THE WRIGHT ASSET ALLOCATION TRUST
ANNUAL REPORT
DECEMBER 31 , 1999
o Wright Managed Growth with Income Fund
<PAGE>
THE WRIGHT ASSET ALLOCATION TRUST
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The Wright Asset Allocation Trust was created to offer a variety of funds to
meet differing investment objectives. Each fund is a "fund of funds." This means
that a fund invests in other mutual funds managed by Wright Investors Service.
Only Wright Managed Growth with Income Fund is currently offered. This fund
seeks a high total return (consisting of price appreciation and high income)
with reduced risk.
The WRIGHT MANAGED GROWTH WITH INCOME FUND is a balanced fund investing its
assets in various Wright managed equity and income funds. Wright allocates the
fund's assets based on a fundamental analysis of the economy and investment
markets in the U.S. and foreign countries. Over the long-term, the fund expects
to have an asset mix of 65% equity (10% is international equity) and 35% fixed
income. This mix will vary over short-term periods as Wright follows a dynamic
process of monitoring the asset allocation model and making adjustments.
Purchases and sales of funds are made when necessary to adjust the asset
allocation model, when new investments become available to the fund, or when
necessary to accommodate redemption activity. The equity allocation may range
from 0 to 75% with up to 20% being international equities. The U.S. equities may
be allocated among large, medium and small companies. The fixed income
allocation may range from 25 to 100%. Fixed income funds selected could include
those investing in U.S. government issues, high quality corporate issues and
mortgage backed securities. Up to 50% of the fixed income allocation could be in
money market securities.
Likely candidates for investment include the following:
o Wright Major Blue Chip Equities Fund
o Wright Selected Blue Chip Equities Portfolio
o Wright International Blue Chip Equities Portfolio
o Wright Total Return Bond Fund
In addition, the fund's assets may be invested in U.S. Treasury bills and
similar money market securities.
Table of Contents
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Page
Investment Objectives ..................................inside front cover
Letter to Shareholders ...................................................1
Management Discussion ....................................................2
Dividend Distributions and Investment Return .............................4
Wright Managed Growth with Income Fund
Portfolio of Investments...........................................5
Financial Statements...............................................6
Notes to Financial Statements ............................................9
<PAGE>
LETTER TO SHAREHOLDERS
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February 2000
Dear Shareholders:
The early days of trading in 2000 were a chaotic introduction to the New Year.
The 30-year Treasury bond lost more than a point on January 3, the first trading
session of the year, while technology stocks gained 3%. Day two saw bonds
advance sharply and tech stocks drop almost 6%. On the third trading day, bonds
were down again, as were tech stocks, although the Dow staged a significant
rebound.
Apparently, what we said some months ago still pertains: "Market volatility is
likely to remain elevated so long as uncertainties about the direction of
interest rates persist." So far in 2000, investors have in fact continued to
worry about interest rates; the strictly upside volatility in stocks seen during
the fourth quarter of 1999 has been replaced by a two-sided volatility. As
everyone with any memory of historical stock market cycles knows, stocks don't
only go higher. And, while it may be obvious only in hindsight, there is more to
investing than buying last year's winners. In the market's favor going forward
in 2000 is the fact that, outside of the technology sector and select other
investor favorites, valuations in the broad market are quite reasonable.
Meanwhile, the economic backdrop remains mostly positive for financial assets.
The U.S. economy is about to begin its record tenth year of expansion, and while
some slowing is likely, growth should still be quite healthy. In Europe and most
of Asia, business is on the mend. Inflation may tick up modestly this year, but
markets are still quite competitive, continuing to constrain pricing power.
Nevertheless, corporate profits stand to rise in the neighborhood of 10% in the
coming year, as business relentlessly pursues productivity improvements.
The dreaded Y2K changeover has come and gone with little apparent effect on
global economies, corporate operations or securities markets. Billions of
dollars spent by corporations, governments and organizations to prepare for Y2K
averted any serious problems, the likelihood of which had probably been
exaggerated in any case. In Wright's own case, I'm happy to report that the
transition to Y2K was entirely uneventful. About the only Y2K-related thing left
to worry about is the billions in excess cash pumped into the financial system
by the Federal Reserve in the event of a run on the banks. Our view is that this
excess will be worked down gradually in order not to have a material effect on
the securities markets.
That said, the Federal Reserve increased interest rates in February, and it is
widely expected that the Fed will raise rates again at its March FOMC meeting,
an expectation that aggravated selling pressures in stocks and bonds early in
2000. While the interest rate outlook is the most problematic aspect of the year
2000 economic environment, we believe that the bulk of the rise in bond yields
is behind us. On the whole, we look forward to the opportunities and challenges
that lie ahead in 2000.
Once again, I call attention to our Internet site (www.wrightinvestors.com),
which continues to expand in value as a resource to investors. Please let us
know if there is any way that we can better serve your investment needs.
Sincerely,
/s/ Peter M. Donovan
Peter M. Donovan
President
<PAGE>
Management Discussion
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Following last summer's correction, global stock prices rebounded strongly in
the fourth quarter to close 1999 at record levels in most major markets. Global
economic conditions continued to firm over the final three months of 1999, led
by the U.S. economy, which completed its fourth straight year of 4% growth.
Corporate profit reports generally made for good reading, and inflation remained
subdued - although the U.S. economy's strong growth, along with improving
business overseas, caused the Federal Reserve to raise interest rates in
November before the Y2K changeover effectively put policy in a
liquidity-supplying mode. Despite higher interest rates, global stock markets
took on an increasingly confident tone as Y2K neared, and every one of the 29
largest national markets advanced in the fourth quarter.
Once again, the technology sector was the prime mover in the fourth quarter
market. Driven by a manic demand for tech stocks, the Nasdaq rose 48% in the
last three months of 1999, bringing its 1999 gain to 86%, the biggest annual
increase ever for a U.S. stock market index. Most stocks didn't fare as well as
Nasdaq in 1999. In fact, while tech stocks were soaring, the NYSE cumulative
advance/decline line hit a four-year low in December. Even Nasdaq saw 2,000 of
its 4,800 constituent stocks decline last year. Clearly, without the great
returns racked up by tech stocks this past year, the S&P 500 would not have been
able to earn its fifth straight yearly return in excess of 20%.
Wright expects that underlying economic conditions will remain favorable for
stocks in the New Year. According to the International Monetary Fund, the world
economy will grow 3.5% in 2000, with inflation staying under 2%. U.S. GDP growth
will probably slow from the 4% pace of the last three years, but growth
approaching 3.5% seems well within the economy's capabilities. Core consumer
prices may rise as much as 2.5% in the U.S. this year; even so, it would still
be the fourth lowest rate in three decades. The Federal Reserve worries that
tight labor markets will boost wages to the point that they can't be offset by
productivity gains, but there is little sign of this yet.
No doubt the steep rise in technology share prices - perhaps the real target of
the Fed's interest rate hikes - has perplexed the Fed, indeed, most of us. From
the Fed's point of view, there was a logical basis for tech stocks to surge 50%
in the six months following the start of Fed easing in September 1998. But how
does one explain the 40% price advance in the six months since the Fed began to
tighten at midyear 1999? So far at least, about the only people chastened by the
Fed's rate hikes have been bond investors and shareholders in companies in the
"old economy" (including many with something most e-businesses lack - profits).
The record highs in the DJIA and the S&P 500 have swelled consumer confidence to
30-year highs. But the wealth effect on economic growth is a two-edged sword.
Should tech stocks lead the rest of the market lower, then consumer spending may
be hard hit by falling confidence. Ironically, this is what the Fed is hoping to
avoid. But it may, in fact, be set on such a course.
Bond investors were a cautious lot in the fourth quarter of 1999 - in fact for
most of 1999. Bonds headed lower in the fourth quarter after a flat performance
- - their best of the year - in the third quarter. Yields on ten-year Treasury
bonds rose by 55 basis points over the October-December period and by 180 bp for
the year. Over the length of the yield curve, the increase averaged 48 bp for
the quarter and 155 for the year. In the fourth quarter, shorter maturities did
better than long, and agency, corporate and mortgage-backed issues outperformed
Treasuries. The Lehman Brothers Treasury Index lost 0.7% for the quarter while
the Lehman U.S. Aggregate index was down about 0.1%. For all of 1999, these
benchmarks declined 2.6% and 0.8%, respectively.
Despite evidence to the contrary, investors still appear to believe that solid
growth inevitably produces higher inflation. Outside of energy and stock prices,
U.S. inflation remained moderate in 1999, with consumer prices ex food and
energy up less than 2%, the lowest rate in more than 30 years. But investors
nevertheless held on to the "growth is bad" posture, which to some degree was
reinforced by the Fed's tightening of monetary policy in 1999. In reversing its
75 basis-point easing of late 1998, the Fed expressed concern that strong demand
and tight labor markets would eventually overcome the benefits of higher
productivity. In the fourth quarter particularly, bonds were also hurt as
investment funds flowed into technology stocks, which produced returns that made
the potential of bonds look dull by comparison.
So far in early 2000, bond prices have continued to move lower. Investors are
nervous about the prospect of more Fed tightening in the new year (although
since inflation is the enemy of bonds, they should, in fact, be encouraged that
the Fed is determined not to get behind the inflation curve). Today's bond
yields offer historically generous real returns in a range of 4.5%. But these
returns look puny compared to recent returns on equities, and bonds may not
start to behave better until equity investors become a little more cautious.
This may be in the cards for 2000; there have already been signs that investors
are not as unequivocally positive on tech stocks as they were in the fourth
quarter of 1999. WIS expects that long-term bond yields will move back under 6%
before the end of 2000.
<PAGE>
At December 31, 1999, six months after its inception, the Wright Managed Growth
with Income Fund (WGIF) held the following: Selected Blue Chip Portfolio
(16.9%), Major Blue Chip Portfolio (32.3%), International Blue Chip Portfolio
(10.5%), U.S. Treasury Portfolio (39.7%), and short-term investments (0.7%). The
following paragraphs discuss the result of major holdings for 1999, with
particular emphasis on the fourth quarter of 1999, the fund's first full quarter
of operations.
WRIGHT SELECTED BLUE CHIP EQUITIES FUND
The Wright Selected Blue Chip Equities Fund (WSBC) had a 9.4% return in the
fourth quarter, trailing the S&P 400 MidCap index's return of 17.2%. For all of
1999, the WSBC had a total return of 5.8%, as compared with 14.7% for the S&P
MidCaps. The portfolio's technology holdings, which amounted to 28% of the fund
at year-end 1999 (S&P 400 = 27%), performed well in absolute terms in the
quarter, but they lagged the even better results of the technology stocks held
in the S&P MidCap index. (Some benchmark tech stocks, such as Veritas Software,
Siebel Systems and Qlogic had returns of better than 125% for the quarter.)
Stock selection also hindered WSBC results in the consumer staples and capital
goods sectors during the fourth quarter, more than offsetting value added in
basic materials and energy stocks. The fund got positive contributions from
Gateway, Keane, Watson Pharmaceuticals, Synopsis and A.G. Edwards in the
quarter.
The stocks in the WSBC Fund had an average P/E multiple of 21.2 times last
12-month earnings, at December 31, significantly below S&P MidCap 400 27.4 P/E.
The latter includes quite a few companies with nominal or negative earnings.
Historical WSBC growth characteristics compare favorably with those of the S&P
MidCaps; the average rate of growth in cash earnings over the past five years
was 21% vs 15% for the S&P MidCaps. Looking ahead over the next five years, WSBC
earnings are estimated to grow at an 18% annual rate, slightly below the S&P
benchmark's 20% growth target.
WRIGHT MAJOR BLUE CHIP EQUITIES FUND
The Wright Major Blue Chip Equities Fund (WMBC) capped off a strong 1999 with a
12.5% return in the fourth quarter, a period of strongly rebounding stock
prices. While WMBC's fourth-quarter result trailed that of the S&P 500 by 240
basis points, the fund outperformed the S&P 500 benchmark by a 23.9% to 21.0%
margin for all of 1999.
In the fourth quarter, the WMBC Fund benefited from stock selection in the
technology sector, where it has a slightly below benchmark weight of 28% (vs 30%
for the S&P 500). Stocks in the consumer staples area were another source of
value added in the fourth quarter. Detracting from WMBC results was the laggard
action of some stocks in the capital goods and consumer cyclicals sectors. Among
the big contributors to results in the last quarter of 1999 were Oracle Systems,
Gateway 2000, EMC Corp. and Sun Microsystems and, among non-technology stocks,
Costco, Avery Dennison and American Express. Fourth-quarter performance was
hampered to some extent by holdings in TJX Cos., Pitney Bowes and Tyco
International, and by underweight positions in America Online and GE.
While the WMBC Fund has averaged slightly better value than the S&P 500 in the
past, it is managed as a Large Cap Blend portfolio (a blend of growth and
value). At December 31, 1999, its holdings averaged a P/E of 24.9 times 12-month
forward earnings, nominally above the S&P 500's 24.6 P/E.
WRIGHT INTERNATIONAL BLUE CHIP EQUITIES FUND
The Wright International Blue Chip Equities Fund (WIBC) earned 31.1% in the
fourth quarter of 1999, which was 17.6% ahead of the FT/S&P Actuaries World ex
US index. Over the 12 months of 1999, WIBC standard shares returned 35.1%, as
compared with 31.8% for the FTSE Actuaries World ex US index. Over the five
years through 1999, the WIBC Fund has returned an average of 2.1% of excess
return per year over the FTSE Actuaries World ex US index.
<PAGE>
The WIBC Fund was repositioned substantially during the fourth quarter of 1999.
The portfolio increased its position in Japan and reduced its weight in the
Netherlands. In addition, the fund divested its holdings in Austria, Belgium and
Norway. Industry allocation played an important part in the fund's
fourth-quarter performance. In keeping with the strategy formulated at the
beginning of the quarter, the fund reduced its holdings in basic industries,
consumer discretionary, industrials and utilities whereas it built positions in
telecommunications, technology, financials, health care and energy. A
performance attribution for the fourth-quarter excess returns shows that the
fund added value through its industry selection, its stock selection and also
through its country selection strategy. The countries that helped were Japan,
France, United Kingdom, Hong Kong and Italy. Relative to the benchmark, the fund
was hurt by its positions in Ireland and the Netherlands and its slight
overexposure to the Euro.
Going forward into 2000, the international markets are poised to provide
superior returns in U.S. dollars. While global GDP growth is being upwardly
revised, inflation expectations continue to remain benign. Corporate earnings in
Euroland are being upwardly revised as well and the Euro's weakness versus the
dollar is expected to reverse to some degree in 2000. Thus investors in Euroland
are expected to benefit with stock as well as currency appreciation. Japan, on
the other hand, continues to mend and corporate Japan is moving towards creating
profitability and shareholder value. Asia and Latin America are also expected to
continue to grow. While the first half of 2000 may experience some volatility,
the second half should reward international investors with decent returns.
WRIGHT U.S. TREASURY FUND
The Wright U.S. Treasury Fund (WUSTB), which holds U.S. Treasury issues
exclusively, lost 0.9% in the fourth quarter of 1999, compared to a loss of 0.8%
for the Lehman Brothers Treasury bond composite. For all of 1999, this fund lost
4.0% compared to a loss of 2.6% for the Lehman Treasury composite. In 1999,
short Treasury maturities did better than long Treasuries as interest rates rose
on average 155 basis points over the length of the yield curve. Over the last
five years, this fund has returned an average of 7.8% annually, compared to 7.4%
for the Lehman Treasury composite.
At the end of 1999, the WUSTB Fund had an average duration of 5.2 years and a
yield to maturity of 6.5%. Given the bond market's poor sentiment and ongoing
negative momentum, the fund's current duration is in line with the duration of
the Lehman Treasury composite benchmark. We anticipate lengthening our duration
target sometime over the next several months in light of our expectation that
bond yields will move lower later this year, resulting in higher returns for
intermediate and long-term bonds.
<TABLE>
<CAPTION>
Dividend Distributions and Investment Return
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N.A.V. Distri- Distri- Value 3 Month Cum.
Period Per bution bution Shares of $1,000 Invstmnt Invstmnt Invstmnt
Ending Share $ P/S in Shares Owned Investment Return Return Return
- ----------------------------------------------------------------------------------------------------------------------------------
WRIGHT MANAGED GROWTH WITH INCOME - ADVISORY SHARE (WGIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7/9/99 $10.00 100.00 $1,000.00
Jul.99 9.82 100.00 982.00 -1.80% - -1.80%
Aug.99 9.74 100.00 974.00 -2.60% - -2.60%
Sep.99 9.68 100.00 968.00 -3.20% -3.20% -3.20%
Oct.99 9.95 100.00 995.00 -0.50% 1.32% -0.50%
Nov.99 10.10 100.00 1,010.00 1.00% 3.70% 1.00%
Dec.99 10.19 0.225 0.122693 112.27 1,144.02 14.40% 18.18% 14.40%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WRIGHT MANAGED GROWTH WITH INCOME FUND (WGIF)
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PORTFOLIO OF INVESTMENTS - December 31, 1999
Shares Value
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INVESTMENT COMPANY SECURITIES - 99.2%
106,448 Selected Blue Chip Equities Portfolio - 16.9%...$ 1,067,678
201,413 Major Blue Chip Equities Fund -
Institutional shares - 32.3%................. 2,038,302
49,657 International Blue Chip Equities Portfolio - 10.4% 659,442
253,160 U.S. Treasury Portfolio - 39.6%................. 2,503,755
-----------
total investments (identified cost, $5,849,179) - 99.2%.....$ 6,269,177
OTHER ASSETS & LIABILITIES - 0.8%........................... 48,103
-----------
NET ASSETS - 100.0%.........................................$ 6,317,280
============
See notes to financial statements
<PAGE>
WRIGHT MANAGED GROWTH WITH INCOME FUND (WGIF)
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STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
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ASSETS:
Investments--
Identified cost...................... $ 5,849,179
Unrealized appreciation.............. 419,998
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Total value (Note 1A).............. $ 6,269,177
Cash................................... 44,076
Receivable for fund shares sold........ 16,681
Receivable from investment adviser..... 19,008
Deferred offering costs................ 19,510
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Total Assets......................... $ 6,368,452
------------
LIABILITIES:
Accrued expenses and other liabilities. $ 51,172
------------
NET ASSETS................................ $ 6,317,280
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NET ASSETS CONSIST OF:
Paid-in capital........................... $ 6,084,029
Accumulated net realized loss
on investments......................... (184,331)
Unrealized appreciation of investments.... 419,998
Distributions in excess of net investment
income................................. (2,416)
------------
Net assets applicable to outstanding shares $ 6,317,280
==============
Shares of beneficial interest outstanding
- Advisor shares................... 620,249
==============
Net asset value, offering price, and
redemption price per share of
beneficial interest................ $10.19
==============
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999(1)
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INVESTMENT INCOME:
Investment income from underlying funds $ 70,863
Interest income........................ 1,862
------------
Total investment income.............. $ 72,725
------------
Expenses--
Expenses from underlying funds......... $ 12,385
Investment adviser fee (Note 2)........ 4,802
Administration fee (Note 2)............ 480
Trustees' compensation................. 4,503
Transfer agent fee..................... 956
Distribution and service fee (Note 3).. 12,006
Custodian fee.......................... 20,882
Printing............................... 279
Legal fees............................. 146
Amortization of offering costs......... 23,490
Registration costs..................... 4,410
Miscellaneous.......................... 110
------------
Total expenses..................... $ 84,449
------------
Deduct--
Reduction of investment adviser fee (Note 2)$ 4,802
Reduction of distribution and service fee
(Note 3)............................. 12,006
Allocation of expenses to the
investment adviser (Note 2).......... 19,008
Reduction of custodian fee (Note 1C)... 943
------------
Total deductions................... $ 36,759
------------
Net expenses....................... $ 47,690
------------
Net investment income........... $ 25,035
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments
(identified cost).................... $ 802
Net realized loss from underlying funds
(identified cost).................... (206,072)
Capital gain distribution received from
underlying fund...................... 106,606
------------
Net realized loss on investments... $ (98,664)
------------
Unrealized appreciation of investments. $ 419,998
------------
Net realized and unrealized gain
on investments..................... $ 321,334
------------
Net increase in net assets from
operations........................ $ 346,369
=============
1 From the start of business, July 14, 1999 to December 31, 1999.
See notes to financial statements
<PAGE>
WRIGHT MANAGED GROWTH WITH INCOME FUND (WGIF)
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Year Ended December 31
STATEMENT OF CHANGES IN NET ASSETS 1999(1)
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INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income.................. $ 25,035
Net realized loss on investments....... (98,664)
Unrealized appreciation of investments 419,998
----------
Increase in net assets from operations $ 346,369
----------
Distributions declared to shareholders -
From net investment income............ $ (25,035)
In excess of net investment income.... (90,518)
From paid-in capital.................. (13,241)
----------
Total distributions................ $ (128,794)
----------
Net increase in net assets from fund
share transactions (Note 4).......... $ 6,099,705
----------
NET ASSETS:
At beginning of period................ $ -
----------
At end of period (including distributions
in excess of net investment income
of $2,416).......................... $ 6,317,280
===========
1 From the start of business, July 14, 1999 to December 31, 1999.
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
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From July 14, 1999
(start of business) to
WRIGHT MANAGED GROWTH WITH INCOME FUND (WGIF) December 31, 1999
- ------------------------------------------------------------------------------
Advisor Shares
Net asset value, beginning of year $ 10.000
---------
Income from investment operations:
Net investment income1 $ 0.058
Net realized and unrealized gain 0.357
---------
Total income from investment operations $ 0.415
---------
Less distributions declared to shareholders:
From net investment income $ (0.044)
In excess of net investment income (0.158)
From realized gain on investments -
From paid-in capital (0.023)
---------
Total distributions $ (0.225)
---------
Net asset value, end of period $ 10.190
===========
Total return(2) 14.40%
Ratios/Supplemental Data(1):
Net assets, end of period (000 omitted) $ 6,317
Ratio of expenses to average net assets 2.01%(3)
Ratio of expenses after custodian fee
reduction to average net assets(4) 1.97%(3)
Ratio of net investment income to average net assets 1.04%(3)
Portfolio turnover rate 18%
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1 During the period presented, the investment adviser and the principal
underwriter reduced their fees and the investment adviser was allocated a
portion of the operating expenses. Had such action not been undertaken, the
net investment loss per share and the ratios would have been as follows:
1999
Net investment loss per share $ (0.025)
===========
Annualized Ratios (as a percentage of average net assets):
Expenses 3.49%(3)
===========
Expenses after custodian fee reduction(4) 3.45%(3)
===========
Net investment loss (0.44%)(3)
===========
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2 Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
the period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the reinvestment date.
3 Annualized.
4 Custodian fees were reduced by credits resulting from cash balances the fund
maintained with the custodian (Note 1C). The computation of net expenses to
average daily net assets reported above is computed without consideration of
such credits.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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(1) SIGNIFICANT ACCOUNTING POLICIES
The Wright Managed Growth with Income Fund (the fund) (one of the series of The
Wright Asset Allocation Trust) is registered under the Investment Company Act of
1940, as amended, as a diversified, open-ended management investment company.
The fund invests, with certain percentage ranges, in underlying blue chip funds
(the underlying funds), for which Wright Investors Services (Wright) serves as
the investment adviser. The following is a summary of significant accounting
policies consistently followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Investment Valuations - Investments in the underlying funds are valued at
net asset value. Other portfolio securities are valued at the last current
sales price on the market where the security is normally traded. Securities
that cannot be valued at these closing prices are valued by Wright at fair
value in accordance with procedures adopted by the trustees. Short-term
obligations maturing in 60 days or less are valued at amortized cost, which
approximates market value.
B. Deferred Offering Costs - Offering costs are being deferred and will be
amortized on a straight line basis over a period not to exceed twelve
months, commencing on the effective date of the fund's initial offering of
its shares. The amount paid by the fund on any withdrawal by the holders of
the initial interests of any of the respective initial interests will be
reduced by a portion of any unamortized offering costs, determined by the
proportion of the amount of the initial interests withdrawn to the initial
interests then outstanding.
C. Expense Reduction - The fund has entered into an arrangement with its
custodian whereby interest earned on uninvested cash balances are used to
offset custodian fees. All significant reductions are reported as a
reduction of expenses in the Statement of Operations.
D. Federal Taxes - The fund's policy is to comply with the provisions of the
Internal Revenue Code (the Code) available to regulated investment
companies and to distribute to shareholders each year all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary.
E. Distributions - The fund requires that differences in the recognition or
classification of income between the financial statements and tax earnings
and profits which result only in temporary over-distributions for financial
statement purposes, are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions in
excess of tax basis earnings and profits are reported in the financial
statements as a return of capital. Permanent differences between book and
tax accounting for certain items may result in reclassification of these
items. During the period from the start of business, July 14, 1999 to
December 31, 1999, $2,435 was reclassified from paid-in capital, $85,667
was reclassified to accumulated net realized loss, and $88,102 was
reclassified to undistributed net investment income due to differences
between book and tax accounting created primarily by the deferral of
certain losses for tax purposes and character reclassifications between net
investment income and net realized capital gains.
<PAGE>
F. Multiple Classes of Shares of Beneficial Interest - The fund offers an
advisor share class. The fund may also offer an individual class, although
such class is not currently offered. The share classes differ in their
respective distribution and service fees. All shareholders bear the common
expenses of the fund pro rata based on the average daily net assets of each
class, without distinction between share classes. Dividends are declared
separately for each class. Each class has equal rights as to voting,
redemption, dividends and liquidation.
G. Other - Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income and distributions to
shareholders are recorded on the accrual basis. However, if the ex-dividend
date has passed, certain dividends from foreign securities are recorded as
the fund is informed of the ex-dividend date.
H. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The fund has engaged Wright Investors' Services (Wright) to perform
investment management, investment advisory, and other services. For its
services, Wright is compensated based upon a percentage of average daily net
assets. For the period from the start of business, July 14, 1999 to December 31,
1999, the effective annual rate was 0.20%. To enhance the net income of the
fund, Wright waived its entire investment adviser fee of $4,802. In addition,
$19,008 of expenses were allocated to the investment adviser.
The fund also has engaged Eaton Vance Management (Eaton Vance) to act as
administrator of the fund. Under the Administrator Agreement, Eaton Vance is
responsible for managing the business affairs of the fund and is compensated
based upon a percentage of average daily net assets. For the period from the
start of business, July 14, 1999 to December 31, 1999, the effective annual rate
was 0.02%. Certain of the Trustees and officers of the fund are Trustees or
officers of the above organizations, Except as to Trustees of the fund who are
not employees of Eaton Vance or Wright, Trustees and officers receive
remuneration for their services to the fund out of the fees paid to Eaton Vance
and Wright.
(3) DISTRIBUTION EXPENSES
The Trustees have adopted a Distribution Plan (the Plan) pursuant to Rule
12b-1 of the Investment Company Act of 1940. The Plan provides that the fund
will pay Wright Investors' Service Distributors, Inc. (Principal Underwriter)
(WISDI), a subsidiary of Wright Investors' Service, an annual rate of 0.25% per
annum of the fund's average net assets attributable to the advisor shares. To
enhance the net income of the fund, the Principal Underwriter waived its entire
distribution fee of $6,006.
<PAGE>
In addition, the Trustees have adopted a service plan (the Service Plan)
which allows the fund to reimburse WISDI for payments to intermediaries for
providing account administration and personal and account maintenance services
to their customers who are beneficial owners of shares. The amount of service
fee payable under the Service Plan with respect to each class of shares of the
fund may not exceed 0.25% annually of the average daily net assets attributable
to the respective classes. To enhance the net income of the fund, the Principal
Underwriter waived its entire service fee of $6,000.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in fund shares were as follow:
For the period from the start of business,
July 14, 1999 to December 31, 1999
Advisor Shares
Shares Amount
- -------------------------------------------------------------------------------
Sales................ 647,984 $ 6,394,147
Issued to shareholders in payment
of distributions declared........ 13,076 128,794
Redemptions........................ (40,811) (423,236)
-------- -----------
Net increase.................. 620,249 $ 6,099,705
========== =============
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than US Government securities and
short term obligations for the period from the start of business, July 14, 1999
to December 31, 1999, were $6,920,910 and $909,960, respectively.
(6) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation (depreciation) of the investment
securities owned at December 31, 1999, as computed on a federal income tax
basis, are as follows:
Aggregate cost.............................. $ 5,854,107
============
Gross unrealized appreciation............... $ 469,543
Gross unrealized depreciation............... (54,473)
-----------
Net unrealized appreciation................. $ 415,070
============
<PAGE>
(7) RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
The fund invests in underlying funds, certain of which invest in securities
issued by companies whose principal business activities are outside the Untied
States which may involve significant risks not present in domestic investments.
For example, there is generally less publicly available information about
foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the fund, political or financial instability or diplomatic and
other developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers (particularly
those located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In general, there is less overall
governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
Settlement of securities transactions in foreign countries may be delayed
and is generally less frequent than in the United States, which could affect the
liquidity of the fund's assets. The fund may be unable to sell securities where
the registration process is incomplete and may experience delays in receipt of
dividends.
(8). LINE OF CREDIT
The fund participates with other funds managed by Wright in a committed $20
million unsecured line of credit agreement with a bank. The fund may temporarily
borrow from the line of credit to satisfy redemption requests or settle
investment transactions. Interest is charged to each fund based on its
borrowings at an amount above the federal funds rate. In addition, a fee
computed at an annual rate of 0.10% on the average daily unused portion of the
$20 million line of credit is allocated among the participating funds at the end
of each quarter. The fund did not have significant borrowing or allocated fees
during the period from the start of business, July 14,1999, to December 31,
1999.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Trustees and Shareholders of
Wright Managed Growth with Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Wright Managed Growth with Income Fund (the
fund) (a separate series of The Wright Asset Allocation Trust) as of December
31, 1999, the related statements of operations and changes in net assets, and
financial highlights for the period from the start of business, July 14, 1999 to
December 31, 1999. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and supplementary data are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as December 31, 1999,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Wright Managed
Growth with Income Fund as of December 31, 1999, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated period from the start of business, July 14, 1999 to December 31, 1999 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 8, 2000
<PAGE>
Wright Investors' Service Distributors, Inc.
1000 Lafayette Boulevard, Bridgeport, CT 06604
ANNUAL REPORT
OFFICERS AND TRUSTEES OF THE FUNDS
Peter M. Donovan, President and Trustee
H. Day Brigham, Jr., Vice President , Secretary and Trustee
A. M. Moody III, Vice President and Trustee
Judith R. Corchard, Vice President and Trustee
Dorcas R. Hardy, Trustee
Leland Miles, Trustee
Lloyd F. Pierce, Trustee
Richard E. Taber, Trustee
Raymond Van Houtte, Trustee
James L. O'Connor, Treasurer
William J. Austin, Jr., Assistant Treasurer
ADMINISTRATOR
Eaton Vance Management
255 State Street
Boston, Massachusetts 02109
INVESTMENT ADVISER
Wright Investors' Service
1000 Lafayette Boulevard
Bridgeport, Connecticut 06604
PRINCIPAL UNDERWRITER
Wright Investors' Service Distributors, Inc.
1000 Lafayette Boulevard
Bridgeport, Connecticut 06604
(800) 888-9471
e-mail: [email protected]
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC Global Fund Services
Wright Managed Investment Funds
P.O. Box 5156
Westborough, Massachusetts 01581-9698
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116-5022
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of a mutual fund unless
accompanied or preceded by a fund's current prospectus.
