 8.125 B- 125 118,437
Falcon Holdings Group L.P./
Falcon Funding Corp.,
Sr Deb Ser B 04-15-10 8.375 B 200 201,500
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 100 91,500
Regional Independent Media Group Plc,
Sr Note (United Kingdom)
07-01-08 (Y) 10.500 B- 175 171,500
STC Broadcasting, Inc.,
Sr Sub Note 03-15-07 11.000 B- 100 99,250
TV Guide, Inc.,
Sr Sub Note 03-01-09 8.125 B+ 100 99,750
--------------
1,487,180
--------------
Metal (0.86%)
Euramax International Plc,
Sr Sub Note (United Kingdom)
10-01-06 (Y) 11.250 B 100 100,125
Koppers Industries, Inc.,
Sr Sub Note 12-01-07 9.875 B- 100 91,750
--------------
191,875
--------------
Oil & Gas (1.63%)
Comstock Resources, Inc.,
Sr Note 05-01-07 11.250 B 100 102,500
Frontier Oil Corp.,
Sr Note 11-15-09 11.750 B+ 200 197,000
Universal Compression, Inc.,
Sr Disc Note, Step Coupon
(9.875%, 02-15-03) 02-15-08 (A) Zero B 100 63,000
--------------
362,500
--------------
Paper & Paper Products (2.98%)
Grupo Industrial Durango, S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 200 199,000
Kappa Beheer BV,
Sr Sub Note (Netherlands)
07-15-09 (E) (R) 10.625 B 150 159,429
Packaging Corp. of America,
Sr Sub Note 04-01-09 9.625 B 200 204,500
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental
Int Cert) 04-01-02 12.250 B- 100 101,250
--------------
664,179
--------------
Retail (0.62%)
United Stationers Supply Co.,
Sr Sub Note 04-15-08 8.375 B 150 137,250
--------------
Steel (0.42%)
AK Steel Corp.,
Sr Note 02-15-09 7.875 BB 100 94,250
--------------
Technology (0.47%)
ChipPAC International Ltd.,
Sr Sub Note 08-01-09 (R) 12.750 B- 100 105,000
--------------
Telecommunications (9.73%)
Allegiance Telecom, Inc.,
Sr Disc Note, Ser B, Step Coupon
(11.75%, 02-15-03)
02-15-08 (A) Zero B 250 178,437
AMSC Acquisition Co., Inc.,
Sr Note Ser B 04-01-08 12.250 B- 100 82,000
Cellco Finance NV,
Sr Note (Netherlands)
08-01-05 (R) (Y) 12.750 B- 100 103,500
Centennial Cellular Operating Co.,
Sr Sub Note 12-15-08 10.750 Caa1 100 107,500
Comunicacion Celular S.A.,
Bond, Step Coupon (13.125%,
11-15-00) (Colombia)
03-01-05 (A) (R) (Y) Zero B 100 66,000
Esprit Telecom Group Plc,
Sr Note (United Kingdom)
12-15-07 (Y) 11.500 B- 100 100,000
Sr Note (Deutsche Mark)
06-15-08 # 11.000 BB- 200 103,278
Intercel, Inc.,
Unit (Sr Discount Note & Warrant),
Step Coupon (12.00%, 02-01-01)
02-01-06 (A) Zero B 200 173,000
Ionica PLC,
Sr Disc Note, Step Coupon
(15.00%, 05-01-02)
(United Kingdom)
05-01-07 (A) (Y) Zero Ca 200 6,500
MetroNet Communications Corp.,
Sr Disc Note, Step Coupon
(10.75%, 11-01-02)
(Canada) 11-01-07 (A) (Y) Zero BBB 200 169,130
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 50 58,000
NorthEast Optic Network, Inc.,
Sr Note 08-15-08 12.750 B- 100 106,000
Nuevo Grupo Iusacell S.A.,
Sr Note (Mexico) 12-01-06 (R) (Y) 14.250 B+ 200 207,000
ONO Finance Plc,
Sr Note (United Kingdom)
05-01-09 (E) (Y) 13.000 CCC+ 50 52,387
Sr Note (United Kingdom)
05-01-09 (R) (Y) 13.000 CCC+ 50 52,000
Orange Plc,
Sr Note (United Kingdom)
08-01-08 (E) 7.625 BBB 25 26,005
Sr Note (United Kingdom)
08-01-08 (Y) 8.000 BBB 100 101,750
Spectrasite Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 04-15-04) 04-15-09 (A) Zero B- 200 107,000
TeleCorp PCS, Inc.,
Sr Disc Note, Step Coupon
(11.625%, 04-15-04)
04-15-09 (A) (R) Zero B3 175 110,250
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.25%, 04-15-04)
(United Kingdom)
04-15-09 (A) (R) (Y) Zero B+ 100 102,533
Williams Communications Group, Inc.,
Sr Note 10-01-09 10.875 BB- 150 156,937
--------------
2,169,207
--------------
Telecommunications Services (21.27%)
CapRock Communications Corp.,
Sr Note 05-01-09 11.500 B 100 102,500
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon
(10.40%, 05-15-03)
(Canada) 05-15-08 (A) # Zero B3 150 65,454
Sr Disc Note, Step Coupon
(10.125%, 05-01-04)
(Canada) 05-01-09 (A) (Y) Zero B3 150 91,125
COLT Telecom Group Plc
(United Kingdom), Sr Note
(Deutsche Mark) 07-31-08 # 7.625 B 300 155,303
Crown Castle International Corp.,
Sr Disc Note, Step Coupon
(10.625%, 11-15-02)
11-15-07 (A) Zero B 150 112,125
Dolphin Telecom Plc,
Sr Disc Note, Step Coupon
(11.50%, 06-01-03)
(United Kingdom)
06-01-08 (A) (Y) Zero CCC+ 200 91,500
Sr Disc Note, Step Coupon
(14.00%, 05-15-04)
(United Kingdom) 05-15-09 (A) (Y) Zero CCC+ 200 90,000
Energis Plc,
Sr Note (United Kingdom)
06-15-09 (R) # 9.500 B 130 217,258
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 9.625 BB 100 99,750
Hermes Europe Railtel BV,
Sr Note (Netherlands)
08-15-07 (Y) 11.500 B 100 102,500
Jazztel Plc,
Sr Note (United Kingdom)
12-15-09 (E) (R) 13.250 CCC+ 200 202,497
Level 3 Communications, Inc.,
Sr Note 05-01-08 9.125 B 100 94,500
McLeodUSA, Inc.,
Sr Note 07-15-07 9.250 B+ 100 100,250
Sr Note 11-01-08 9.500 B+ 50 50,125
Metromedia Fiber Network, Inc.,
Sr Note 11-15-08 10.000 B+ 300 306,750
Sr Note (United States)
12-15-09 (E) 10.000 B+ 100 103,012
Nextel Communications, Inc.,
Sr Disc Note 08-15-04 9.750 B 75 77,250
Sr Disc Note, Step Coupon
(9.95%, 02-15-03) 02-15-08 (A) Zero B 125 87,813
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 250 163,750
NEXTLINK Communications, Inc.,
Sr Disc Note, Step Coupon
(12.125%, 12-01-04)
12-01-09 (R) Zero B 100 58,250
Sr Note 11-15-08 10.750 B 100 103,000
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 100 108,000
Sr Note Ser B, Step Coupon
(12.375%, 10-01-03)
10-01-08 (A) Zero B- 150 104,625
Omnipoint Corp.,
Sr Note 09-15-09 (R) 11.500 CCC+ 100 108,000
Orion Network Systems,
Sr Note 01-15-07 11.250 B+ 100 74,000
Primus Telecommunications
Group, Inc., Sr Note 10-15-09 (R) 12.750 B- 250 258,750
Qwest Communications International,
Inc., Sr Note Ser B 04-01-07 10.875 BB+ 65 71,941
RCN Corp.,
Sr Disc Note, Step Coupon
(11.125%, 10-15-02)
10-15-07 (A) Zero B- 200 141,500
Tele1 Europe B.V.,
Sr Note (Netherlands)
12-01-09 (E) (R) 11.875 B- 200 203,505
Teligent, Inc.,
Sr Note 12-01-07 11.500 CCC 100 97,500
Time Warner Telecom LLC,
Sr Note 07-15-08 9.750 B 100 102,500
Tritel PCS, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 05-15-04)
05-15-09 (A) (R) Zero B3 100 63,000
United Pan-Europe Communications N.V.,
Sr Disc Note, Step Coupon
(13.375%, 11-01-04)
(Netherlands) 11-01-09 (E) (R) Zero B- 100 55,913
Sr Note (Netherlands)
11-01-07 (E) (R) 10.875 B- 100 103,264
Sr Note (Netherlands)
11-01-09 (E) (R) 11.250 B- 100 103,264
VersaTel Telecom International N.V.,
Sr Note (Netherlands)
05-15-08 (Y) 13.250 B- 100 106,500
Sr Note Ser EU (Netherlands)
07-15-09 (E) 11.875 B- 100 107,293
Viatel, Inc.,
Sr Note 04-15-08 11.250 B- 350 348,250
Winstar Equipment Corp.,
Sec Note 03-15-04 12.500 CCC+ 100 106,500
--------------
4,739,017
--------------
Telecommunications/Internet Service Providers (1.88%)
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 100 105,000
Verio, Inc.,
Sr Note 12-01-08 11.250 B- 300 315,000
--------------
420,000
--------------
Transportation (1.66%)
Continental Airlines, Inc.,
Sr Note 12-15-05 8.000 BB- 200 184,500
Fine Air Services Corp.,
Sr Note 06-01-08 9.875 B 100 85,000
North American Van Lines, Inc.,
Sr Sub Note 12-01-09 (R) 13.375 B- 100 100,000
--------------
369,500
--------------
Utilities (3.88%)
Calpine Corp.,
Sr Note 04-01-08 7.875 BB+ 100 95,250
CMS Energy Corp.,
Sr Note Ser B 11-15-00 7.375 Ba3 250 248,528
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 100 107,985
Deb Ser B 07-23-06 13.250 BB 150 176,190
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico)
11-15-09 (R) (Y) 9.625 BB 100 89,500
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 145 148,061
--------------
865,514
--------------
TOTAL BONDS
(Cost $21,974,386) (93.81%) 20,904,118
-------- --------------
NUMBER OF
SHARES
---------
COMMON STOCKS
KLM Royal Dutch Airlines N.V.
(Netherlands) 397 9,900
Nextel Communications, Inc. (Class A)** 232 23,925
Northeast Utilities** 6,000 123,375
Viatel, Inc.** 795 42,632
--------------
199,832
--------------
TOTAL COMMON STOCK
(Cost $127,949) (0.90%) 199,832
-------- --------------
PREFERRED STOCKS AND WARRANTS
Allegiance Telecom Inc., Warrant** 250 20,000
American Mobile Satellite Corp.,
Warrant (R)** 100 0
Comunicacion Celular S.A., Warrant
(Colombia)** 100 0
DIVA Systems Corp., Warrant** 750 1,500
Loral Space & Communications Ltd.,
Warrant** 100 1,000
LTV Corp., 8.25%, Conv Preferred
Stock (R) 4,000 243,000
NEXTLINK Communications Inc., 14.00%,
Preferred Stock 2,041 110,214
ONO Finance Plc, Warrant (United
Kingdom) (R) (Y)** 50 5,000
ONO Finance Plc, Warrant (United
Kingdom) (E) (R)** 50 5,037
VersaTel Telecom B.V., Warrant (R)** 100 40,000
--------------
425,751
--------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $335,445) (1.91%) 425,751
-------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.25%)
Investment in a joint repurchase agreement
transaction with Barclay's, Inc. - Dated
12-31-99 due 01-03-00 (Secured by
U.S. Treasury Bond 10.625% due
08-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due 01-31-00
thru 05-15-00) - Note B 2.490% $278 278,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.50% 602
-----------
TOTAL SHORT-TERM INVESTMENTS (1.25%) 278,602
---------- -----------
TOTAL INVESTMENTS (97.87%) 21,808,303
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (2.13%) 473,680
---------- -----------
TOTAL NET ASSETS (100.00%) $22,281,983
========== ===========
* Credit ratings are unaudited and rated by Moody's Investors Service
or John Hancock Advisers, Inc. where Standard & Poor's ratings are not
available.
** Non-income producing security.
# Par value of foreign bonds is expressed in local currency, as shown
parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(E) Parenthetical disclosure of a country in the security description
represents country of issuer; however, security is euro denominated.
(R) These securities are exempt from registration under rule 144A of
the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $3,757,773 or 16.86% of
the fund's net assets as of December 31, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
Portfolio Concentration
December 31, 1999 (Unaudited)
- ---------------------------------------------------------------------------
The V.A. Strategic Income Fund invests primarily in securities issued
in the United States of America. The performance of this Fund is
closely tied to the economic and financial conditions of the countries
within which it invests. The concentration of investments by industry
category for individual securities held by the Fund is shown in the
schedule of investments. In addition, concentration of investments can
be aggregated by various countries. The table below shows the
percentages of the Fund's investments at December 31, 1999 assigned to
country categories.
MARKET VALUE
AS A % OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
Australia 0.65%
Bahamas 0.42
Canada 4.01
Colombia 0.30
France 0.48
Luxembourg 0.47
Mexico 1.29
Netherlands 4.73
United Kingdom 9.26
United States 76.26
----------
TOTAL INVESTMENTS 97.87%
==========
Additionally, the concentration of investments can be aggregated by
the quality rating for each debt security.
QUALITY DISTRIBUTION
- --------------------
AAA 26.70%
BBB 3.37
BB 9.76
B 48.83
CCC 5.12
CC 0.03
----------
TOTAL BONDS 93.81%
==========
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
NOTE A -
ORGANIZATION
John Hancock V.A. Financial Industries Fund ("V.A. Financial Industries
Fund"), John Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund"), John
Hancock V.A. International Fund ("V.A. International Fund"), John
Hancock V.A. Large Cap Growth Fund ("V.A. Large Cap Growth Fund"), John
Hancock V.A. Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund"), John
Hancock V.A. Regional Bank Fund ("V.A. Regional Bank Fund"), John
Hancock V.A. Small Cap Growth Fund ("V.A. Small Cap Growth Fund"), John
Hancock V.A. Core Equity Fund ("V.A. Core Equity Fund"), John Hancock
V.A. Large Cap Value Fund ("V.A. Large Cap Value Fund"), John Hancock
V.A. Sovereign Investors Fund ("V.A. Sovereign Investors Fund"), John
Hancock V.A. Bond Fund ("V.A. Bond Fund"), John Hancock V.A. High Yield
Bond Fund ("V.A. High Yield Bond Fund), John Hancock V.A. Money Market
Fund ("V.A. Money Market Fund") and John Hancock V.A. Strategic Income
Fund ("V.A. Strategic Income Fund") (each a "Fund," collectively, the
"Funds") are separate series of John Hancock Declaration Trust (the
"Trust"), an open-end management investment company, registered under
the Investment Company Act of 1940. Prior to May 1, 1999, V.A. Large Cap
Growth Fund was known as John Hancock V.A. Growth Fund, V.A. Mid Cap
Growth Fund was known as John Hancock V.A. Special Opportunities Fund,
V.A. Small Cap Growth Fund was known as John Hancock V.A. Emerging
Growth Fund, V.A. Core Equity Fund was known as John Hancock V.A.
Independence Equity Fund and V.A. Large Cap Value Fund was known as John
Hancock Growth and Income Fund. The Trust, organized as a Massachusetts
business trust in 1995, consists of fourteen different series at
December 31, 1999. Each Fund currently has one class of shares with
equal rights as to voting, redemption, dividends and liquidation within
its respective Fund. The Trustees may authorize the creation of
additional series from time to time to satisfy various investment
objectives. An insurance company issuing a Variable Contract that
participates in the Trust will vote shares of the Funds held by the
insurance company's separate accounts as required by law. In accordance
with current law and interpretations thereof, participating insurance
companies are required to request voting instructions from policy owners
and must vote shares of the Funds in proportion to the voting
instructions received.
The investment objective of the V.A. Financial Industries Fund is to
seek capital appreciation. The investment objective of the V.A. 500
Index Fund is to provide investment results that correspond to the total
return performance of the Standard & Poor's 500 Stock Price Index (the
"S&P 500 Index"). The investment objective of the V.A. International
Fund is to seek long-term growth of capital. The investment objective of
the V.A. Large Cap Growth Fund is to seek long-term capital
appreciation. The investment objective of the V.A. Mid Cap Growth Fund
is to seek long-term capital appreciation. The investment objective of
the V.A. Regional Bank Fund is to seek long-term capital appreciation.
The investment objective of the V.A. Small Cap Growth Fund is to seek
long-term capital appreciation. The investment objective of the V.A.
Core Equity Fund is to seek above-average total return, consisting of
capital appreciation and income. The investment objective of the V.A.
Large Cap Value Fund is to seek the highest total return (capital
appreciation plus current income) that is consistent with reasonable
safety of capital. The investment objective of the V.A. Sovereign
Investors Fund is to seek long-term growth of capital and income without
assuming undue market risks. The investment objective of the V.A. Bond
Fund is to seek a high level of current income consistent with prudent
investment risk. The investment objective of the V.A. High Yield Bond
Fund is to seek maximum current income without assuming undue risk. The
investment objective of the V.A. Money Market Fund is to seek maximum
current income consistent with capital preservation and liquidity. The
investment objective of the V.A. Strategic Income Fund is to seek a high
level of current income.
NOTE B -
ACCOUNTING POLICIES
VALUATION OF INVESTMENTS Securities in the Funds' portfolios (except
for the V.A. Money Market Fund) are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost, which approximates market value. All
portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign Currency Translation." The Funds may invest in indexed
securities whose value is linked either directly or inversely to changes
in foreign currencies, interest rates, indices or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
The V.A. Money Market Fund's portfolio of securities is valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company
Act of 1940, 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. Interest income on certain portfolio
securities such as negotiable bank certificates of deposit and interest-
bearing notes is accrued daily and included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in joint repurchase
agreement transactions. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Funds'
custodian bank receives delivery of the underlying securities for the
joint account on the Funds' behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to foreign
taxes and are accrued, as applicable.
FEDERAL INCOME TAXES The Funds' policies are to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies. They will not be subject to federal
income tax on taxable earnings which are distributed to shareholders.
For federal income tax purposes, net currency exchange gains and losses
from sales of foreign debt securities may be treated as ordinary income
even though such items are capital gains and losses for accounting
purposes.
For federal income tax purposes, the following Funds had capital loss
carryforwards available. To the extent such carryforwards are used by
the Funds, no capital gain distributions will be made. Capital loss
carryforwards in the amount of $4,130, which were acquired by the V.A.
Strategic Income Fund from the merger of the V.A. World Bond Fund on
March 26, 1999, may be limited in a given year.
Expired capital loss carryforwards are reclassified to capital paid-in,
in the year of expiration. Additionally, net capital losses attributable
to security transactions occurring after October 31, 1999 are treated as
arising on the first day (January 1, 2000) of the Funds' next taxable
year.
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS POST 10/31/1999
CARRYFORWARD CARRYFORWARD LOSS TREATED AS
FUND EXPIRING 12/31/2006 EXPIRING 12/31/2007 ARISING 1/1/2000
- ---- ------------------- ------------------- -------------------
<S> <C> <C> <C>
V.A. Financial Industries Fund $ -- $2,140,648 $2,011,448
V.A. 500 Index Fund -- -- 32,182
V.A. International Fund -- -- --
V.A. Large Cap Growth Fund -- -- --
V.A. Mid Cap Growth Fund -- -- 2,013
V.A. Regional Bank Fund -- -- 6,293
V.A. Small Cap Growth Fund -- -- --
V.A. Core Equity Fund -- -- --
V.A. Large Cap Value Fund -- -- 4,326
V.A. Sovereign Investors Fund 157,877 101,159 110,401
V.A. Bond Fund -- 67,593 29,471
V.A. High Yield Bond Fund 122,097 -- 1,954
V.A. Money Market Fund -- -- --
V.A. Strategic Income Fund 4,130 136,493 8,695
</TABLE>
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds are notified
of the dividend. Interest income on investment securities is recorded on
the accrual basis. Foreign income may be subject to foreign withholding
taxes, which are accrued as applicable.
The Funds record all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative size of the Funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Funds. Actual results
could differ from these estimates.
ORGANIZATION EXPENSES Any expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that commenced
with the investment operations of each applicable Fund.
BANK BORROWINGS The Funds (except V.A. Money Market Fund) are 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. Effective March 12, 1999, the Funds
entered into a syndicated line of credit agreement with various banks
that enable the Funds to participate with other funds managed by the
Adviser in an unsecured line of credit with banks which permit
borrowings up to $500 million, collectively. Interest is charged to each
fund, based on its borrowings. In addition, a commitment fee is charged
based on the average daily unused portion of the line of credit and is
allocated among the participating funds. The Funds had no borrowing
activity for the year ended December 31, 1999.
SECURITIES LENDING The Funds may lend their securities to certain
qualified brokers who pay the Funds negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Funds 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, 1999, the V.A.
International Fund loaned securities having a market value of
$324,508 collateralized by cash in the amount of $334,763,
which was invested in a short-term instrument and the V.A. Small
Cap Growth loaned securities having a market value of $177,384
collateralized by securities in the amount of $183,286.
FOREIGN CURRENCY TRANSLATION All assets and 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 Funds. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Funds do 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 gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
or losses arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end, resulting from
changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for the
V.A. Core Equity Fund, V.A. 500 Index Fund, V.A. Sovereign Investors
Fund and V.A. Money Market Fund) may enter into forward foreign currency
exchange contracts as a hedge against the effect of fluctuations in
currency exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the
contracts are marked to market daily at the applicable foreign currency
exchange rates. Any resulting unrealized gains and losses are included
in the determination of each Fund's daily net assets. The Funds record
realized gains and losses at the time the forward foreign currency
contract is closed out or offset by a matching contract. Risks may arise
upon entering these contracts from potential inability of counterparties
to meet the terms of the contract and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar. These
contracts involve market or credit risk in excess of the unrealized gain
or loss reflected in the Funds' Statements of Assets and Liabilities.
The Funds (except for the V.A. Core Equity Fund, V.A. 500 Index Fund,
V.A. Sovereign Investors Fund and V.A. Money Market Fund) may also
purchase and sell forward contracts to facilitate the settlement of
foreign currency denominated portfolio transactions, under which they
intend to take delivery of the foreign currency. Such contracts normally
involve no market risk if they are offset by the currency amount of the
underlying transaction.
Open forward foreign currency exchange contracts for the Trust at
December 31, 1999, were as follows:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ---------- ------------
V.A. INTERNATIONAL FUND
Sells
Euro Currency 61,336 JAN 00 ($205)
Indonesian Rupiah 56,338,800 JAN 00 (214)
Pound Sterling 3,556 JAN 00 (15)
Singapore Dollar 14,294 JAN 00 (13)
-------
($447)
=======
V.A. LARGE CAP VALUE FUND
Buys
Japanese Yen 3,697,363 MAR 00 ($453)
-------
Sells
Japanese Yen 828,898 JAN 00 $1
Japanese Yen 3,705,446 MAR 00 (447)
-------
($446)
=======
V.A. BOND FUND
Sells
Euro Currency 61,548 MAR 00 $913
-------
V.A. HIGH YIELD BOND FUND
Buys
Euro Currency 25,776 FEB 00 ($553)
Euro Currency 51,482 MAR 00 197
Pound Sterling 16,429 FEB 00 (171)
-------
($527)
=======
Sells
Canadian Dollar 14,283 MAR 00 ($296)
Euro Currency 142,181 JAN 00 10,744
Euro Currency 233,521 FEB 00 14,338
Euro Currency 211,767 MAR 00 6,626
Pound Sterling 15,125 JAN 00 620
Pound Sterling 80,154 FEB 00 2,410
-------
$34,442
=======
V.A. STRATEGIC INCOME FUND
Buys
Euro Currency 463,542 FEB 00 ($16,813)
Pound Sterling 232,073 FEB 00 (959)
-------
($17,772)
=======
Sells
Euro Currency 463,542 FEB 00 $30,482
Pound Sterling 301,031 JAN 00 12,459
Pound Sterling 719,540 FEB 00 15,511
Pound Sterling 865,614 MAR 00 707
-------
$59,159
=======
FINANCIAL FUTURES CONTRACTS The Funds (except V.A. Money Market Fund)
may buy and sell financial futures contracts to hedge against the
effects of fluctuations in interest rates, currency exchange rates and
other market conditions. Buying futures tends to increase the Funds'
exposure to the underlying instrument. Selling futures tends to decrease
the Funds' exposure to the underlying instrument or hedge other Funds'
instruments. At the time each 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,"
equal to a certain percentage of the value of the financial futures
contract being traded. Each day, the futures contract is valued at the
official settlement price on the board of trade or U.S. commodities
exchange on which it trades. Subsequent payments, known as "variation
margin," to and from the broker are made on a daily basis as the market
price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," will be recorded
by the Funds as unrealized gains or losses.
When the contracts are closed, the Funds recognize a gain or 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
contracts may not correlate with changes in the value of the underlying
securities. In addition, the Funds could be prevented from opening or
realizing the benefits of closing out futures positions because of
position limits or limits on daily price fluctuation imposed by an
exchange.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
Open financial futures contracts for the Trust at December 31, 1999 were
as follows:
OPEN UNREALIZED
EXPIRATION CONTRACTS POSITION APPRECIATION
- ---------- ----------------- ---------- ------------
V.A. 500 INDEX FUND
MAR 00 1 S&P 500 Long $9,156
=======
At December 31, 1999, the V.A. 500 Index Fund had deposited $18,750 in a
segregated account to cover margin requirements on open financial
futures contracts.
OPTIONS The Funds (except V.A. Money Market Fund) may purchase options
contracts. Listed options are valued at the last quoted sales price on
the exchange on which they are primarily traded. Over-the-counter
options are valued at the mean between the last bid and asked prices.
Upon the writing of a call or put option, an amount equal to the premium
received by the Fund will be included in the Statement of Assets and
Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked to market to reflect the current
market value of the written option.
The Funds may use option contracts to manage their exposure to
changing security prices. Writing puts and buying calls will tend to
increase the Funds' exposure to the underlying instrument and buying
puts and writing calls will tend to decrease the Funds' exposure to the
underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value will reflect the
maximum exposure of the Funds in these contracts, but the actual
exposure will be limited to the change in value of the contract over the
period the contract remains open.
Risks may also arise if counterparties do not perform under the
contract's terms ("credit risk"), or if the Funds are unable to offset a
contract with a counterparty on a timely basis ("liquidity risk").
Exchange-traded options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk in
highly unusual market conditions. To minimize credit and liquidity risks
in over-the-counter option contracts, the Funds will continuously
monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Funds'
Statements of Assets and Liabilities.
There were no written option transactions for the year ended
December 31, 1999, for the Funds.
NOTE C -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, each Fund pays a
monthly management fee to the Adviser, for a continuous investment
program equivalent, on an annual basis as follows:
FUND RATE
- ---- ----
V.A. Financial Industries Fund 0.80% of average daily net assets
V.A. 500 Index Fund 0.35% of average daily net assets
V.A. International Fund 0.90% of average daily net assets
V.A. Large Cap Growth Fund 0.75% of average daily net assets
V.A. Mid Cap Growth Fund 0.75% of average daily net assets
V.A. Regional Bank Fund 0.80% of average daily net assets
V.A. Small Cap Growth Fund 0.75% of average daily net assets
V.A. Core Equity Fund 0.70% of average daily net assets
V.A. Large Cap Value Fund 0.60% of average daily net assets
V.A. Sovereign Investors Fund 0.60% of average daily net assets
V.A. Bond Fund 0.50% of average daily net assets
V.A. High Yield Bond Fund 0.60% of average daily net assets
V.A. Money Market Fund 0.50% of average daily net assets
V.A. Strategic Income Fund 0.60% of average daily net assets
John Hancock Advisers International Limited ("JHAI") serves as the
sub-adviser to the V.A. International Fund pursuant to a subadvisory
agreement among the Fund, the Adviser and JHAI. JHAI was formed in 1987
and is a wholly owned subsidiary of the Adviser. JHAI provides
international investment research and advisory services to investment
companies and institutional clients. On December 1, 1999, the
shareholders of the V.A. International Fund approved a new subadvisory
contract between the Adviser and Indocam International Investments
Services ("IIIS"), effective January 1, 2000. Under the new contract,
IIIS will provide the V.A. International Fund with advice and
recommendations regarding the V.A. International Fund's investments. The
Adviser pays a portion of its advisory fee from the V.A. International
Fund to JHAI at the following rate: 70% of the advisory fee payable by
the Fund. Effective January 1, 2000, JHAI will voluntarily limit its
subadvisory fee to 0.05% of the V.A. International Fund's average daily
net assets. As of January 1, 2000, the Adviser will pay a portion of its
advisory fee from the V.A. International Fund to IIIS at the following
rate: 55% of the advisory fee payable by the Fund.
Independence Investment Associates, Inc. ("IIA") serves as the sub-
adviser to the V.A. Core Equity Fund pursuant to a separate subadvisory
agreement among the Fund, the Adviser, and IIA. IIA was organized in
1982 and is a wholly owned indirect subsidiary of John Hancock Mutual
Life Insurance Company ("JHMLICo"). IIA provides investment advice and
advisory services to investment companies and institutional accounts.
The Adviser pays a portion of its advisory fee from the V.A. Core Equity
Fund to IIA at the following rate: 55% of the advisory fee payable by
the Fund.
The V.A. 500 Index Fund has an agreement with Standard & Poor's
("S&P") to license certain trademarks and trade names of S&P and of the
S&P 500 Index, which is determined, composed and calculated by S&P
without regard to the Adviser or the V.A. 500 Index Fund. (Requisite
disclosure regarding the use of the Standard & Poor's name is included
in the Trust's prospectus.)
Effective February 10, 1997, the Adviser agreed to limit its management
fee on the V.A. 500 Index Fund to 0.10% of the Fund's average daily net
assets. The Adviser may terminate this limitation in the future.
Accordingly, for the year ended December 31, 1999, the reduction in the
Fund's management fee amounted to $81,532.
The Adviser has voluntarily agreed to limit each Fund's expenses,
excluding the management fee, to 0.25% of each Fund's average daily
net assets. Accordingly, the reductions in expenses for the year ended
December 31, 1999 were as follows:
FUND FEE REDUCTION
- ---- -------------
V.A. Financial Industries Fund $ --
V.A. 500 Index Fund 48,517
V.A. International Fund 100,697
V.A. Large Cap Growth Fund 3,265
V.A. Mid Cap Growth Fund 37,793
V.A. Regional Bank Fund --
V.A. Small Cap Growth Fund 41,006
V.A. Core Equity Fund --
V.A. Large Cap Value Fund --
V.A. Sovereign Investors Fund --
V.A. Bond Fund 30,015
V.A. High Yield Bond Fund 16,324
V.A. Money Market Fund --
V.A. Strategic Income Fund 3,603
The Adviser reserves the right to terminate this limitation in the
future.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
year was at an annual rate of less than 0.02% of the average net assets
of the Funds.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, Ms. Anne C. Hodsdon and Mr.
Richard S. Scipione are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Funds. The compensation of
unaffiliated Trustees is borne by the Funds. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The
Funds make investments into other John Hancock funds, as applicable, to
cover their liability for the deferred compensation. Investments to
cover the Funds' deferred compensation liability are recorded on the
Funds' books as an other asset. The deferred compensation liability and
the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses.
The Adviser and other subsidiaries of John Hancock Mutual Life
Insurance Company owned the following shares of beneficial interest of
the Funds as of December 31, 1999:
FUND SHARES OF BENEFICIAL INTEREST
- ---- -----------------------------
V.A. Financial Industries Fund --
V.A. 500 Index Fund --
V.A. International Fund 222,987
V.A. Large Cap Growth Fund 102,341
V.A. Mid Cap Growth Fund 50,071
V.A. Regional Bank Fund 51,995
V.A. Small Cap Growth Fund 102,547
V.A. Core Equity Fund --
V.A. Large Cap Value Fund 52,730
V.A. Sovereign Investors Fund --
V.A. Bond Fund 125,908
V.A. High Yield Bond Fund 244,286
V.A. Money Market Fund 115,864
V.A. Strategic Income Fund 494,232
NOTE D -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities for the Funds, excluding
short-term securities, during the year ended December 31, 1999, were
as follows:
FUND PURCHASES SALES
- ---- ----------- -----------
V.A. Financial Industries Fund $35,055,103 $39,313,221
V.A. 500 Index Fund 8,639,187 1,557,032
V.A. International Fund 8,290,079 8,550,835
V.A. Large Cap Growth Fund 35,732,659 27,006,559
V.A. Mid Cap Growth Fund 5,846,137 3,571,941
V.A. Regional Bank Fund 11,681,004 10,112,018
V.A. Small Cap Growth Fund 17,337,802 12,353,728
V.A. Core Equity Fund 39,763,490 27,129,812
V.A. Large Cap Value Fund 50,070,303 40,564,005
V.A. Sovereign Investors Fund
U.S. Government Securities 1,028,614 --
Other Investments 23,049,771 10,011,211
V.A. Bond Fund
U.S. Government Securities 13,663,565 15,822,068
Other Investments 20,375,274 17,054,453
V.A. High Yield Bond Fund
U.S. Government Securities -- --
Other Investments 11,454,414 10,379,553
V.A. Strategic Income Fund
U.S. Government Securities 2,313,135 564,387
Other Investments 14,112,484 9,328,560
At December 31, 1999, the cost (excluding the corporate savings
accounts) and gross unrealized appreciation and depreciation in value of
investments owned by the Funds, as computed on a federal income tax
basis, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
V.A. Financial Industries Fund $42,186,487 $ 7,910,868 $1,265,709 $ 6,645,159
V.A. 500 Index Fund 26,844,616 13,178,435 2,077,270 11,101,165
V.A. International Fund 6,912,226 2,497,690 227,249 2,270,441
V.A. Large Cap Growth Fund 18,022,997 4,863,409 892,093 3,971,316
V.A. Mid Cap Growth Fund 4,546,110 1,964,459 138,994 1,825,465
V.A. Regional Bank Fund 22,491,056 719,489 2,765,775 (2,046,286)
V.A. Small Cap Growth Fund 13,982,774 7,380,878 474,594 6,906,284
V.A. Core Equity Fund 37,305,600 9,392,353 1,866,215 7,526,138
V.A. Large Cap Value Fund 28,700,532 12,135,379 2,572,477 9,562,902
V.A. Sovereign Investors Fund 45,162,849 7,889,523 2,203,048 5,686,475
V.A. Bond Fund 13,033,378 17,079 625,388 (608,309)
V.A High Yield Bond Fund 10,214,169 309,385 1,492,925 (1,183,540)
V.A. Money Market Fund 32,453,203 -- -- --
V.A. Strategic Income Fund 22,715,781 456,741 1,364,821 (908,080)
</TABLE>
NOTE E -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended December 31, 1999, reclassifications have been
made in each Fund's capital accounts to report these balances on a tax
basis, excluding certain temporary differences, as of December 31, 1999.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Funds, are primarily attributable to differences in the treatment of
net operating losses, foreign currency gains and losses and return of
capital under federal tax rules versus generally accepted accounting
principles. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET
CAPITAL INVESTMENT REALIZED
FUND PAID-IN INCOME/(LOSS) GAIN/(LOSS)
- ---- --------- -------------- ------------
<S> <C> <C> <C>
V.A. Financial Industries Fund ($24,815) ($885) $25,700
V.A. 500 Index Fund (38) (12) 50
V.A. International Fund (11) 1,407 (1,396)
V.A. Large Cap Growth Fund (15) 40,855 (40,840)
V.A. Mid Cap Growth Fund (2) 6,426 (6,424)
V.A. Regional Bank Fund (29) (22) 51
V.A. Small Cap Growth Fund (11) 82,268 (82,257)
V.A. Core Equity Fund (40) 2,492 (2,452)
V.A. Large Cap Value Fund (82) 10,442 (10,360)
V.A. Sovereign Investors Fund (2,348) 2,314 34
V.A. Bond Fund (17) 21,484 (21,467)
V.A. High Yield Bond Fund 8,782 (1,000) (7,782)
V.A. Money Market Fund (30) 49 (19)
V.A. Strategic Income Fund (7,246) (38,225) 45,471
</TABLE>
NOTE F -
REORGANIZATION
On March 18, 1999, the shareholders of John Hancock V.A. World Bond Fund
(VAWBF) approved a plan of reorganization between VAWBF and V.A.
Strategic Income Fund, providing for the transfer of substantially all
of the assets and liabilities of VAWBF to V.A. Strategic Income Fund in
exchange solely for shares of V.A. Strategic Income Fund. The
acquisition of VAWBF was accounted for as a tax free exchange of 253,313
shares of V.A. Strategic Income for the net assets of VAWBF, which
amounted to $2,569,836, including $17,012 of unrealized depreciation,
after the close of business on March 26, 1999.
NOTE G -
SHAREHOLDER MEETING (UNAUDITED)
On December 1, 1999, the shareholders of John Hancock V.A. International
Fund approved a subadvisory contract between the Adviser and Indocam
International Investment Services (465,986 FOR, 81,973 AGAINST and
25,945 ABSTAINING).
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
To the Contract Owners and Trustees of
John Hancock Declaration Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of John Hancock Declaration
Trust (the Trust) (comprising, respectively, V.A. Financial Industries
Fund, V.A. 500 Index Fund, V.A. International Fund, V.A. Large Cap
Growth Fund (formerly, V.A. Growth Fund), V.A. Mid Cap Growth Fund
(formerly, V.A. Special Opportunities Fund), V.A. Regional Bank Fund,
V.A. Small Cap Growth Fund (formerly, V.A. Emerging Growth Fund), V.A.
Core Equity Fund (formerly, V.A. Independence Equity Fund), V.A. Large
Cap Value Fund (formerly, V.A. Growth and Income Fund), V.A. Sovereign
Investors Fund, V.A. Bond Fund, V.A. High Yield Bond Fund, V.A. Money
Market Fund and V.A. Strategic Income Fund) as of December 31, 1999, and
the related statements of operations for the year then ended, the
statements of changes in net assets 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios constituting the
John Hancock Declaration Trust at December 31, 1999, the results of
their operations for the year then ended, and the changes in their net
assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the
United States.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
TAX INFORMATION (UNAUDITED)
The Funds designated the following as long-term capital gain dividends
during the fiscal year ended December 31, 1999.
Additionally, the following dividend distributions qualify for the
dividends received deduction available to corporations.
FUND PURCHASES SALES
- ---- ----------- -------
V.A. Financial Industries Fund $ 25,360 99.96%
V.A. 500 Index Fund 126,055 85.42
V.A. International Fund 259,599 --
V.A. Large Cap Growth Fund 222,670 12.13
V.A. Mid Cap Growth Fund 5,407 --
V.A. Regional Bank Fund -- 84.35
V.A. Small Cap Growth Fund 441,478 --
V.A. Core Equity Fund 166,196 36.40
V.A. Large Cap Value Fund 494,597 2.78
V.A. Sovereign Investors Fund -- 89.11
V.A. Bond Fund -- --
V.A. High Yield Bond Fund -- 4.14
V.A. Money Market Fund -- --
V.A. Strategic Income Fund -- 1.54
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common stocks
held in the V.A. Sovereign Investors Fund as of December 31, 1999.
- -------------------------------------------------------------------------
PERCENT OF
COMPANY DIVIDEND INCREASE
- ------- -----------------
Abbott Laboratories 13.3%
AFLAC, Inc. 14.6
ALLTEL Corp. 5.1
American General Corp. 6.7
American Home Products Corp. 4.6
American International Group, Inc. 13.1
Automatic Data Processing, Inc. 24.5
Avery Dennison Corp. 13.8
Bank of America Corp. 16.4
Baxter International, Inc. 1.8
Bemis Co., Inc. 4.5
Bestfoods, Inc. 8.5
Bristol-Myers Squibb Co. 14.1
CenturyTel, Inc. 4.0
Chevron Corp. 1.6
Citigroup, Inc. 44.8
Dayton Hudson Corp. 21.2
Dover Corp. 10.0
DuPont (E.I.) De Nemours & Co. 2.2
Emerson Electric Co. 12.7
Exxon Mobil Corp. 1.8
Fannie Mae 12.5
First Tennessee National Corp. 15.3
Gannett Co., Inc. 5.1
General Electric Co. 16.8
Grainger (W.W.), Inc. 6.8
Hasbro, Inc. 14.3
Hewlett-Packard Co. 6.7
Home Depot, Inc. 37.5
Honeywell International, Inc. 13.3
Illinois Tool Works, Inc. 29.4
Interpublic Group of Companies, Inc. (The) 17.2
Johnson & Johnson 12.4
Johnson Controls, Inc. 12.0
Kimberly-Clark Corp. 4.0
Leggett & Platt, Inc. 12.5
Lowe's Cos., Inc. 8.3
Masco Corp. 4.5
McDonald's Corp. 11.1
McGraw-Hill Cos., Inc. 10.3
Merck & Co., Inc. 17.9
Minnesota Mining & Manufacturing Co. 1.8
Nucor Corp. 8.3
Pentair, Inc. 6.7
PepsiCo, Inc. 4.9
Philip Morris Cos., Inc. 9.5
Pitney Bowes, Inc. 13.3
Questar Corp. 3.1
ReliaStar Financial Corp. 12.7
RPM, Inc. 9.1
SBC Communications, Inc. 3.2
Schering-Plough Corp. 14.0
SunTrust Banks, Inc. 38.0
SYSCO Corp. 27.3
Warner-Lambert Co. 0.3
Wells Fargo Co. 12.9
----
The average dividend increase for this group was 12.4%
====
Historical Data (Unaudited)
The table below shows the record for the V.A. Sovereign Investors
Fund during the past periods.
- -----------------------------------------------------------------
PER SHARE
YEAR -----------------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- ------- ----------- ----------- ------ -------------
1996(1) 103,482 $0.07 $10.74 $0.02
1997 896,718 0.18 13.59 0.01
1998 2,188,296 0.25 15.61 --
1999 3,149,115 0.24 15.96 --
(1) For the period from commencement of operations on August 29, 1996 to
December 31, 1996.
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page. A box sectioned in quadrants with a triangle in upper left, a
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right. A tag line below reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-824-0335
This report is for the information of shareholders of the John Hancock
Declaration Trust. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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DEC0A 12/99
2/00
