P R O S P E C T U S September 8, 1998
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Catholic Values Equity Investment Portfolio
A managed investment portfolio seeking long-term growth of capital and
reasonable current income
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a series of
The Wright Managed Blue Chip Series Trust
Catholic Values Equity Investment Portfolio (the "Portfolio"), a
diversified series of The Wright Managed Blue Chip Series Trust (the "Trust"),
is a funding vehicle for variable insurance contracts (the "Contracts") to be
offered by participating insurance companies. Shares of the Portfolio will be
offered exclusively to the separate accounts ("Accounts") of participating
insurance companies. The terms and conditions of the Contracts and any
limitations upon portfolios in which Accounts may invest are set forth in a
separate prospectus. The Portfolio reserves the right to limit in the future the
types of Accounts that may invest in Portfolio shares.
Participating insurance companies are the record holders and the owners of
each Portfolio share. Within the limitations set forth in the appropriate
Contract, Contractholders may direct through a participating insurance company
the allocation of amounts available for investment under their Contracts in the
Portfolio. Instructions for any such allocation, or the purchase or redemption
of the shares of the Portfolio, must be made by a participating insurance
company as the record holder of the Portfolio's shares. The rights of a
participating insurance company as the record holder and the owner of shares of
the Portfolio are different from the rights of a Contractholder. The term
"shareholder" in this Prospectus refers to a participating insurance company and
not to the Contractholder.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference.
A Statement of Additional Information dated September 8, 1998 for the
Portfolio has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. This Statement is available without charge
from Wright Investors' Service Distributors, Inc., 1000 Lafayette Boulevard,
Bridgeport, Connecticut 06604 (888-974-9471). In addition, the Securities and
Exchange Commission maintains a website (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference and
other information regarding the Portfolio.
Shares of the Portfolio are not deposits or obligations of, or endorsed or
guaranteed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Portfolio involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
Table of Contents
The Portfolio's Investment Objective and Policies........ 2
Other Investment Policies................................ 3
The Investment Adviser................................... 5
Investment Committee and Catholic Advisory Board......... 7
The Administrator........................................ 8
How the Portfolio Values its Shares...................... 9
How to Purchase and Redeem Shares........................ 9
Distribution and Taxation................................ 10
Performance Information.................................. 11
Other Information about the Trust........................ 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Portfolio's Investment Objective and Policies
The Portfolio's objective is long-term growth of capital and reasonable
current income. Reasonable current income means that amount of income that can
be achieved, consistent with the Portfolio's goal of long-term growth of
capital, from a predominantly equity portfolio.
The Portfolio will, through continuous supervision by Wright Investors'
Service, Inc. ("Wright" or the "Adviser") and the Catholic Advisory Board,
pursue its objective by investing in a broadly diversified portfolio consisting
primarily of equity securities of high-quality, well-established and profitable
U.S. and non-U.S. companies that offer products or services and undertake
activities that are consistent with the core teachings of the Catholic Church.
How Investments are Selected. Securities selected for the Portfolio are
drawn from investment lists prepared by Wright and known as The Approved Wright
Investment List (the "AWIL") and The International Approved Wright Investment
List (the "International AWIL"). Securities drawn from these Investment Lists
will be reviewed for compliance with the core teachings of the Catholic Church
by the Catholic Advisory Board, which is appointed by the Board of Trustees of
the Trust (the "trustees") and is made up of prominent lay members of the
Catholic Church.
The Approved Wright Investment Lists (AWIL and International AWIL). Wright
systematically reviews about 5,200 U.S. companies and about 12,500 non-U.S.
companies in The Worldscope(R) database which it developed. This review first
identifies those companies which, on the basis of at least five years of audited
records, meet the minimum standards of prudence (e.g., the value of the
company's assets and shareholders' equity exceeds certain minimum standards and
its operations have been profitable during the last three years) and thus are
suitable for consideration by fiduciary investors. Companies meeting these
requirements (about 2,300 companies) are considered by Wright to be suitable for
prudent investment. They may be large or small, may have their securities traded
on exchanges or over the counter and may include companies not currently paying
dividends on their shares.
These approximately 2,300 companies are then subjected to extensive
analysis and evaluation in order to identify those which meet Wright's 32
fundamental standards of Investment Quality. Only those companies which meet or
exceed all of these standards (a subset of the 2,300 companies considered
suitable for prudent investment) are eligible for selection by the Wright
Investment Committee for inclusion in the Investment Lists. See the Statement of
Additional Information for a more detailed description of Wright Quality Ratings
and the Investment Lists.
All companies on the Investment Lists are, in the opinion of Wright,
soundly financed with established records of earnings profitability and equity
growth. All have established investment acceptance and active, liquid markets
for their publicly owned shares. The companies on the Investment Lists will be
referred to in this prospectus as "Blue Chips."
The Catholic Advisory Board. The Catholic Advisory Board assures that the
Portfolio's investments are consistent with Catholic values. Each member of the
Board is involved in various Catholic organizations and activities and is in
contact with numerous Catholic institutions and Catholic clergy. Using the best
publicly available information obtainable by Wright, the Catholic Advisory Board
will identify those companies
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recommended by Wright whose products, services and/or activities are
substantially consistent with core Catholic Church teachings. In addition,
information received from shareholders, secondary materials, and general input
from interested sources is consistently reviewed and evaluated. The result is
continuous dialogue, continuous information input, continuous review, and thus
continuous evaluation. It is believed that independent thinking and independent
information support a portfolio that adheres to Catholic doctrine while
balancing changes in the market place, changes in informational input, and
changes in value systems. Thus, the Portfolio combines Catholic values with
investment values.
The Catholic Advisory Board will have sole discretion to determine which
companies meet the Portfolio's religious criteria. Wright will be solely
responsible for evaluating the investment merits of the Portfolio's holdings.
When a company is found not to be in compliance with core Catholic teachings,
Wright is asked to remove it from the Portfolio's holdings. This policy may
cause the Portfolio to dispose of a security at a time when it may be
disadvantageous from an investment viewpoint to do so.
Because the Portfolio will consider for investment only securities which
meet the Portfolio's investment and religious criteria, the return on securities
chosen may be lower than if the Portfolio considered only investment criteria
when selecting investments. However, Wright does not expect there to be a
material effect on the performance.
Primary Investments. The Portfolio will, under normal market conditions,
invest at least 80% of its net assets in equity securities of Blue Chip
companies, including common stocks, preferred stocks, warrants and securities
convertible into stock. As a matter of nonfundamental policy, it is expected
that the Portfolio will normally be fully invested in equity securities.
However, the Portfolio may invest up to 20% of its net assets in the short-term
debt securities described under "Defensive and Certain Short-Term Investments."
In addition, for temporary defensive purposes the Portfolio may hold cash or
invest more than 20% of its net assets in these short-term debt securities.
Other Investment Policies
Foreign Investments. The Portfolio may invest up to 30% of its total assets
in equity securities of foreign companies that are on the International AWIL and
that are traded on a securities market of the country in which the company is
located or other foreign securities exchanges. In addition, the Portfolio may
purchase securities in the form of American Depositary Receipts ("ADRs") or
similar securities representing interests in an underlying foreign security.
ADRs are not necessarily denominated in the same currency as the underlying
foreign securities. If an ADR is not sponsored by the issuer of the underlying
foreign security, the institution issuing the ADR may have reduced access to
information about the issuer.
Investments in foreign securities involve risks in addition to those
associated with investments in the securities of U.S. issuers. These risks
include less publicly available financial and other information about foreign
companies; less rigorous securities regulation; the potential imposition of
currency controls, foreign
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withholding and other taxes; and war, expropriation or other adverse
governmental actions. Foreign equity markets may be less liquid than United
States markets and may be subject to delays in the settlement of portfolio
transactions. Brokerage commissions and other transaction costs in foreign
markets tend to be higher than in the United States. The value of foreign
securities denominated in a foreign currency will vary in accordance with
changes in currency exchange rates, which can be volatile. In addition, the
prices of unsponsored ADRs may be more volatile than if they were sponsored by
the issuers of the underlying securities. These considerations generally are of
greater concern in developing countries.
Warrants and Convertible Securities. The Portfolio may invest up to 5% of
its net assets in warrants. Warrants acquired by the Portfolio will entitle it
to buy common stock at a specified price and time. The Portfolio may invest up
to 5% of its net assets in convertible securities. Convertible debt securities
and convertible preferred stock entitle the Portfolio to acquire the issuer's
stock by exchange or purchase at a predetermined rate.
Borrowing; Portfolio Securities Loans. The Portfolio may borrow for
temporary or emergency purposes in an amount up to one-third of the Portfolio's
total assets. The Portfolio may lend portfolio securities with a value up to 30%
of its total assets to enhance its income. Each loan must be fully
collateralized by cash or other liquid assets. The Portfolio may pay reasonable
fees in connection with securities loans. Wright will evaluate the
creditworthiness of prospective institutional borrowers and monitor the adequacy
of the collateral to reduce the risk of default by borrowers.
Diversification. The Portfolio is diversified and therefore may not, with
respect to 75% of its total assets, (1) invest more than 5% of its total assets
in the securities of any one issuer, other than U.S. Government securities, or
(2) acquire more than 10% of the outstanding voting securities of any one
issuer. The Portfolio will not concentrate (invest 25% or more of its total
assets) in the securities of issuers in any one industry.
Illiquid Securities. The Portfolio may purchase restricted securities,
including those eligible for resale to "qualified institutional buyers" pursuant
to Rule 144A under the Securities Act of 1933 (the "Securities Act") and
commercial paper sold in reliance on Section 4(2) of the Securities Act. The
trustees will monitor the Portfolio's investments in these securities, focusing
on certain factors, including valuation, liquidity and availability of
information. The trustees may adopt guidelines and delegate to Wright the daily
monitoring and determination of the liquidity of restricted securities.
Purchases of restricted securities, other than liquid Rule 144A securities and
Section 4(2) commercial paper, are subject to an investment restriction limiting
all the Portfolio's illiquid securities to not more than 15% of the Portfolio's
net assets. Illiquid securities include repurchase agreements maturing in more
than seven days, securities that are not readily marketable and restricted
securities.
Defensive and Certain Short-Term Investments. Under normal market
conditions up to 20% of the Portfolio's net assets or, during periods of unusual
market conditions, when Wright believes that investing for temporary defensive
purposes is appropriate, all or any portion of the Portfolio's assets may be
held in cash, money market instruments or other short-term obligations. These
include short-term obligations issued or guaranteed as to interest and principal
by the U.S. Government or any agency or instrumentality thereof (including
repurchase agreements collateralized by such securities); and U.S. dollar
denominated, high quality commercial paper, short-term corporate obligations,
other debt instruments, certificates of deposit, bankers' acceptances and time
deposits of domestic and foreign banks. The Portfolio may invest in instruments
and obligations of banks that have other relationships with the Fund, Wright or
Eaton Vance. No preference will be shown towards investing in banks which have
such relationships.
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The prices of fixed income securities vary inversely with interest rates.
Therefore, the value of the Portfolio's investments in convertible securities
and short-term obligations will decline when interest rates are rising. The
investment objective and, unless otherwise indicated, policies of the Portfolio
may be changed by the trustees without a vote of the Portfolio's shareholders.
The Portfolio is not a complete investment program and there is no assurance
that the Portfolio will achieve its investment objective. The market price of
securities held by the Portfolio and the net asset value of the Portfolio's
shares will fluctuate in response to stock market developments and currency
exchange rate fluctuations.
The Portfolio has adopted certain fundamental investment restrictions which
are enumerated in detail in the Statement of Additional Information. Fundamental
restrictions may only be changed by the vote of a majority of the Portfolio's
outstanding voting securities. All of the fund's other investment restrictions
and policies are nonfundamental and may be changed without shareholder approval
by the Trustees.
The Investment Adviser
The Portfolio has engaged Wright to act as its investment adviser pursuant
to its Investment Advisory Contract. Wright, acting under the general
supervision of the trustees, furnishes the Portfolio with investment advice and
management services. The trustees are responsible for the general oversight of
the conduct of the Portfolio's business. Wright is a wholly-owned subsidiary of
The Winthrop Corporation ("Winthrop"). The School for Ethical Education,1000
Lafayette Boulevard, Bridgeport, CT 06604, is a controlling shareholder of
Winthrop and Wright.
Wright is a leading independent international investment management and
advisory firm which, together with its parent, Winthrop, has more than 30 years
of experience. Its staff of over 125 people includes a highly respected team of
economists, investment experts and research analysts. Wright manages assets for
bank trust departments, corporations, unions, municipalities, eleemosynary
institutions, professional associations, institutional investors, fiduciary
organizations, family trusts and individuals as well as mutual funds. Wright
originated one of the world's largest and most complete databases,
Worldscope(R), with financial information on 17,700 domestic and international
corporations. At the end of 1997, Wright managed approximately $4 billion of
assets.
Under the Portfolio's Investment Advisory Contract, the Portfolio is
required to pay Wright a monthly advisory fee at the annual rates (as a
percentage of average daily net assets) set forth in the table below.
ANNUAL ADVISORY FEE RATES
Under $500 Million Over
$500 Million to $1 Billion $1 Billion
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0.75% 0.73% 0.68%
Wright has agreed not to impose a portion of its management fee and to make
other arrangements, if necessary, to limit other expenses of the Portfolio to
the extent required to reduce total operating expenses to 1.50% of average daily
net assets. This agreement is voluntary and temporary and may be revised or
terminated by Wright at any time with or without notice to shareholders.
Pursuant to the Investment Advisory Contract, Wright also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio.
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The Portfolio is responsible for the payment of all expenses relating to
its operations other than those expressly stated to be payable by Wright under
its Investment Advisory Contract.
Wright places the portfolio security transactions for the Portfolio, which
in some cases may be effected in block transactions which include other accounts
managed by Wright. Wright provides similar services directly for bank trust
departments and other advisory accounts. Wright seeks to execute the Portfolio's
security transactions on the most favorable terms and in the most effective
manner possible.
Wright is also the investment adviser to the other portfolios in the Trust;
certain of the funds in The Wright Managed Equity Trust and The Wright Managed
Income Trust; all the funds in The Wright EquiFund Equity Trust (collectively,
the "Wright Funds"); Catholic Values Investment Trust and the portfolios in The
Wright Blue Chip Master Portfolio Trust. Additional information may be obtained
from the website maintained by Wright (http://www.wrightinvestors.com).
Like most mutual funds, the Portfolio relies on computers in conducting
daily business and processing information. There is concern that on January 1,
2000 some computer programs will be unable to recognize the new year and as a
consequence computer malfunctions will occur. Wright and Eaton Vance Management
(Eaton Vance" or the "Administrator") are taking steps that they believe are
reasonably designed to address this potential problem and to obtain satisfactory
assurance from other service providers to the Portfolio that they are also
taking steps to address the issue. There can, however, be no assurance that
these steps will be sufficient to avoid any adverse impact on the Portfolio or
its shareholders.
Since May 1, 1997, Wright has been providing investment management services
to another mutual fund, Catholic Values Investment Trust Equity Fund ("CVIT
Fund"), whose investment objective, policies and strategies are substantially
similar to those of the Portfolio. No other account managed by the Adviser has
investment objectives, policies and strategies substantially similar to CVIT
Fund Performance of CVIT Fund is not that of the Portfolio, is not a substitute
for the Portfolio's performance and does not predict the Portfolio's
performance, which may be greater or less than that of CVIT Fund. For the
periods shown, the performance of CVIT Fund was as follows:
Catholic Values Investment Trust Equity Fund
One Life of
Year(1)(3)(4) CVIT Fund(2)(3)(4)
24.88% 20.86%
(1) From June 30, 1997
(2) From inception on May 1, 1997
(3) Performance of CVIT Fund has been adjusted to reflect estimated expenses
of the Portfolio. Performance of CVIT Fund has not been adjusted to reflect
voluntary reductions by the Adviser of the Portfolio's total operating
expenses to limit such expenses to 1.50% of average daily net assets. If
these reductions were reflected, performance of CVIT Fund would have been
21.90% and 22.32%, respectively, for one year and the life of the fund.
(4) Performance of CVIT Fund does not reflect any charges assessed against
insurance companies separate accounts or variable annuity products which
invest in the Portfolio. These charges would have the effect of lowering
performance.
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Investment Committee and Catholic Advisory Board
Investment Committee
An Investment Committee of eight officers of Wright, all of whom are
experienced analysts, exercises disciplined direction and control over all
purchases and sales of securities, policies and procedures for the Portfolio.
The members of the Investment Committee are as follows:
Peter M. Donovan, CFA, President and Chief Executive Officer of Wright. Mr.
Donovan received a BA Economics from Goddard College and joined Wright from
Jones, Kreeger & Co., Washington, D.C. in 1966. Mr. Donovan is the president of
The Wright Managed Income Trust, The Wright Managed Equity Trust, The Wright
Managed Blue Chip Series Trust, The Wright EquiFund Equity Trust, Catholic
Values Investment Trust and The Wright Blue Chip Master Portfolio Trust. He is
also director of Aetna Master Fund, a Luxembourg SICAV. He is a member of the
New York Society of Security Analysts and the Hartford Society of Financial
Analysts.
Judith R. Corchard, Chairman of the Investment Committee, Executive Vice
President - Investment Management of Wright. Ms. Corchard attended the
University of Connecticut and joined Wright in 1960. Ms. Corchard is also a
member of the New York Society of Security Analysts, the Hartford Society of
Financial Analysts, and AIMR. She is a vice president and trustee of The Wright
Managed Income Trust, The Wright Managed Equity Trust, The Wright Managed Blue
Chip Series Trust, The Wright EquiFund Equity Trust, Catholic Values Investment
Trust and The Wright Blue Chip Master Portfolio Trust.
Jatin J. Mehta, CFA, Chief Investment Officer - U.S. Equities of Wright.
Mr. Mehta received a BS Civil Engineering from University of Bombay, India and
an MBA from the University of Bridgeport. Before joining Wright in 1969, Mr.
Mehta was an executive of the Industrial Credit Investment Corporation of India,
a World Bank agency in India for financial assistance to private industry. He is
a member of the New York Society of Security Analysts and the Hartford Society
of Financial Analysts.
Harivadan K. Kapadia, CFA, Senior Vice President - Investment Analysis and
Information of Wright. Mr. Kapadia received a BA (hon.) Economics and Statistics
and MA Economics from University of Baroda, India and an MBA from the University
of Bridgeport. Before joining Wright in 1969, Mr. Kapadia was Assistant Lecturer
at the College of Engineering and Technology in Surat, India and Lecturer, at
the B.J. College of Commerce, VVNagar, India. He has published the textbooks:
"Elements of Statistics," "Statistics," "Descriptive Economics," and "Elements
of Economics." He was appointed Adjunct Professor at the Graduate School of
Business, Fairfield University in 1981. He is a member of the New York Society
of Security Analysts and the Hartford Society of Financial Analysts.
Michael F. Flament, CFA, Senior Vice President - Investment and Economic
Analysis of Wright. Mr. Flament received a BS Mathematics from Fairfield
University; an MA Mathematics from University of Massachusetts and an MBA
Finance from the University of Bridgeport and joined Wright in 1972. He is a
member of the New York Society of Security Analysts and the Hartford Society of
Financial Analysts.
James P. Fields, CFA, Senior Vice President and Investment Officer of
Wright. Mr. Fields received a BS Accounting from Fairfield University and an MBA
Finance from Pace University. He joined Wright in 1982 and is also a member of
the New York Society of Security Analysts.
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Amit S. Khandwala, Senior Vice President - International Investments of
Wright. Mr. Khandwala received a BS (Economics, Accounting, International
Business and Computers) from University of Bombay, India, and an MBA
(Investments, Corporate Finance, International Finance & International
Marketing) from the University of Hartford. Mr. Khandwala has taught in the
Executive MBA Program at the University of Hartford Business School and his
research on ADRs has been published in The Journal of Portfolio Management. He
was involved in establishing the Stamford Society of Securities Analysts and is
a member of the New York Society of Security Analysts and the Hartford Society
of Financial Analysts. He joined Wright in 1986.
Charles T. Simko, Jr.,CFA, Vice President - Investment Research of Wright.
Mr. Simko received a BS in Mathematics from Fairfield University. He joined
Wright in 1985.
Catholic Advisory Board
The Catholic Advisory Board consults with the Adviser in order to avoid
investing in the securities of any issuer whose products and/or activities are
inconsistent with core Catholic Church teachings. The members of the Catholic
Advisory Board are as follows:
Thomas P. Melady, Chairman, former U.S. Ambassador to Burundi, Uganda and
to the Holy See, President Emeritus of Sacred Heart University.
Margaret M. Heckler, Eight term Congresswoman from the Massachusetts 10th
District, former Secretary of the Department of Health and Human Services,
former Ambassador to Ireland.
Bowie K. Kuhn, former Commissioner of Baseball.
Timothy J. May, Senior Partner, Patton Boggs, L.L.P.
Thomas S. Monaghan, President, CEO and Chairman of the Board of Domino's
Pizza, Inc.
William A. Wilson, former (and first) U.S. Ambassador to the Holy See.
Although he is not in any way connected with the Portfolio, His Eminence
John Cardinal O'Connor is the Ecclesiastical Advisor to the Catholic Advisory
Board.
The Administrator
Eaton Vance serves as the Portfolio's administrator under an Administration
Agreement and is responsible for managing the legal and business affairs of the
Portfolio, subject to the supervision of the trustees. Eaton Vance's services
include recordkeeping, preparation and filing of documents required to comply
with federal and state securities laws, supervising the activities of the
Portfolio's custodian and transfer agent, providing assistance in connection
with the trustees' and shareholders' meetings and other administrative services
necessary to conduct the Portfolio's business. Eaton Vance will not provide any
investment management or advisory services to the Portfolio. For its services
under the Administration Agreement, Eaton Vance receives a
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monthly administration fee at the annual rates (as a percentage of average
daily net assets) set forth in the following table.
ANNUAL ADMINISTRATION FEE RATES
Under $100 Million Over $100 Million
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0.07% 0.04%
Eaton Vance, its affiliates and its predecessor companies have been
primarily engaged in managing assets of individuals and institutional clients
since 1924 and managing, administering and marketing mutual funds since 1931.
Total assets under management are approximately $25 billion. Eaton Vance is a
wholly-owned subsidiary of Eaton Vance Corp. ("EVC"), a publicly-held holding
company.
How the Portfolio Values its Shares
The Portfolio values its shares once on each day the New York Stock
Exchange ("NYSE") is open as of the close of regular trading on the NYSE
(normally 4:00 p.m. New York time). If the Exchange closes early, the time of
valuation is accelerated. The net asset value per share is determined by
Investors Bank & Trust Company ("IBT"), the Portfolio's custodian (as agent for
the Portfolio), with the assistance of Wright for securities that involve
valuation problems. Such determination is accomplished by dividing the number of
outstanding shares of the Portfolio into the value of the its net assets.
Securities listed on securities exchanges or in the NASDAQ National Market
are valued at closing sale prices. Unlisted or listed securities, for which
closing sale prices are not available, are valued at the mean between latest bid
and asked prices. The Portfolio values foreign securities on the basis of
quotations from the primary market in which they are traded, translated from the
local currency into U.S. dollars using current exchange rates. If quotations are
not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, the Portfolio values its assets
by a method that the trustees believe accurately reflects fair value. On any day
an international market is closed and the Exchange is open, the Portfolio will
value its foreign securities, if any, at the prior day's close with the current
day's exchange rate. Fixed income securities for which market quotations are
readily available are valued on the basis of valuations supplied by a pricing
service. Fixed income and equity securities for which market quotations are
unavailable, restricted securities, and other assets are valued at their fair
value as determined in good faith by or at the direction of the trustees.
How to Purchase and Redeem Shares
Shares of the Portfolio are not offered to the public but may be purchased
only by participating insurance companies for their Accounts allocable to
Contracts. Within the limitations set forth in the appropriate Contract,
Contractholders may direct a participating insurance company to purchase or
redeem shares of the Portfolio. Instructions for any such purchase or redemption
of shares must be made by a participating insurance company and Contractholders
should not direct instructions or inquiries to the Portfolio.
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Subject to the foregoing, the Portfolio sells its shares to participating
insurance companies without a sales charge at the net asset value per share next
determined after the purchase order is received. The Portfolio reserves the
right to reject any order for the purchase of its shares or to limit or suspend,
without notice, the offering of its shares.
Shares of the Portfolio may be redeemed on any day on which it is open for
business. The Portfolio redeems its shares at the net asset value per share next
determined after the redemption request is received from a participating
insurance company. Proceeds of any redemption are delivered to the participating
insurance company within seven days after receipt of the redemption request. The
right to redeem shares of the Portfolio and to receive payment therefor may be
suspended at times (a) when the securities markets are closed, other than
customary weekend and holiday closings, (b) when trading is restricted for any
reason, (c) when an emergency exists as a result of which disposal by the
Portfolio of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Portfolio fairly to determine the value of its
net assets, or (d) when the Securities and Exchange Commission by order permits
a suspension of the right of redemption or a postponement of the date of payment
or redemption.
Although the Portfolio normally intends to redeem shares in cash, it
reserves the right to redeem shares by distributing securities in kind if deemed
advisable by the trustees. The value of any portfolio securities distributed
upon redemption will be determined in the manner as described under "How the
Portfolio Values its Shares." If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur transaction costs upon the disposition
of any such securities.
Distributions and Taxation
The Portfolio is treated as a separate entity for federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the "Code"). The
Portfolio intends to qualify to be treated as a "regulated investment company"
for federal income tax purposes under the Code. In order to so qualify, the
Portfolio must meet certain requirements with respect to the sources of its
income, the diversification of its assets, and the distribution of its income to
shareholders. By so qualifying, the Portfolio will not be subject to federal
income taxes to the extent that its net investment income and net realized
capital gains are distributed to shareholders in accordance with applicable
timing requirements.
It is the intention of the Portfolio to distribute substantially all its
net investment income. Dividends from investment income are expected to be
declared annually. However, the trustees may decide to declare dividends at
other intervals. Dividends will be distributed in the form of additional full
and fractional shares of the Portfolio and not in cash, but shareholders may
redeem such shares for cash, as described above.
All net realized long- or short-term capital gains of the Portfolio after
reduction by capital losses, including any available capital loss carryforwards,
if any, will be declared and distributed at least annually either during or
after the close of the Portfolio's taxable year and will be reinvested in
additional full and fractional shares of the Portfolio. The Portfolio may be
subject to foreign withholding or other foreign taxes, with respect to income
(possibly including, in some cases, capital gains) derived from securities of
foreign issuers. U.S. income tax treaties with certain countries may eliminate
or reduce the rates of these taxes. The Portfolio intends to provide the
documentation necessary to achieve the lower treaty rate of withholding whenever
applicable or to seek a refund of amounts withheld in excess of the treaty rate.
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For a discussion of the tax treatment of Contractholders with respect to
their Contracts, including the tax treatment of investment earnings of and
withdrawals from the segregated accounts underlying such Contracts, reference
should be made to the prospectus for the Contracts accompanying this Prospectus.
Performance Information
From time to time, the Portfolio may publish its total return in
advertisements and communications to shareholders. The Portfolio's total return
is determined by computing the annual percentage change in value of $1,000
invested at net asset value for specified periods ending with the most recent
calendar quarter. This computation assumes the re-investment of all
distributions and complete redemption of the investment. The investment results
of the Portfolio will change over time, and the Portfolio's past performance is
not a prediction of future performance.
Other investments, indices, indicators of economic activity or averages of
mutual fund results may be cited or compared with the Portfolio's investment
results. Rankings or listings by magazines, newspapers, other periodicals or
independent statistical or rating services, such as Lipper Analytical Services,
Inc. and Morningstar, Inc., may also be referenced.
Other Information about the Trust
The Trust is an open-end management company established in April 1993 as a
business trust under Massachusetts law. The Portfolio, which is a series of the
Trust, was established in June 1998. The Trust's shares of beneficial interest
have no par value. Shares of the Trust may be issued in series or portfolios.
The Trust currently has three portfolios. Each portfolio's shares may be issued
in an unlimited number by the trustees. Each share of a portfolio represents an
equal proportionate beneficial interest in that portfolio and, when issued and
outstanding, the shares are fully paid and non-assessable by the Trust.
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted in proportion to the amount of the net asset value of a
portfolio which they represent. Voting rights are not cumulative, which means
that the holders of more than 50% of the shares voting for the election of
trustees can elect 100% of the trustees. Shares have no preemptive or conversion
rights and are freely transferable. Upon liquidation of a portfolio,
shareholders are entitled to share pro rata in the net assets of such portfolio.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing trustees unless and until such time as
less than a majority of the trustees holding office have been elected by
shareholders. In such an event, the trustees then in office will call a
shareholders' meeting for the election of trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the trustees will continue to hold office and may
appoint successor trustees.
The Trust's by-laws provide that no person shall serve as a trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
trustee and that the Trust is required to provide assistance in communicating
with shareholders about such a meeting.
<PAGE>
The rights, if any, of Contractholders to vote the shares of a portfolio
are governed by the relevant Contract. For information on such voting rights,
see the prospectus describing the Contracts.
Custodian and Transfer Agent. IBT, located at 200 Clarendon Street, Boston,
Massachusetts 02116, serves as the Portfolio's custodian and transfer agent.
Independent Auditors. Deloitte & Touche LLP, located at 125 Summer Street,
Boston, Massachusetts 02110, serves as the Portfolio's independent auditors.
<PAGE>
Statement of Additional Information
September 8, 1998
CATHOLIC VALUES EQUITY INVESTMENT PORTFOLIO
a series of
The Wright Managed Blue Chip Series Trust
24 Federal Street
Boston, Massachusetts 02110
Table of Contents
PAGE
- -------------------------------------------------------------------------------
Additional Information about the Trust................... 2
Additional Investment Information........................ 2
Investment Restrictions.................................. 4
Trustees, Officers and the Catholic Advisory Board....... 5
Control Persons and Principal Holders of Shares.......... 7
Investment Advisory and Administrative Services.......... 7
Custodian................................................ 8
Independent Certified Public Accountants................. 8
Brokerage Allocation..................................... 8
Pricing of Shares........................................ 9
Taxes.................................................... 9
Calculation of Performance and Yield Quotations.......... 11
Appendix................................................. 12
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by the
current Prospectus of The Wright Managed Blue Chip Series Trust (the "Trust")
offering shares of the Catholic Values Equity Investment Portfolio (the
"Portfolio"), dated September 8, 1998, as supplemented from time to time, which
is incorporated herein by reference. This Statement of Additional Information
should be read in conjunction with the Prospectus. A copy of the Prospectus may
be obtained without charge from Wright Investors' Service Distributors, Inc.,
1000 Lafayette Boulevard, Bridgeport, Connecticut 06604 (Telephone:
888-974-9471).
<PAGE>
Additional Information about the Trust
Unless otherwise defined herein, capitalized terms have the meaning given
them in the Prospectus.
The Trust's Declaration of Trust may be amended with the affirmative vote
of a majority of the outstanding shares of the Trust or, if only the interests
of the Portfolio are affected, a majority of the Portfolio's outstanding shares.
The trustees are authorized to make amendments to the Declaration of Trust that
do not have a material adverse effect on the interests of shareholders. The
Trust may be terminated (i) upon the sale of the Trust's assets to another
investment company, if approved by the holders of two-thirds of the outstanding
shares of the Trust, except that if the Trustees recommend such sale of assets,
the approval by the vote of a majority of the Trust's outstanding shares will be
sufficient, or (ii) upon liquidation and distribution of the assets of the
Trust, if approved by a majority of its Trustees or by the vote of a majority of
the Trust's outstanding shares. If not so terminated, the Trust may continue
indefinitely.
The Trust's Declaration of Trust further provides that the Trustees will
not be liable for errors of judgment or mistakes of fact or law; however,
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office.
The Trust is an organization of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. The Trust's Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Trust property or the
acts, obligations or affairs of the Trust. The Declaration of Trust also
provides for indemnification out of the Trust property of any shareholder held
personally liable for the claims and liabilities to which a shareholder may
become subject by reason of being or having been a shareholder. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations. The Trust has been advised by counsel that the risk of any
shareholder incurring any liability for the obligations of a Trust is extremely
remote. Wright does not consider this risk to be material.
Additional Investment Information
Description of Investments
U.S. Government, Agency and Instrumentality Securities - U.S. Government
securities in which the Portfolio may invest are short-term obligations issued
by the Treasury and include bills, certificates of indebtedness, notes, and
bonds. Agencies and instrumentalities of the U.S. Government are established
under the authority of an act of Congress and include, but are not limited to,
the Government National Mortgage Association ( "GNMA"), the Tennessee Valley
Authority, the Bank for Cooperatives, the Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks, and the
Federal National Mortgage Association ( "FNMA").
The Portfolio has no current intention of investing in securities issued by
GNMA or FNMA or in any other mortgage-backed securities.
Repurchase Agreements - The Portfolio may invest in repurchase agreements,
which involve purchase of U.S. Government securities. At the same time the
Portfolio purchases the security, it resells it to the vendor (a member bank of
the Federal Reserve System or recognized securities dealer that meets Wright
credit standards), and is obligated to redeliver the security to the vendor on
an agreed-upon date in the future. The resale price exceeds the purchase price
and reflects an agreed-upon market rate unrelated to the coupon rate on the
purchased security. Such transactions afford an opportunity for the Portfolio to
earn a return on cash which is only temporarily available. The Portfolio's risk
is the ability of the vendor to pay an agreed-upon sum upon the delivery date.
The Portfolio believes this risk is limited to the difference between the market
value of the security and the repurchase price provided for in the repurchase
agreement.
Repurchase agreements must be fully collateralized at all times. In the
event of a default or bankruptcy by a vendor under a repurchase agreement, the
Portfolio will seek to liquidate such collateral. However, the exercise of the
right to liquidate such collateral could involve certain costs, delays and
restrictions and is not ultimately assured. To the extent that proceeds from any
sale upon a default of the obligations to repurchase are less than the
repurchase price, the Portfolio could suffer a loss.
In all cases when entering into repurchase agreements with other than
FDIC-insured depository institutions, the Portfolio will take physical
possession of the underlying collateral security, or will receive written
confirmation of the purchase of the collateral security and a custodial or
safekeeping receipt from a third party under a written bailment for hire
contract, or will be the recorded owner of the collateral security through the
Federal Reserve Book-Entry System.
Short-Term Investments - The Portfolio may invest in the following types of
short-term obligations to the extent set forth in the Prospectus:
Certificates of Deposit - are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified rate of return,
and are normally negotiable.
<PAGE>
Bankers' Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short-term credit needs. Commercial paper acquired by the
Portfolio must, at the date of investment, be rated A-1 by Standard & Poor's
Ratings Group ( "S&P") or P-1 by Moody's Investors Service, Inc. ( "Moody's"),
or, if not rated by such rating organizations, be deemed by the trustees to be
of comparable quality.
Finance Company Paper - refers to promissory notes issued by finance
companies in order to finance their short-term credit needs. Finance company
paper must have the same ratings as commercial paper at the time of purchase.
See "Commercial Paper" above.
Corporate Obligations - include bonds and notes issued by corporations and
other entities in order to finance short-term credit needs. Corporate
obligations and other debt instruments in which the Portfolio may invest must,
at the date of investment, be rated AA or better by S&P or Aa or better by
Moody's or, if not rated by such rating organizations, be deemed by the trustees
to be of comparable quality.
"When Issued" Securities - Securities are frequently offered on a
"when-issued" basis. When so offered, the price, which is generally expressed in
terms of yield to maturity, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities may take place at
a later date. Normally, the settlement date occurs 15 to 90 days after the date
of the transaction. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. During the period between purchase and settlement, no
payment is made by the Portfolio to the issuer and no interest accrues to the
Portfolio. To the extent that assets of the Portfolio are held in cash pending
the settlement of a purchase of securities, the Portfolio would earn no income;
however, the Portfolio intends to be fully invested to the extent practicable
and subject to the policies stated above. While when-issued securities may be
sold prior to the settlement date, it is intended that such securities will be
purchased for the Portfolio with the purpose of actually acquiring them unless a
sale appears to be desirable for investment reasons.
At the time a commitment to purchase securities on a when-issued basis is
made for the Fund, the transaction will be recorded and the value of the
security reflected in determining the Portfolio's net asset value. The Portfolio
will establish a segregated account in which the Portfolio will maintain cash
and liquid securities equal in value to commitments for when-issued securities.
If the value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will at least equal the amount of the Portfolio's
when-issued commitments. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
Securities purchased on a when-issued basis and the securities held by the
Portfolio are subject to changes in value based upon the public's perception of
the creditworthiness of the issuer and changes in the level of interest rates.
(Thus, both positions will change in value in the same way, i.e., both
experiencing appreciation when interest rates decline and depreciation when
interest rates rise.) Therefore, to the extent that the Portfolio remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be greater fluctuations in the market value
of the Portfolio's net assets than if only cash were set aside to pay for
when-issued securities.
The Portfolio has no current intention of investing in when-issued
securities.
Illiquid and Restricted Securities - The Portfolio may purchase securities
that are not registered ( "restricted securities") under the Securities Act of
1933 ( "1933 Act"), including securities offered and sold to "qualified
institutional buyers"("QIB's") under Rule 144A under the 1933 Act. However, the
Portfolio will not invest more than 15% of its net assets in illiquid
investments, which include repurchase agreements maturing in more than seven
days, securities that are not readily marketable and restricted securities not
eligible for resale to QIB's. If the value of the Portfolio's illiquid
investments increased to more than 15% of net assets, Wright would begin
reducing these investments in an orderly manner to the extent necessary to
comply with the 15% limit. If the Board of Trustees determines, based upon a
continuing review of the trading markets for specific Rule 144A securities, that
they are liquid, then such securities may be purchased without regard to the 15%
limit. The trustees may adopt guidelines and delegate to Wright the daily
function of monitoring and determining the liquidity of restricted securities.
The trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The trustees will carefully monitor the
Portfolio's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information.
The Portfolio may acquire other restricted securities including securities
for which market quotations are not readily available. These securities may be
sold only in privately negotiated transactions or in public offerings with
respect to which a registration statement is in effect under the 1933 Act. Where
registration is required, the Portfolio may be obligated to pay all or part of
the registration expenses
<PAGE>
and a considerable period may elapse between the time of the decision to
sell and the time the Portfolio may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the Portfolio might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities will be priced at
fair market value as determined in good faith by the Trust's trustees. The
Portfolio does not currently intend to purchase restricted securities.
Lending Portfolio Securities - The Portfolio may seek to increase income by
lending portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Securities and Exchange Commission,
such loans are required to be secured continuously by collateral in cash or
liquid securities maintained on a current basis at an amount at least equal to
the market value of the securities loaned, which will be marked to market daily.
The Portfolio would have the right to call a loan and obtain the securities
loaned at any time on up to five business days' notice. The Portfolio would not
have the right to vote any securities having voting rights during the existence
of a loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or the giving or withholding of their
consent on a material matter affecting the investment. The Portfolio does not
currently intend to engage in securities loans.
Warrants and Convertible Securities - Warrants are subject to the same
market risks as stocks, but may be more volatile in price. The Portfolio's
investments in warrants will not entitle it to receive dividends or exercise
voting rights and will become worthless if the warrants cannot be profitably
exercised before their expiration dates. Convertible securities are subject both
to the credit and interest rate risks associated with debt obligations and to
the stock market risk associated with equity securities. Convertible debt
securities in which the Portfolio may invest must, at the date of investment, be
rated AA or better by S&P or Aa or better by Moody's or, if not rated by one of
these rating organizations, be deemed by Wright to be of comparable quality.
Interest Rate Risk - The market value of the U.S. Government securities,
short-term investments and convertible securities in which the Portfolio may
invest varies inversely with changes in the prevailing levels of interest rates.
For example, if interest rates rise after one of the foregoing securities has
been purchased, the value of the security would decline.
Short Sales - The Portfolio may engage in short sales in order to profit
from an anticipated decline in the value of a security. The Portfolio may also
engage in short sales to attempt to limit its exposure to a possible market
decline in the value of its portfolio securities through short sales of
securities which Wright believes possess volatility characteristics similar to
those being hedged. To effect such a transaction, the Portfolio must borrow the
security sold short to make delivery to the buyer. The Portfolio then is
obligated to replace the security borrowed by purchasing it at the market price
at the time of replacement. Until the security is replaced the Portfolio is
required to pay to the lender any accrued interest or dividends and may be
required to pay a premium. The Portfolio may only make short sales "against the
box," meaning that the Portfolio either owns the securities sold short or, by
virtue of its ownership of other securities, has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions.
The Portfolio has no current intention of engaging in short sales.
Financial Futures Contracts and Related Options - The Portfolio does not
currently intend to purchase or sell financial futures contracts or related
options.
Portfolio Turnover Rate - The Portfolio estimates that its portfolio
turnover rate will be approximately 22% per year.
Investment Restrictions
The following investment restrictions have been adopted by the Portfolio
and may be changed only by the vote of a majority of the Portfolio's outstanding
voting securities, which as used in this Statement of Additional Information
means the lesser of (a) 67% of the shares of the Portfolio if the holders of
more than 50% of the shares are present or represented at the meeting or (b)
more than 50% of the shares of the Portfolio. Accordingly, the Portfolio may
not:
(1) With respect to 75% of the total assets of the Fund, purchase the
securities of any issuer if such purchase at the time thereof would
cause more than 5% of its total assets (taken at market value) to be
invested in the securities of such issuer, or purchase securities of
any issuer if such purchase at the time thereof would cause more than
10% of the total voting securities of such issuer to be held by the
Fund, except obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and except securities of other
investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940. In addition, the Portfolio may not
issue bonds, debentures or senior equity securities, other than shares
of beneficial interest;
(3) Purchase securities on margin (but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities);
<PAGE>
(4) Underwrite or participate in the marketing of securities of others;
(5) Make an investment in any one industry if such investment would cause
investments in such industry to equal or exceed 25% of the Portfolio's
total assets, at market value at the time of such investment (other
than securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities);
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate;
(7) Purchase or sell commodities or commodity contracts for the purchase or
sale of physical commodities, except that the Portfolio may purchase
and sell financial futures contracts, options on financial futures
contracts and all types of currency contracts; or
(8) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments (b) entering into
repurchase agreements or (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Portfolio,
the Portfolio may invest its assets in an open-end management investment company
with substantially the same investment objective, policies and restrictions as
the Portfolio.
The Portfolio has adopted the following investment policy which may be
changed without approval by the Portfolio's shareholders. As a matter of
nonfundamental policy, the Portfolio will not invest more than 15% of net assets
in illiquid investments.
Except for the Portfolio's investment policy with respect to borrowing
money, if a percentage restriction contained in the Portfolio's investment
policies is adhered to at the time of investment, a later increase or decrease
in the percentage resulting from a change in the value of portfolio securities
or the Portfolio's net assets will not be considered a violation of such
restriction.
Trustees, Officers and the
Catholic Advisory Board
Trustees and Officers
The trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Those trustees who are "interested
persons" (as defined in the Investment company Act of 1940 (the 1940 Act)) of
the Trust, Wright, The Winthrop Corporation ( "Winthrop"), Eaton Vance, Eaton
Vance's wholly owned subsidiary, Boston Management and Research ("BMR"), Eaton
Vance's parent company, Eaton Vance Corp. ( "EVC"), or Eaton Vance's and BMR's
trustee, Eaton Vance, Inc. ( "EV") by virtue of their affiliation with either
the Trust, Wright, Winthrop, Eaton Vance, BMR, EVC or EV, are indicated by an
asterisk (*).
PETER M. DONOVAN (55), President and Trustee*
President, Chief Executive Officer and Director of Wright and Winthrop; Vice
President, Treasurer and a Director of Wright Investors' Service Distributors,
Inc.
Address: 1000 Lafayette Boulevard, Bridgeport, CT 06604
H. DAY BRIGHAM, JR. (71), Vice President, Secretary and Trustee*
Retired, Vice President, Chairman of the Management Committee and Chief Legal
Officer of Eaton Vance, BMR, EVC and EV and Director of EV and EVC; Director of
Wright and Winthrop since February, 1997.
Address: 92 Reservoir Avenue, Chestnut Hill, MA 02167
JUDITH R. CORCHARD (59), Vice President and Trustee*
Executive Vice President, Investment Management: Senior Investment Officer;
Chairman of the Investment Committee and Director of Wright and Winthrop. Ms.
Corchard was appointed a Trustee of the Trust on December 10, 1997.
Address: 1000 Lafayette Boulevard, Bridgeport, CT 06604
WINTHROP S. EMMET (87), Trustee
Retired New York City Attorney at Law; Trust Officer, First National City Bank,
New York, NY (1963-1971).
Address: Box 327, West Center Road, West Stockbridge, MA 01266
LELAND F. MILES (74), Trustee
President Emeritus, University of Bridgeport (1987-present); President,
University of Bridgeport (1974-1987); Director, United Illuminating Company.
Address: 332 North Cedar Road, Fairfield, CT 06430
A.M. MOODY, III (61), Vice President & Trustee*
Senior Vice President, Wright and Winthrop; President, Wright Investors'
Service Distributors, Inc.
Address: 1000 Lafayette Boulevard, Bridgeport, CT 06604
LLOYD F. PIERCE (79), Trustee
Retired Vice Chairman (prior to 1984 - President), People's Bank, Bridgeport,
CT; Member, Board of Trustees, People's Bank, Bridgeport, CT; Board of
Directors, Southern Connecticut Gas Company; Chairman, Board of Directors,
COSINE (a software company).
Address: 140 Snow Goose Court, Daytona Beach, FL 32119
<PAGE>
RICHARD E. TABER (49), Trustee
Chairman and Chief Executive Officer of First County Bank, Stamford, CT
(1989-present). Mr.Taber was appointed a Trustee of the Trust on March 18, 1997.
Address: 117 Prospect Street, Stamford, CT 06904
RAYMOND VAN HOUTTE (73), Trustee
President Emeritus and Counselor of The Tompkins County Trust Company,
Ithaca, NY (since January 1989); President and Chief Executive Officer, The
Tompkins County Trust Company (1973-1988); President, New York State Bankers
Association (1987-1988); Trustee Emeritus of The Paleonlogical Institution
(since May, 1995).
Address: One Strawberry Lane, Ithaca, NY 14850
JAMES L. O'CONNOR (53), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: 24 Federal Street, Boston, MA 02110
JANET E. SANDERS (62), Assistant Secretary and Assistant Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: 24 Federal Street, Boston, MA 02110
WILLIAM J. AUSTIN, JR. (46), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
Address: 24 Federal Street, Boston, MA 02110
A. JOHN MURPHY (35), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: 24 Federal Street, Boston, MA 02110
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993. Officer of
various investment companies managed by Eaton Vance or BMR.
Address: 24 Federal Street, Boston, MA 02110
All of the trustees and officers hold identical positions with The Wright
Managed Equity Trust, The Wright Managed Income Trust, The Wright EquiFund
Equity Trust, The Wright Blue Chip Master Portfolio Trust and Catholic Values
Investment Trust. Each trustee who is not an employee of Wright, Winthrop, Eaton
Vance, its parents or subsidiaries, including Mr. Brigham, receives annual
compensation from the Trust. The trustees who are employees of Wright receive no
compensation from the Trust. Non-affiliated trustees, including Mr. Brigham,
also receive additional payments from other investment companies for which
Wright provides investment advisory services. The Trust does not have a
retirement plan for the trustees. The Portfolio will not compensate the Trustees
for serving on the Board during the current fiscal year. See the "Compensation
Table" on the next page.
The Board of Trustees has established an Independent Trustees' Committee
consisting of all of the Independent Trustees, who are Messrs. Emmet, Miles,
Pierce (Chairman), Taber and Van Houtte. The responsibilities of the Independent
Trustees" Committee include those of an audit committee of the financial
governance of the Trust, a nominating committee for additional or replacement
trustees of the Trust and a contract review committee for consideration of
renewals or changes in the investment advisory agreements, distribution
agreements and distribution plans and other agreements as appropriate.
Catholic Advisory Board
The members of the Catholic Advisory Board and their principal occupations
during the past five years are set forth below. Each member of the Catholic
Advisory Board may be contacted at the following address: The Wright Managed
Blue Chip Series Trust, 24 Federal Street, Boston, Massachusetts 02110.
THOMAS P. MELADY (71), Chairman. Former U.S. Ambassador to Burundi
and to the Holy See, President Emeritus of Sacred Heart University, author
of 14 books and numerous articles.
MARGARET M. HECKLER (66), Eight term Congresswoman from the Massachusetts 10th
District, former Secretary of the Department of Health and Human Services,
former Ambassador to Ireland.
BOWIE K. KUHN (71), former Commissioner of Baseball.
TIMOTHY J. MAY (65), Senior Partner, Patton Boggs, L.L.P.
THOMAS S. MONAGHAN (61), President, CEO and Chairman of the Board of Domino's
Pizza, Inc.
WILLIAM A. WILSON (83), former (and first) U.S. Ambassador to the Holy See.
The members of the Catholic Advisory Board are paid by the Portfolio. The
Trust does not have a retirement plan for the Catholic Advisory Board members.
The Catholic Advisory Board members serve the Portfolio and Catholic Values
Investment Trust. The Portfoio will not compensate Catholic Advisory Board
members for serving during the current fiscal year. See the following
"Compensation Table."
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
Aggregate Pension or Estimated Annual Total
Compensation from Retirement Benefits Benefits Upon Compensation
Trustees the Portfolio(1) Accrued Retirement Paid(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Day Brigham, Jr. None None None $6,000
Winthrop S. Emmet None None None $7,000
Leland Miles None None None $6,250
Lloyd F. Pierce None None None $7,000
Richard E. Taber None None None $5,000
Raymond Van Houtte None None None $7,000
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) These compensation amounts are estimated for the Portfolio's fiscal year
ending December 31, 1998.
(2) Total compensation paid is for the year ended December 31, 1997 and includes service on the then-existing boards in the Wright
Portfolio complex (24 funds).
</FN>
</TABLE>
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Annual Total
Catholic Advisory Compensation from Retirement Benefits Benefits Upon Compensation
Board Members the Portfolio(1) Accrued Retirement Paid(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas P. Melady None None None $2,000
Margaret M. Heckler None None None $2,000
Bowie K. Kuhn None None None $2,000
Timothy J. May* None None None None
Thomas S. Monaghan None None None $2,000
William A. Wilson None None None $2,000
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) These compensation amounts are estimated for the Portfolio's fiscal year
ending December 31, 1998.
(2) Total compensation paid is for the year ended December 31, 1997 and includes service only on Catholic Values Investment Trust's
advisory board.
* Mr. May was appointed to the Catholic Advisory Board for Catholic Values Investment Trust on December 2, 1997.
</FN>
</TABLE>
Control Persons and
Principal Holders of Shares
As of the date of this Statement of Additional Information, all of the
outstanding shares of the Portfolio are owned by Wright.
Investment Advisory and
Administrative Services
The Portfolio has engaged Wright to act as the Portfolio's investment
adviser pursuant to an Investment Advisory Contract (the "Investment Advisory
Contract"). Wright, acting under the general supervision of the trustees,
furnishes the Portfolio with investment advice and management services, as
described below. The School For Ethical Education, 1000 Lafayette Boulevard,
Bridgeport, Connecticut 06604 may be considered a controlling person of Wright's
parent, Winthrop, and Wright by reason of its ownership of 25% of the
outstanding shares of Winthrop.
Pursuant to the Investment Advisory Contract, Wright will carry out the
investment and reinvestment of the assets of the Fund, will furnish continuously
an investment program with respect to the Fund, will determine which securities
should be purchased, sold or exchanged in consultation with the Catholic
Advisory Board, and will implement such determinations. Wright will be solely
responsible for evaluating the investment merits of the Portfolio's portfolio
investments. Wright will furnish to the Portfolio investment advice and
management services, office space, equipment and clerical personnel, and
investment advisory, statistical and research facilities. In addition, Wright
has arranged for certain members of the Eaton Vance and Wright organizations to
serve without salary as officers or trustees of the Trust. In return for these
services, the Portfolio is obligated to pay a monthly advisory fee calculated at
the rates set forth in the Portfolio's current Prospectus.
The Portfolio has engaged Eaton Vance to act as its administrator pursuant
to an Administration Agreement. For its services under the Administration
Agreement, Eaton Vance receives monthly administration fees at the annual rates
set forth in the Portfolio's current Prospectus.
<PAGE>
Eaton Vance and EV are both wholly owned subsidiaries of EVC. BMR is a
wholly owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR. The
Directors of EV are M. Dozier Gardner, James B. Hawkes and Benjamin A. Rowland,
Jr. The Directors of EVC consist of the same persons and John G. L. Cabot, John
M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. Mr. Hawkes is chairman,
president and chief executive officer and Mr. Gardner is vice chairman of EVC,
Eaton Vance, BMR and EV. All of the issued and outstanding shares of Eaton Vance
and of EV are owned by EVC. All of the issued and outstanding shares of BMR are
owned by Eaton Vance. All shares of the outstanding Voting Common Stock of EVC
are deposited in a Voting Trust, the Voting Trustees of which are Messrs.
Gardner, Hawkes and Rowland, and Alan R. Dynner, Thomas E. Faust, Jr., William
M. Steul, and Wharton P. Whitaker. The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting trust
receipts issued under said Voting Trust are owned by certain of the officers of
Eaton Vance and BMR who are also officers or officers and Directors of EVC and
EV. As of March 31, 1998, Messrs. Gardner and Hawkes each owned 24% of such
voting trust receipts, Messrs. Rowland and Faust owned 15% and 13%,
respectively, and Messrs. Dynner, Steul and Whitaker owned 8% of such voting
trust receipts. Messrs. Austin, Murphy, O'Connor and Woodbury and Ms. Sanders
are officers of the Trust and are also members of the Eaton Vance, BMR and EV
organizations. Eaton Vance will receive the fees paid under the Administration
Agreement.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management.
EVC, EV, Eaton Vance and BMR may also enter into other businesses.
The Portfolio will be responsible for all of its expenses not expressly
stated to be payable by Wright under its Investment Advisory Contract ,
including, without limitation, the fees and expenses of its custodian and
transfer agent, including those incurred for determining the Portfolio's net
asset value and keeping the Portfolio's books; the cost of share certificates;
membership dues to investment company organizations; brokerage commissions and
fees; fees and expenses of registering its shares; expenses of reports to
shareholders, proxy statements, and other expenses of shareholders' meetings;
insurance premiums; printing and mailing expenses; interest, taxes and corporate
fees; legal and accounting expenses; expenses of trustees not affiliated with
Eaton Vance or Wright; and investment advisory and administration fees. The
Portfolio will also bear expenses incurred in connection with litigation in
which the Portfolio is a party and the legal obligation the Portfolio may have
to indemnify the officers and trustees of the Trust with respect thereto.
The Portfolio's Investment Advisory Contract and Administration Agreement
will remain in effect until February 28, 2000. The Investment Advisory Contract
may be continued from year to year thereafter so long as such continuance after
February 28, 2000 is approved at least annually (i) by the vote of a majority of
the trustees who are not "interested persons" of the Trust, Eaton Vance or
Wright cast in person at a meeting specifically called for the purpose of voting
on such approval and (ii) by the board of trustees or by vote of a majority of
the outstanding shares of the Portfolio. The Portfolio's Administration
Agreement may be continued from year to year after February 28, 2000 so long as
such continuance is approved annually by the vote of a majority of the trustees.
Each agreement may be terminated at any time without penalty on sixty (60) days
written notice by the board of trustees or directors of either party, or by vote
of the majority of the outstanding shares of the Portfolio. Each agreement will
terminate automatically in the event of its assignment. Each agreement provides
that, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties to the Portfolio under such
agreement on the part of Eaton Vance or Wright, neither Eaton Vance nor Wright,
as the case may be, will be liable to the Portfolio for any loss incurred.
Custodian
IBT, 200 Clarendon Street, Boston, MA 02116, acts as custodian for the
Portfolio. IBT has the custody of all cash and securities of the Portfolio,
maintains the Portfolio's general ledgers and computes the daily net asset value
per share. In such capacity it attends to details in connection with the sale,
exchange, substitution, transfer or other dealings with the Portfolio's
investments, receives and disburses all Portfolios and performs various other
ministerial duties upon receipt of proper instructions from the Portfolio.
Independent Certified Public Accountants
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110-1617, is the
Trust's independent certified public accountant, providing audit services, tax
return preparation, and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission.
Brokerage Allocation
Wright places the portfolio security transactions for the Fund, which in
some cases may be effected in block
<PAGE>
transactions which include other accounts managed by Wright. Wright
provides similar services directly for bank trust departments and other
investment advisory accounts. Wright seeks to execute portfolio security
transactions on the most favorable terms and in the most effective manner
possible. In seeking best execution, Wright will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the markets for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, experience and financial condition of the
broker-dealer and the value and quality of service rendered by the broker-dealer
in other transactions, and the reasonableness of the brokerage commission or
markup, if any.
It is expected that on frequent occasions there will be many broker-dealer
firms which will meet the foregoing criteria for a particular transaction. In
selecting among such firms, Wright may give consideration to those firms which
supply brokerage and research services, quotations and statistical and other
information to Wright for its use in servicing its advisory accounts.Wright may
include firms which purchase investment services from Wright. The term
"brokerage and research services" includes advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). Such services and information may be useful
and of value to Wright in servicing all or less than all of its accounts and the
services and information furnished by a particular firm may not necessarily be
used in connection with the account which paid brokerage commissions to such
firm. The advisory fee paid by the Portfolio to Wright is not reduced as a
consequence of Wright's receipt of such services and information. While such
services and information are not expected to reduce Wright's normal research
activities and expenses, Wright would, through use of such services and
information, avoid the additional expenses which would be incurred if it should
attempt to develop comparable services and information through its own staff.
Under the Portfolio's Investment Advisory Contract, Wright has the
authority to pay commissions on portfolio transactions for brokerage and
research services exceeding that which other brokers or dealers might charge
provided certain conditions are met. This authority will not be exercised,
however, until the Prospectus or this Statement of Additional Information has
been supplemented or amended to disclose the conditions under which Wright
proposes to do so.
The Investment Advisory Contract expressly recognizes the practices which
are provided for in Section 28(e) of the Securities Exchange Act of 1934 by
authorizing the selection of a broker or dealer which charges the Portfolio a
commission which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if it is determined in
good faith that such commission was reasonable in relation to the value of the
brokerage and research services which have been provided.
Pricing of Shares
For a description of how the Portfolio values its shares, see "How the
Portfolio Values its Shares" in the Portfolio's current Prospectus. The
Portfolio values securities with a remaining maturity of 60 days or less by the
amortized cost method. The amortized cost method involves initially valuing a
security at its cost (or its fair market value on the sixty-first day prior to
maturity) and thereafter assuming a constant amortization to maturity of any
discount or premium, without regard to unrealized appreciation or depreciation
in the market value of the security.
The Portfolio values foreign securities, if any, on the basis of quotations
from the primary market in which they are traded. Any assets or liabilities
expressed in terms of foreign currencies are translated into U.S. dollars by the
custodian based on London currency exchange quotations as of 5:00 p.m., London
time (12:00 noon, New York time) on the date of any determination of the
Portfolio's net asset value.
The Portfolio will not price its securities on the following national
holidays: New Year's Day; Martin Luther King, Jr. Day; Presidents' Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.
<PAGE>
Taxes
In order to qualify as a regulated investment company as described in the
Prospectus, the Portfolio must, among other things, (1) derive at least 90% of
its gross income in each taxable year from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stocks
or securities or foreign currencies, or other income (including but not limited
to gains from options and forward contracts) derived with respect to its
business of investing in such stocks or securities and (2) diversify its
holdings in compliance with the diversification requirements of Subchapter M of
the Code so that, at the end of each quarter of the Portfolio's taxable year,
(a) at least 50% of the market value of the Portfolio's total assets is
represented by cash, U.S. Government securities and other securities limited in
respect of any one issuer to not more than 5% of the value of the Portfolio's
total (gross) assets and to not more than 10% of the voting securities of such
issuer, and (b) not more than 25% of the value of its total (gross) assets is
invested in securities of any one issuer (other than U.S. Government securities)
or certain other issuers controlled by the Portfolio.
As a regulated investment company, the Portfolio will not be subject to
federal income tax on net investment income and net capital gains (short- and
long-term), if any, that it distributes to its shareholders if at least 90% of
its investment company taxable income (i.e., all of its net taxable income other
than the excess, if any, of net long-term capital gain over net short-term
capital loss ("net capital gain"), for the taxable year is distributed in
accordance with applicable timing requirements, but will be subject to tax at
regular corporate rates on any investment company taxable income or net capital
gain that is not so distributed. In general, dividends will be treated as paid
when actually distributed, except that dividends declared in October, November
or December and made payable to shareholders of record in such a month will be
treated as having been received by shareholders on December 31, if the dividend
is paid in the following January. The Portfolio intends to satisfy the
distribution requirement in each taxable year. The Portfolio's distributions
from investment company taxable income and net capital gain are generally
treated as ordinary income and long-term capital gain, respectively, under the
Code. Insurance companies should consult their own tax advisers regarding the
tax rules governing their treatment upon receipt of these distributions and the
proceeds of share redemptions (including exchanges).
The Portfolio will not be subject to federal excise tax or the related
distribution requirements for any taxable year in which all of its shares are
held by segregated asset accounts of life insurance companies held in connection
with variable contracts or are attributable to certain "seed money" in
accordance with Section 4982(f) of the Code.
Investment by the Portfolio in the stock of a "passive foreign investment
company" may cause the Portfolio to recognize income prior to the receipt of
distributions from such a company or to become subject to tax upon the receipt
of certain excess distributions from, or upon disposition of its stock of, such
a company, although an election may generally be available that would ameliorate
some of these adverse tax consequences.
The Portfolio intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on the Portfolio by the 1940 Act and Subchapter M of the Code, place certain
limitations on the assets of each separate account and, because Section 817(h)
and those regulations treat the assets of the Portfolio as assets of the related
separate account, the assets of the Portfolio, that may be represented by any
one, two, three and four investments. Specifically, the regulations provide
that, except as permitted by the "safe harbor" described below, as of the end of
each calendar quarter or within 30 days thereafter no more than 55% of the total
assets of the Portfolio may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three investments and no
more than 90% by any four investments. For this purpose, all securities of the
same issuer are considered a single investment, and each U.S. Government agency
and instrumentality is considered a separate issuer. Section 817(h) provides, as
a safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are satisfied
and no more than 55% of the value of the account's total assets are cash and
cash items (including receivables), U.S. Government securities and securities of
other regulated investment companies. Failure by the Portfolio to both qualify
as a regulated investment company and satisfy the Section 817(h) requirements
would generally result in treatment of the variable contract holders other than
as described in the applicable variable contract prospectus, including inclusion
in ordinary income of income accrued under the contracts for the current and all
prior taxable years. Any such failure may also result in adverse tax
consequences for the insurance company issuing the contracts.
The Trust may therefore find it necessary to take action to seek to ensure
that a Contract continues to qualify as a Contract under federal tax laws,
although the insurance company that maintains each segregated asset account is
responsible for ensuring that the assets held in that account satisfy the
diversification requirements of Section 817(h) of the Code and the applicable
regulations and the Trust itself can control only the assets held within the
Portfolio. The Trust, for example, may be required to alter the investment
objectives of the Portfolio or substitute the shares of one portfolio for those
of another. No such change of investment
<PAGE>
objectives or substitution of securities will take place without notice to
the shareholders of the affected portfolio. Failure by the Portfolio to qualify
as a regulated investment company would also subject the Portfolio to federal
and possibly state taxation of its income and gains, whether or not distributed
to shareholders, and distributions would generally be treated as ordinary income
to the extent of the Portfolio's current or accumulated earnings and profits.
The Portfolio is not subject to Massachusetts corporate excise or franchise
tax. Provided that the Portfolio qualifies as a regulated investment company
under the Code, it will also not be required to pay any Massachusetts income
tax.
Calculation of Performance
and Yield Quotations
The average annual total return of the Portfolio is determined for a
particular period by calculating the actual dollar amount of investment return
on a $1,000 investment in the Portfolio made at the maximum public offering
price (i.e. net asset value) at the beginning of the period, and then
calculating the annual compounded rate of return which would produce that
amount. Total return for a period of one year is equal to the actual return of
the Portfolio during that period. This calculation assumes that all dividends
and distributions are reinvested at net asset value on the reinvestment dates
during the period.
The yield of the Portfolio is computed by dividing its net investment
income per share earned during a recent 30-day period by the maximum offering
price (i.e. net asset value) per share on the last day of the period and
analyzing the resulting figure. Net investment income per share is equal to the
Portfolio's dividends and interest earned during the period, with the resulting
number being divided by the average daily number of shares outstanding and
entitled to receive dividends during the period.
The Portfolio's yield is calculated according to the following formula:
6
Yield = 2 [( a-b + 1) - 1]
---
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (after reductions).
c = the average daily number of shares outstanding during the period.
d = the net asset value per share on the last day of the period.
Yield and effective yield will be based on historical earnings and are not
intended to indicate future performance. Yield and effective yield will vary
based on changes in market conditions and the level of expenses. The Portfolio's
yield or total return may be compared to the Consumer Price Index and various
domestic securities indices. The Portfolio's yield or total return and
comparisons with these indices may be used in advertisements and in information
furnished to present or prospective shareholders.
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Portfolio may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. In addition, the performance of the
Portfolio may be compared to alternative investment or savings vehicles and/or
to indexes or indicators of economic activity, e.g., inflation or interest
rates. Performance rankings and listings reported in newspapers or national
business and financial publications, such as Barron's, Business Week, Consumers
Digest, Consumer Reports, Financial World, Forbes, Fortune, Investors Business
Daily, Kiplinger's Personal Finance Magazine, Money Magazine, New York Times,
Smart Money, USA Today, U.S. News and World Report, The Wall Street Journal and
Worth may also be cited (if the Portfolio is listed in any such publication) or
used for comparison, as well as performance listings and rankings from various
other sources including Bloomberg Financial Markets, CDA/Wiesenberger,
Donoghue's Mutual Fund Almanac, Investment Company Data, Inc., Johnson's Charts,
Kanon Bloch Carre and Co., Lipper Analytical Services, Inc., Micropal, Inc.,
Morningstar, Inc., Schabacker Investment Management and Towers Data Systems,
Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements, in sales
literature, or in reports to shareholders of the Portfolio. The performance of
the Portfolio will not be presented in advertisements or sales literature
without also preseneting the performance of the separate account.
<PAGE>
APPENDIX
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Wright Quality Ratings
Wright Quality Ratings provide the means by which the fundamental criteria
for the measurement of quality of an issuer's securities can be objectively
evaluated.
Each rating is based on 32 individual measures of quality grouped into four
components: (1) Investment Acceptance, (2) Financial Strength, (3) Profitability
and Stability, and (4) Growth. The total rating is three letters and a numeral.
The three letters measure (1) Investment Acceptance, (2) Financial Strength, and
(3) Profitability and Stability. Each letter reflects a composite measurement of
eight individual standards which are summarized as A: Outstanding, B: Excellent,
C: Good, D: Fair, L: Limited, and N: Not Rated. The numeral rating reflects
Growth and is a composite of eight individual standards ranging from 0 to 20.
Equity Securities
Investment Acceptance reflects the acceptability of a security by and its
marketability among investors, and the adequacy of the floating supply of its
common shares for the investment of substantial funds.
Financial Strength represents the amount, adequacy and liquidity of the
corporation's resources in relation to current and potential requirements. Its
principal components are aggregate equity and total capital, the ratio of
invested equity capital to debt, the adequacy of net working capital, its fixed
charges coverage ratio and other appropriate criteria.
Profitability and Stability measures the record of a corporation's
management in terms of (1) the rate and consistency of the net return on
shareholders' equity capital investment at corporate book value, and (2) the
profits or losses of the corporation during generally adverse economic periods,
including its ability to withstand adverse financial developments.
Growth per common share of the corporation's equity capital, earnings, and
dividends - rather than the corporation's overall growth of dollar sales and
income.
These ratings are determined by specific quantitative formulae. A
distinguishing characteristic of these ratings is that The Wright Investment
Committee must review and accept each rating. The Committee may reduce a
computed rating of any company, but may not increase it.
Debt Securities
Wright ratings for commercial paper, corporate bonds and bank certificates
of deposit consist of the two central positions of the four position
alphanumeric corporate equity rating. The two central positions represent those
factors which are most applicable to fixed income and reserve investments. The
first, Financial Strength, represents the amount, the adequacy and the liquidity
of the corporation's resources in relation to current and potential
requirements. Its principal components are aggregate equity and total capital,
the ratios of (a) invested equity capital, and (b) long-term debt, total of
corporate capital, the adequacy of net working capital, fixed charges coverage
ratio and other appropriate criteria. The second letter represents Profitability
and Stability and measures the record of a corporation's management in terms of:
(a) the rate and consistency of the net return on shareholders' equity capital
investment at corporate book value, and (b) the profits and losses of the
corporation during generally adverse economic periods, and its ability to
withstand adverse financial developments.
The first letter rating of the Wright four-part alphanumeric corporate
rating is not included in the ratings of fixed-income securities since it
primarily reflects the adequacy of the floating supply of the company's common
shares for the investment of substantial funds. The numeric growth rating is not
included because this element is identified only with equity investments.
A-1 and P-1 Commercial Paper Ratings
by S&P and Moody's
An S&P Commercial Paper Rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
`A': Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety. The
`A-1' designation indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to S&P by the
issuer or obtained from other sources it considers reliable. The ratings may be
changed, suspended or withdrawn as a result of changes in or unavailability of
such information.
Issuers (or related supporting institutions) rated P-1 by
<PAGE>
Moody's have a superior capacity for repayment of short-term promissory
obligations. P-1 repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Bond Ratings
In addition to Wright quality ratings, bonds or bond insurers may be
expected to have credit risk ratings assigned by the two major rating companies,
Moody's and S&P. Moody's uses a nine-symbol system with Aaa being the highest
rating and C the lowest. S&P uses a 10-symbol system that ranges from AAA to D.
Bonds within the top four categories of Moody's (Aaa, Aa, A and Baa) and of S&P
(AAA, AA, A and BBB) are considered to be of investment-grade quality. Note that
both S&P and Moody's currently give their highest rating to issuers insured by
the American Municipal Bond Assurance Corporation (AMBAC) or by the Municipal
Bond Investors Assurance Corporation (MBIA).
Bonds rated A by S&P have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher-rated categories. The
rating of AA is accorded to issues where the capacity to pay principal and
interest is very strong and they differ from AAA issues only in small degree.
The AAA rating indicates an extremely strong capacity to pay principal and
interest.
Bonds rated A by Moody's are judged by Moody's to possess many favorable
investment attributes and are considered as upper medium grade obligations.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater degree or there may be other elements present which make the long-term
risks appear somewhat larger. Bonds rated Aaa by Moody's are judged to be of the
best quality. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issuers.
Note Ratings
In addition to Wright quality ratings, municipal notes and other short-term
loans may be assigned ratings by Moody's or S&P.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample although
not so large as in the preceding group.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. the designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics.
An "SP-2" designation indicates a satisfactory capacity to pay principal and
interest.
