<PAGE>
N-30D Table of Contents
Seven Seas Series Fund Name N-30D page
- --------------------------- ----------
Money Market and US Government Money Market Funds. . . . . . . . 2 - 28
Short Term Government Securities Fund. . . . . . . . . . . . . . 29 - 37
Matrix Equity Fund . . . . . . . . . . . . . . . . . . . . . . . 38 - 56
S&P 500 Index Fund . . . . . . . . . . . . . . . . . . . . . . . 57 - 82
Small Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . . 83 - 103
Active International Fund. . . . . . . . . . . . . . . . . . . . 104 - 125
Yield Plus Fund. . . . . . . . . . . . . . . . . . . . . . . . . 126 - 149
US Treasury Money Market and Prime Money Market Funds. . . . . . 150 - 176
Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . 177 - 193
Intermediate Fund. . . . . . . . . . . . . . . . . . . . . . . . 194 - 210
Emerging Markets Fund. . . . . . . . . . . . . . . . . . . . . . 211 - 235
Tax Free Money Market Fund . . . . . . . . . . . . . . . . . . . 236 - 256
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 10
Money Market Fund Financial Statements . . . . . . . . . . . 11
US Government Money Market Fund Financial Statements . . . . 19
Notes to Financial Statements. . . . . . . . . . . . . . . . 25
Fund Management and Service Providers. . . . . . . . . . . . 29
This report is prepared from the books and records of the Funds and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objectives and operations of the Funds, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Money Market and US Government
Money Market Funds. I hope you find this information to be a useful tool as you
review your overall investment strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Money Market Fund since her
arrival at State Street in February 1994. Ms. Williams is the Mutual Funds Unit
Head responsible for oversight of money market and other short-term funds. Prior
to joining State Street, she was a portfolio manager with PNC Bank and the
Calvert Group. There are eight other portfolio managers who work with Ms.
Williams in managing the Fund.
Ms. Lisa Hatfield, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the US Government Money
Market Fund since June 1994. Ms. Hatfield has been with State Street since 1986
and has managed several money market funds since 1987. There are eight other
portfolio managers who work with Ms. Hatfield in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Donughue's Money Fund
Yearly Periods Salomon Brothers Average-Trademark-
Ended August 31 Money Market Fund 3-Month T-Bill Index** -- All Taxable++
- --------------- ----------------- ---------------------- ---------------------
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1988 $10,241 $10,220 $10,218
1989 $11,183 $11,087 $11,072
1990 $12,132 $11,990 $11,936
1991 $12,991 $12,775 $12,697
1992 $13,599 $13,320 $13,207
1993 $14,040 $13,729 $13,567
1994 $14,510 $14,217 $13,983
1995 $15,310 $15,010 $14,699
</TABLE>
In the last year, the interest rate environment has been very volatile, with
rapid rate increases by the Federal Reserve through February 1995. Over the last
fiscal year, two interest rate moves increased the Fed Funds' target rate from
4.75% to 6.00%. Continued rate increases were assumed which generated a very
steep yield curve throughout the first several months of the year. However, in
July 1995, the Federal Reserve reversed its tightening policy by lowering the
Fed Funds' target by 25 basis points to 5.75%. As the economy slowed from the
first quarter and the possibility of rate cuts increased, the yield curve
flattened, even inverting out to five years for a short time.
With the shifting outlook for growth and Fed policy in the last year, the short
end of the yield curve experienced wide swings in rates. The range on the
3-month Treasury bill was 4.62% to 6.06%, while 3-month LIBOR (London Interbank
Offering Rates) ranged from 5.0% to 6.5% and 1-year LIBOR ranged from 5.8125% to
7.8125%.
The Seven Seas Series Money Market Fund was managed consistently with its
objective of providing safety of principal and liquidity while maintaining high
quality investments and competitive returns. Fund investments included floating
rate and fixed rate notes based on relative values in the marketplace. Nearly
one-half of the Fund continued to be invested in plain vanilla floating rate
SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- --------
<S> <C> <C>
1 Year $ 10,552 5.52%
5 Years $ 12,620 4.76%
Inception $ 15,310 5.98%+
</TABLE>
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ ---------- --------
<S> <C> <C>
1 Year $ 10,558 5.58%
5 Years $ 12,519 4.60%
Inception $ 15,010 5.69%+
</TABLE>
NARROWLY BASED AVERAGE:
DONOGHUE'S MONEY FUND
AVERAGE-Trademark- --ALL TAXABLE
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- --------
<S> <C> <C>
1 Year $ 10,512 5.12%
5 Years $ 12,314 4.25%
Inception $ 14,699 5.40%+
</TABLE>
*The Fund commenced operations on May 2, 1988. Index comparison began May 1,
1988.
**Equal dollar amounts of 3-month Treasury bills are purchased at the beginning
of each of three consecutive months. As each bill matures, all proceeds are
rolled over or reinvested in a new 3-month bill. The income used to calculate
the monthly return is derived by subtracting the original amount invested from
the maturity value. The yield curve average is the basis for calculating the
return on the Index. The Index is rebalanced monthly by market capitalization.
++IBC/Donoghue's Money Fund Averages-Trademark- --a universe of taxable funds.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
notes using standard money market indexes such as one- and 3-month LIBOR,
3-month Treasury bills and the Fed Funds rate. These securities allow for
periodic resetting of rates at attractive levels relative to LIBOR, and for the
Fund to respond more rapidly to changing interest rates. The average maturity of
the Fund was targeted close to the Donoghue's average maturity, which gradually
increased over the period from 38 to 60 days.
The Fund returned 5.52% for the fiscal year ended August 31, 1995 as compared to
the Salomon Brothers 3-Month Treasury Index of 5.58%. Fund performance is net of
actual expenses, whereas Index results do not include expenses of any kind. The
Salomon Brothers Treasury Bill Index was chosen as a standard, well-known
representation of money market rates. The Seven Seas Series Money Market Fund
outperformed the Donoghue's Money Fund Average by .40%.
------------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Donoghue's Money Fund
Yearly Periods US Government Money Salomon Brothers 3-Month Average-Trademark-
Ended August 31 Market Fund T-Bill Index** -- All Taxable++
- --------------- ------------------- ------------------------- ---------------------
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1991 $10,306 $10,293 $10,278
1992 $10,769 $10,731 $10,690
1993 $11,100 $11,061 $10,981
1994 $11,466 $11,454 $11,318
1995 $12,083 $12,093 $11,898
</TABLE>
In the last year, the interest rate environment has been very volatile, with
rapid rate increases by the Federal Reserve through February 1995. Over the
last fiscal year, two interest rate moves increased the Fed Funds' target
rate from 4.75% to 6.00%. Continued rate increases were assumed which
generated a very steep yield curve throughout the first several months of the
year. However, in July 1995, the Federal Reserve reversed its tightening
policy by lowering the Fed Funds' target by 25 basis points to 5.75%. As the
economy slowed from the first quarter and the possibility of rate cuts
increased,the yield curve flattened, even inverting out to five years for a
short time.
With the shifting outlook for growth and Fed policy in the last year, the
short end of the yield curve experienced wide swings in rates. The range on
the 3-month Treasury bill was 4.62% to 6.06%, while 3-month LIBOR (London
Interbank Offering Rates) ranged from 5.0% to 6.5% and 1-year LIBOR ranged
from 5.8125% to 7.8125%.
The Seven Seas Series US Government Money Market Fund was managed
consistently with its objective of providing safety of principal, daily
liquidity and a competitive yield by investing in US Treasuries and
Government agencies. The Fund returned 5.38% for the fiscal year ended August
31, 1995 as compared
SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ---------
<S> <C> <C>
1 Year $ 10,538 5.38%
Inception $ 12,083 4.30%+
</TABLE>
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ---------
<S> <C> <C>
1 Year $ 10,558 5.58%
Inception $ 12,093 4.31%+
</TABLE>
NARROWLY BASED AVERAGE:
DONOGHUE'S MONEY FUND
AVERAGE-Trademark- --ALL TAXABLE
<TABLE>
<CAPTION>
Period Ended Growth Total
08/31/95 $10,000 Return
- ------------ --------- ---------
<S> <C> <C>
1 Year $ 10,512 5.12%
Inception $ 11,898 3.94%
</TABLE>
*The Fund commenced operations on March 1 1991. Index comparison began March
1, 1991.
**Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income used
to calculate the monthly return is derived by subtracting the original amount
invested from the maturity value. The yield curve average is the basis for
calculating the return on the Index. The Index is rebalanced monthly by market
capitalization.
++IBC/Donoghue's Money Fund Averages-Trademark- --a universe of taxable funds.
+Annualized.
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
to the Salomon Brothers 3-Month Treasury Index of 5.58%. Fund performance is
net of expenses whereas the Index represents absolute return. The Salomon
Brothers Treasury Bill Index was chosen as a standard, well-known
representation of money market rates. In comparison to its peer group as
measured by the Donoghue's Money Fund Average, the Seven Seas Series US
Government Money Market Fund outperformed the average by .26% for the fiscal
year.
The Fund looked for opportunities to extend maturity when appropriate and
increased holdings of floating rate notes to 40% of the Fund. The Fund was
managed with a focus on floating rate note indices that had a high
correlation to funding targets; such as LIBOR, Fed Funds, and US Treasury
bills. The increased holding of floating rate notes allowed the Fund to
respond more rapidly to changes in interest rates and enhanced yield while
maintaining stability. Anticipating a Fed ease by year-end, the average
maturity of the Fund was extended to 51 days in August from 34 days in April.
With uncertainty as to Fed policy going forward, the Fund will try to
maintain its floating rate note position when the securities represent value,
and the maturity should remain neutral to the Donoghue's Money Fund Average.
----------------------------------------
Performance is historical and assumes reinvestment of all dividends and
capital gains. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than when
purchased. Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the
US Government. There can be no assurance that a money market fund will be able
to maintain a stable net asset value of $1.00 per share.
Annual Report 9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statements of assets and liabilities and
statements of net assets of each of the Funds of The Seven Seas Series Fund
(in this report comprised of Money Market and US Government Money Market
Funds (the "Funds")), as of August 31, 1995, and the related statements of
operations, the statements of changes in net assets and the financial
highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds enumerated above as of August 31, 1995, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated therein in conformity with generally accepted
accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 13, 1995
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1995
Principal Date
Amount of Value
(000) Rate Maturity (000)
--------------------------------------------------------
BANKERS ACCEPTANCE - 0.4%
<S> <C> <C> <C> <C>
First Union Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000 6.110% 10/25/95 $ 9,908
----------
TOTAL BANKERS ACCEPTANCE (COST $9,908) . . . . . . . . . . . . . . . . 9,908
----------
CERTIFICATES OF DEPOSIT - 3.5%
Bank of America, Chicago . . . . . . . . . . . . . . . . . . . . . . . 28,000 5.790 09/25/95 28,000
Bank of New York, Wilmington . . . . . . . . . . . . . . . . . . . . . 50,000 6.000 11/17/95 49,990
Old Kent Bank & Trust Co. . . . . . . . . . . . . . . . . . . . . . . 18,000 5.960 12/28/95 17,936
----------
TOTAL CERTIFICATES OF DEPOSIT (COST $95,926) . . . . . . . . . . . . . 95,926
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.6%
Abbey National PLC, London . . . . . . . . . . . . . . . . . . . . . . 20,000 6.220 10/31/95 19,998
Abbey National PLC, London . . . . . . . . . . . . . . . . . . . . . . 24,000 5.720 12/08/95 23,989
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $43,987). . . . . . . . 43,987
----------
YANKEE CERTIFICATES OF DEPOSIT - 1.8%
Societe Generale Bank. . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.780 09/05/95 50,000
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $50,000). . . . . . . . . . 50,000
----------
CORPORATE BONDS AND NOTES - 15.6%
ABN AMRO Bank (Canada)(MTN). . . . . . . . . . . . . . . . . . . . . . 14,000 5.560 06/05/96 13,962
American General Finance Corp. (MTN) . . . . . . . . . . . . . . . . . 15,940 5.000 06/15/96 15,815
Bankamerica Corp. (MTN). . . . . . . . . . . . . . . . . . . . . . . . 24,000 5.000 06/01/96 23,819
Bank of America, Chicago . . . . . . . . . . . . . . . . . . . . . . . 16,000 5.820 11/06/95 16,002
Bank of America, Chicago (MTN) . . . . . . . . . . . . . . . . . . . . 25,000 5.875 08/15/96 24,971
Bank of New York . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.670 03/07/96 19,979
Barnett Banks, Inc. (MTN). . . . . . . . . . . . . . . . . . . . . . . 40,000 5.790 07/22/96 39,993
Beneficial Corp. (MTN) . . . . . . . . . . . . . . . . . . . . . . . . 43,250 7.450 01/19/96 43,468
Comerica Bank, Detroit (MTN) . . . . . . . . . . . . . . . . . . . . . 14,000 6.180 05/28/96 14,025
FCC National Bank, Wilmington. . . . . . . . . . . . . . . . . . . . . 25,000 5.900 08/21/96 24,974
First National Bank of Boston. . . . . . . . . . . . . . . . . . . . . 25,000 5.750 12/04/95 25,000
General Electric Capital Corp. (MTN) . . . . . . . . . . . . . . . . . 5,000 4.570 10/06/95 4,994
General Electric Capital Corp. (MTN) . . . . . . . . . . . . . . . . . 8,000 6.009 08/28/96 7,998
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION> STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
Principal Date
Amount of Value
(000) Rate Maturity (000)
--------------------------------------------------------
<S> <C> <C> <C> <C>
General Motors Acceptance Corp. (MTN) . . . . . . . . . . . . . . . . $ 5,000 7.950% 09/06/95 $ 5,000
General Motors Acceptance Corp. (MTN). . . . . . . . . . . . . . . . . 5,000 8.750 04/09/96 5,076
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.100 05/15/96 19,983
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 6.150 05/31/96 25,056
J.P. Morgan & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . 40,000 6.200 05/13/96 39,999
J.P. Morgan & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.970 08/21/96 19,994
Mellon Financial Co. . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 6.125 11/15/95 14,004
Nationsbank, Dallas (MTN). . . . . . . . . . . . . . . . . . . . . . . 25,000 7.550 01/09/96 25,128
----------
TOTAL CORPORATE BONDS AND NOTES (cost $429,240). . . . . . . . . . . . 429,240
----------
COMMERCIAL PAPER - 6.5%
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . . 25,000 5.910 09/01/95 25,000
General Motors Acceptance Corp.. . . . . . . . . . . . . . . . . . . . 85,000 5.880 09/01/95 85,000
Glaxo Wellcome PLC . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.798 11/28/95 34,511
GTE Finance Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.864 09/07/95 34,966
----------
TOTAL COMMERCIAL PAPER (cost $179,477) . . . . . . . . . . . . . . . . 179,477
----------
DOMESTIC SHORT-TERM ADJUSTABLE RATE NOTES - 37.8%
American Express Centurion Bank (MTN)(a) . . . . . . . . . . . . . . . 25,000 5.895 12/12/95 25,000
Barnett Banks, Inc. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.918 02/22/96 24,998
Beneficial Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 50,000 5.800 09/29/95 49,999
Caterpillar Financial Services (MTN)(a) . . . . . . . . . . . . . . . 30,000 5.875 06/14/96 30,000
Caterpillar Financial Services (MTN)(a) . . . . . . . . . . . . . . . 20,000 6.038 06/28/96 20,015
CIT Group Holdings, Inc. (a) . . . . . . . . . . . . . . . . . . . . . 50,000 6.000 11/03/95 49,991
Citicorp (MTN)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 42,020 6.188 12/15/95 42,028
Citicorp (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 15,250 6.138 06/10/96 15,274
Dean Witter Discover & Co. (a) . . . . . . . . . . . . . . . . . . . . 6,270 6.120 12/15/95 6,272
FCC National Bank, Wilmington (a) . . . . . . . . . . . . . . . . . . 25,000 5.600 11/08/95 24,987
FCC National Bank, Wilmington (a) . . . . . . . . . . . . . . . . . . 9,850 5.750 02/16/96 9,844
FCC National Bank, Wilmington (a) . . . . . . . . . . . . . . . . . . 6,000 6.100 03/04/96 6,005
First Fidelity Bancorporation New (a) . . . . . . . . . . . . . . . . 44,100 5.975 08/02/96 44,134
First National Bank of Boston (a) . . . . . . . . . . . . . . . . . . 50,000 5.895 11/08/95 50,000
First National Bank of Boston (a) . . . . . . . . . . . . . . . . . . 20,000 5.968 02/28/96 20,000
Fleet Bank, New York (MTN)(a) . . . . . . . . . . . . . . . . . . . . 25,000 6.050 10/12/95 24,999
Fleet Financial Group, Inc. (MTN)(a) . . . . . . . . . . . . . . . . . 50,000 5.980 08/19/96 49,981
Ford Motor Credit (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 15,000 6.800 06/17/96 15,101
</TABLE>
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
Principal Date
Amount of Value
(000) Rate Maturity (000)
--------------------------------------------------------
<S> <C> <C> <C> <C>
General Electric Capital Corp. (MTN)(a) . . . . . . . . . . . . . . . $ 44,320 5.700% 05/06/96 $ 44,319
General Motors Acceptance Corp. (MTN)(a) . . . . . . . . . . . . . . . 16,500 6.088 02/22/96 16,501
IBM Credit Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 40,000 5.800 09/29/95 39,999
IBM Credit Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 50,000 5.798 10/12/95 49,998
Pepsico, Inc. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.794 09/20/95 49,997
PNC Bank, Pittsburgh(a). . . . . . . . . . . . . . . . . . . . . . . . 75,000 5.815 08/12/96 74,959
Sears Roebuck & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 37,500 5.875 11/07/95 37,497
Shawmut Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 6.030 06/07/96 25,000
Shawmut Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 30,000 6.031 06/24/96 29,988
Wachovia Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 6.000 01/16/96 25,004
Wachovia Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.813 05/31/96 24,998
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 85,000 6.043 01/25/96 84,994
Westpac Bank Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . 30,000 6.600 10/06/95 30,004
----------
TOTAL DOMESTIC SHORT-TERM ADJUSTABLE
RATE NOTES (cost $1,041,886) . . . . . . . . . . . . . . . . . . . . . 1,041,886
----------
TIME DEPOSITS - 10.2%
Abbey National Bank. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.813 11/15/95 50,000
Harris Bank & Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.781 09/11/95 50,000
NationsBank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.750 09/12/95 30,000
Society National Bank. . . . . . . . . . . . . . . . . . . . . . . . . 100,000 5.844 09/01/95 100,000
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.813 09/01/95 50,000
----------
TOTAL TIME DEPOSITS (cost $280,000). . . . . . . . . . . . . . . . . . 280,000
----------
UNITED STATES GOVERNMENT AGENCIES - 17.2%
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.070 06/03/96 19,987
Federal Home Loan Bank(a). . . . . . . . . . . . . . . . . . . . . . . 157,850 5.830 03/14/96 157,745
Federal National Mortgage Association (MTN). . . . . . . . . . . . . . 10,000 5.500 06/12/96 9,968
Federal National Mortgage Association (MTN). . . . . . . . . . . . . . 25,000 5.590 06/21/96 24,951
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 50,000 5.725 10/30/95 49,998
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 75,000 5.600 02/16/96 74,981
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 50,000 6.080 08/13/96 50,059
Student Loan Marketing Association(a). . . . . . . . . . . . . . . . . 25,000 5.850 03/20/96 25,024
Student Loan Marketing Association(a). . . . . . . . . . . . . . . . . 61,580 5.650 07/19/96 61,592
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $474,305). . . . . . . . 474,305
----------
</TABLE>
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
Principal Date
Amount of Value
(000) Rate Maturity (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE BANK NOTES - 4.8%
Fleet National Bank, Providence(a) . . . . . . . . . . . . . . . . . . $ 50,000 6.050% 09/08/95 $ 50,000
Key Bank (MTN)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 6.000 09/26/95 24,998
Southtrust Bank(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 5.875 09/14/95 27,000
Southtrust Bank(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.875 12/08/95 29,998
----------
TOTAL VARIABLE RATE BANK NOTES (cost $131,996) . . . . . . . . . . . . 131,996
----------
TOTAL INVESTMENTS (amortized cost $2,736,725) - 99.4%. . . . . . . . . 2,736,725
----------
REPURCHASE AGREEMENTS - 0.4%
Agreement with HSBC Securities Corp. of $11,352
acquired August 31, 1995 at 5.870% to be repurchased at $11,354
on September 1, 1995, collateralized by
$10,000 FMC Discount Notes
5.640% due 11/27/95 valued at $9,862, and by
$1,750 FMC Discount Notes
5.700% due 10/06/95 valued at $1,740 . . . . . . . . . . . . . . . . . 11,352
----------
TOTAL REPURCHASE AGREEMENTS (cost $11,352) . . . . . . . . . . . . . . 11,352
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $2,748,077)(b) - 99.8% . . . . . . . . . . . . . . . . . . . . . 2,748,077
OTHER ASSETS AND LIABILITIES, NET - 0.2% . . . . . . . . . . . . . . . 4,818
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . $2,752,895
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
(MTN) represents Medium Term Note.
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
ASSETS
<S> <C> <C>
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . . . . $2,736,724,978
Repurchase agreements (cost $11,352,000)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,352,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 868
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,064,270
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,499
--------------
2,769,380,615
LIABILITIES
Payables (Note 4):
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,780,958
Accrued administrative fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,962
Accrued advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,702
Accrued custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,887
Accrued transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,848
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,416 16,485,773
----------- --------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,752,894,842
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,963,273)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,756,858
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,754,101,257
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,752,894,842
--------------
--------------
Net asset value, offering and redemption price per share
($2,752,894,842 divided by 2,756,858,115 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
<TABLE>
<CAPTION>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
STATEMENT OF OPERATIONS
For The Fiscal Year Ended August 31, 1995
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,729,575
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,981,114
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827,164
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526,837
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,928
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,135
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,578
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198,500
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,683
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,476
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,268 10,806,683
-------------- --------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,922,892
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576,551
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,499,443
--------------
--------------
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149,922,892 $ 96,352,215
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . 576,551 (4,539,825)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . 150,499,443 91,812,390
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . (149,922,892) (96,352,215)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . (268,477,535) 522,852,735
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (267,900,984) 518,312,910
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,020,795,826 2,502,482,916
---------------- ----------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,752,894,842 $3,020,795,826
---------------- ----------------
---------------- ----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,138,940,091 29,516,002,326
Fund shares issued to shareholders in reinvestments of distributions . . . . . . . . . . . 137,268,575 77,271,649
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,544,686,201) (29,070,421,240)
---------------- ----------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (268,477,535) 522,852,735
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or period ended August 31
and other performance information derived from the financial statements.
1995 1994 1993 1992 1991 1990 1989 1988++
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income . . . . . . . . . .0538 .0330 .0320 .0458 .0686 .0817 .0883 .0239
--------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . (.0538) (.0330) (.0320) (.0458) (.0686) (.0817) (.0883) (.0239)
--------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE
END OF YEAR. . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (%)(a). . . . . . . . . . . 5.52 3.35 3.24 4.68 7.08 8.48 9.19 2.41
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses, net,
to average daily net
assets (b). . . . . . . . . . . . . . .39 .36 .33 .35 .37 .37 .43 .44
Operating expenses, gross,
to average daily net
assets (b). . . . . . . . . . . . . . .39 .36 .38 .35 .38 .43 .51 .63
Net investment income to
average daily net assets (b). . . . . 5.37 3.33 3.20 4.40 6.59 8.13 8.97 7.30
Net assets, end of
year ($000 omitted) . . . . . . . . . 2,752,895 3,020,796 2,502,483 4,263,057 1,645,428 650,598 442,614 193,777
Per share amount of fees
waived ($ omitted). . . . . . . . . . -- -- .0005 -- .0000 .0005 .0004 .0010
</TABLE>
++ For the period May 2, 1988 (commencement of operations) to August 31, 1988.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1988 are annualized.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1995
Pricipal Date
Amount of Value
(000) Rate Maturity* (000)
-----------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 64.7%
Federal Farm Credit Bank (MTN)(a). . . . . . . . . . . . . . . . . . . $ 20,000 5.950% 09/16/96 $ 19,997
Federal Farm Credit Bank Discount Notes. . . . . . . . . . . . . . . . 5,000 6.390 04/17/96 5,003
Federal Home Loan Bank(a). . . . . . . . . . . . . . . . . . . . . . . 15,000 5.920 10/20/95 14,998
Federal Home Loan Bank(a). . . . . . . . . . . . . . . . . . . . . . . 20,000 5.670 03/08/96 19,977
Federal Home Loan Bank(a). . . . . . . . . . . . . . . . . . . . . . . 10,000 5.830 03/14/96 9,993
Federal Home Loan Bank(a). . . . . . . . . . . . . . . . . . . . . . . 5,000 6.030 05/06/96 4,999
Federal Home Loan Bank (MTN)(a). . . . . . . . . . . . . . . . . . . . 10,000 5.750 12/15/95 10,000
Federal Home Loan Bank Discount Notes. . . . . . . . . . . . . . . . . 20,000 6.400 09/18/95 20,005
Federal Home Loan Bank Discount Notes. . . . . . . . . . . . . . . . . 5,000 6.850 02/28/96 5,003
Federal Home Loan Bank Discount Notes. . . . . . . . . . . . . . . . . 5,000 6.210 03/28/96 4,820
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . . . 10,000 5.670 09/20/95 9,970
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . . . 10,000 6.840 02/28/96 10,046
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . . . 10,000 6.005 05/13/96 9,989
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 10,000 5.725 10/30/95 10,000
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 20,000 5.788 01/19/96 19,996
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 15,000 5.950 02/09/96 14,997
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 20,000 5.600 02/16/96 19,998
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 20,000 5.700 08/16/96 19,989
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . . 15,000 5.860 08/16/96 14,992
Federal National Mortgage Association Discount Notes . . . . . . . . . 5,000 5.600 02/12/96 4,872
Federal National Mortgage Association Discount Notes . . . . . . . . . 10,000 6.460 03/27/96 10,013
Federal National Mortgage Association Discount Notes . . . . . . . . . 8,000 5.500 06/12/96 7,974
Federal National Mortgage Association Discount Notes . . . . . . . . . 15,000 5.590 06/21/96 14,970
Student Loan Marketing Association(a). . . . . . . . . . . . . . . . . 8,000 5.670 02/08/96 7,999
Student Loan Marketing Association(a). . . . . . . . . . . . . . . . . 10,250 5.650 07/19/96 10,254
Student Loan Marketing Association(a). . . . . . . . . . . . . . . . . 11,000 5.875 11/27/96 11,036
Student Loan Marketing Association (MTN)(a). . . . . . . . . . . . . . 5,000 5.705 07/01/96 4,997
--------
TOTAL UNITED STATES GOVERNMENT AGENCIES (Cost $316,887). . . . . . . . 316,887
--------
UNITED STATES GOVERNMENT TREASURIES - 7.0%
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . . 25,000 5.580 09/21/95 24,923
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . . 10,000 5.460 07/25/96 9,503
--------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $34,426) . . . . . . . 34,426
--------
TOTAL INVESTMENTS (amortized cost $351,313) - 71.7%. . . . . . . . . . 351,313
--------
</TABLE>
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
Value
(000)
---------
<S> <C>
REPURCHASE AGREEMENTS - 33.5%
Agreement with Donaldson, Lufkin & Jenrette Securities Corp. of $14,213
acquired August 31, 1995 at 5.875% to be repurchased at $14,215
on September 1, 1995, collateralized by:
$9,747 United States Treasury Bonds,
11.250% due 02/15/15 valued at $14,523. . . . . . . . . . . . . . . . . . . $ 14,213
Agreement with HSBC Securities, Inc. of $100,000
acquired August 31, 1995 at 5.850% to be repurchased at $100,016
on September 1, 1995, collateralized by:
$103,545 Federal National Mortgage Association Discount Notes,
5.700% due 12/08/95 valued at $101,962 . . . . . . . . . . . . . . . . . . 100,000
Agreement with HSBC Securities, Inc. of $20,000
acquired August 31, 1995 at 5.870% to be repurchased at $20,003
on September 1, 1995, collateralized by:
$5,000 Federal National Mortgage Association Discount Notes,
5.620% due 10/25/95 valued at $4,957, and by
$5,525 Federal National Mortgage Association Discount Notes,
5.670% due 09/14/95 valued at $5,513, and by
$10,000 FMC Discount Notes,
5.670% due 09/20/95 valued at $9,969. . . . . . . . . . . . . . . . . . . . 20,000
Agreement with UBS Securities, Inc. of $30,000
acquired August 31, 1995 at 5.830% to be repurchased at $30,005
on September 1, 1995, collateralized by:
$29,460 United States Treasury Notes,
7.125% due 02/15/23 valued at $30,693 . . . . . . . . . . . . . . . . . . . 30,000
-------
TOTAL REPURCHASE AGREEMENTS (cost $164,213). . . . . . . . . . . . . . . . . . . 164,213
---------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $515,526)(b) - 105.2%. . . . . . . . . . . . . . . . . . . . . . . . . . . 515,526
OTHER ASSETS AND LIABILITIES, NET - (5.2%) . . . . . . . . . . . . . . . . . . . (25,388)
---------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 490,138
---------
---------
</TABLE>
* The interest rate for all securities with a maturity greater than 13
months has an automatic reset feature resulting in an effective maturity
of 13 months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
(MTN) represents Medium Term Note.
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
<TABLE>
<CAPTION>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . . . $ 351,312,567
Repurchase agreements (cost $164,213,000)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,213,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,315,994
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,472
----------------
517,843,778
LIABILITIES
Payables (Note 4):
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,922,500
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,270,513
Accrued administrative fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,964
Accrued advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373,511
Accrued custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,373
Accrued distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,128
Accrued transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,004
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,237 27,706,230
---------------- ----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 490,137,548
----------------
----------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (158,819)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,296
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,806,071
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 490,137,548
----------------
----------------
Net asset value, offering and redemption price per share
($490,137,548 divided by 490,296,367 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,484,926
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 970,313
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,825
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,647
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,798
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,365
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,986
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,770
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,537
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,241
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . . . . 2,971
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,691 1,643,144
---------------- ----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,841,782
----------------
REALIZED GAIN (LOSS) ON INVESTMENTS,
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . 101,628
----------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,943,410
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,841,782 $ 9,806,585
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . 101,628 (260,447)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . 20,943,410 9,546,138
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . (20,841,782) (9,806,585)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . 238,870,688 114,289,979
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,972,316 114,029,532
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,165,232 137,135,700
---------------- ----------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 490,137,548 $ 251,165,232
---------------- ----------------
---------------- ----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,109,979,137 3,667,258,571
Fund shares issued to shareholders in reinvestments of distributions . . . . . . . . . . . 13,741,104 8,738,216
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,884,849,553) (3,561,706,808)
---------------- ----------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,870,688 114,289,979
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or period ended August 31
and other performance information derived from the financial statements.
1995 1994 1993 1992 1991++
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR. . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income. . . . . . . . . . . .0528 .0324 .0304 .0441 .0302
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . (.0528) (.0324) (.0304) (.0441) (.0302)
--------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF YEAR. . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (%)(a). . . . . . . . . . . . . 5.38 3.30 3.08 4.49 3.06
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
daily net assets (b) . . . . . . . . . . .42 .38 .39 .41 .23
Operating expenses, gross, to average
daily net assets (b) . . . . . . . . . . .42 .39 .46 .42 .43
Net investment income to average
daily net assets (b) . . . . . . . . . . 5.37 3.27 3.04 4.26 5.94
Net assets, end of
year ($000 omitted). . . . . . . . . . . 490,138 251,165 137,136 156,707 94,646
Per share amount of fees
waived ($ omitted) . . . . . . . . . . . -- -- -- .0001 .0011
Per share amount of fees
reimbursed ($ omitted) . . . . . . . . . -- .0001 .0007 -- --
</TABLE>
++ For the period March 1, 1991 (commencement of operations) to
August 31, 1991.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1991 are
annualized.
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET AND
US GOVERNMENT MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on two portfolios
(collectively, the "Funds"), The Seven Seas Series Money Market Fund (the
"Money Market Fund") and The Seven Seas Series US Government Money Market
Fund (the "Government Money Market Fund"). The Investment Company is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company which was organized as a
Massachusetts business trust on October 3, 1987 and now operates under a
First Amended and Restated Master Trust Agreement dated October 13, 1993,
as amended. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.001 par value. The Investment Company
has available Class B and Class C shares of the Funds as of August 15,
1994; however, shares have not been offered on these classes as of the date
of these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Funds in the preparation of these
financial statements.
SECURITY VALUATION: The Funds' portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Funds utilize the
amortized cost valuation method in accordance with Rule 2a-7 of the
Investment Company Act of 1940, as amended.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. The Funds, accordingly, paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1995, the Money Market and Government Money Market Funds had net
tax basis capital loss carryovers of $4,159,322 and $157,456, respectively,
which may be applied against any realized net taxable gains in each
succeeding year or until their expiration date of August 31, 2003. In
addition, as permitted by tax regulations, the Money Market Fund intends to
defer a net realized capital loss of $5,844 incurred from November 1, 1994
to August 31, 1995, and treat it as arising in fiscal year 1996.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET AND
US GOVERNMENT MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Funds declare and record
dividends on net investment income daily and pay them monthly. Capital gain
distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Funds to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Government Money Market Fund has
incurred expenses in connection with its organization and initial
registration. These costs have been deferred and are being amortized over
60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby each
Fund, through its custodian or third-party custodian, receives delivery of
the underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Funds' Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases, sales, and maturities of investment securities, excluding US
Government and Agency obligations and repurchase agreements, for the Money
Market Fund aggregated to $60,069,833,883, $272,141,786 and
$59,192,227,000, respectively.
For the fiscal year ended August 31, 1995, purchases, sales, and maturities
of US Government and Agency obligations, excluding repurchase agreements,
for the Funds aggregated to the following:
<TABLE>
<CAPTION>
Purchases Sales Maturities
-------------- -------------- --------------
<S> <C> <C> <C>
Money Market Fund $ 979,871,669 $ 478,077,610 $ 909,223,906
Government Money Market Fund 1,312,012,722 135,309,742 1,046,405,000
</TABLE>
SECURITIES LENDING: Each Fund may loan securities with a value up to 33
1/3% of its total assets to certain brokers. Each Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET AND
US GOVERNMENT MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
by non-cash collateral, brokers pay the Funds negotiated lenders' fees,
which are divided between each fund and its lending agent, and are included
as interest income to the Funds. Income generated from the investment of
cash collateral is also divided between each Fund and its lending agent,
and is included as interest income to the Funds. All collateral received
will equal at least 100% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less
than 100% of the market value of the loaned securities during the period of
the loan. Should the borrower of the securities fail financially, there is
a risk of delay in recovery of the securities or loss of rights in the
collateral. Consequently, loans are made only to borrowers which are deemed
to be of good financial standing. As of the fiscal year ended August 31,
1995, there were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Funds in accordance with their investment
objectives, policies, and limitations. For these services, the Funds pay a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of their average daily net assets. The Investment Company has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Funds
pay fees to the Agents in an amount that per annum is equal to .025% and
.175% of the average daily value of all Fund shares held by or for
customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
of the average daily value of net assets on an annual basis, which includes
a limit of .20% in shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET AND
US GOVERNMENT MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
related to distribution and shareholder servicing fees are included in the
accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the funds (up to a maximum of 15% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
28 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 29
<PAGE>
THE SEVEN SEAS SERIES FUND -Registered Trademark-
July 31, 1995
TABLE OF CONTENTS
Page
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 3
Short Term Government Securities Fund Financial Statements . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 7
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 10
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund -Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of operations for the eleven months
ended July 31, 1995, the statements of changes in net assets for the eleven
months ended July 31, 1995 and for the fiscal year ended August 31, 1994, and
the financial highlights for the eleven months ended July 31, 1995, for each of
the two fiscal years in the period ended August 31, 1994 and for the period
April 15, 1992 (commencement of operations) to August 31, 1992, of The Seven
Seas Series Short Term Government Securities Fund (the "Fund"). These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights of the Fund
referred to above present fairly, in all material respects, the results of
its operations for the eleven months ended July 31, 1995 the changes in its
net assets for the eleven months ended July 31, 1995, and for the fiscal year
ended August 31, 1994, and the financial highlights for the eleven months
ended July 31, 1995, for each of the two fiscal years in the period ended
August 31, 1994 and for the period April 15, 1992 (commencement of
operations) to August 31, 1992, in conformity with generally accepted
accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
Final Annual Report 3
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
For the Eleven Months Ended July 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 685,835
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . $ 56,811
Administrative fees. . . . . . . . . . . . . . . . 3,341
Custodian fees . . . . . . . . . . . . . . . . . . 17,228
Distribution fees. . . . . . . . . . . . . . . . . 18,265
Professional fees. . . . . . . . . . . . . . . . . 15,131
Registration fees. . . . . . . . . . . . . . . . . 17,504
Shareholder servicing fees . . . . . . . . . . . . 9,103
Transfer agent fees. . . . . . . . . . . . . . . . 3,582
Trustees' fees . . . . . . . . . . . . . . . . . . 688
Amortization of deferred organization expenses . . 2,292
Miscellaneous. . . . . . . . . . . . . . . . . . . 2,532
-----------
Expenses before waivers and reimbursements . . . . 146,477
Expenses waived. . . . . . . . . . . . . . . . . . (28,839)
Expenses reimbursed by Adviser . . . . . . . . . . (19,149) 98,489
----------- -----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . 587,346
-----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . (519,658)
Net change in unrealized appreciation or depreciation of
investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 259,201
-----------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . (260,457)
-----------
Net increase (decrease) in net assets resulting from operations. . $ 326,889
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4 Final Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE ELEVEN FOR THE FISCAL
MONTHS ENDED YEAR ENDED
JULY 31, 1995 AUGUST 31, 1994
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 587,346 $ 1,184,233
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . (519,658) (115,520)
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . . . . 259,201 (622,664)
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . . . . . 326,889 446,049
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . (587,346) (1,184,233)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . -- (465,844)
In excess of net realized gain on investments. . . . . . . . . . . . . . . -- (257,170)
Increase (decrease) in net assets from Fund share transactions . . . . . . . (25,459,685) (8,292,218)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . (25,720,142) (9,753,416)
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 25,720,142 35,473,558
------------- -------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 25,720,142
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1995 1994
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . 1,898,412 $ 18,155,076 2,868,828 $ 28,111,301
Fund shares issued to shareholders
in reinvestments of distributions. . 57,704 551,152 183,942 1,822,735
Fund shares redeemed . . . . . . . . . (4,617,672) (44,165,913) (3,858,056) (38,226,254)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . (2,661,556) $ (25,459,685) (805,286) $ (8,292,218)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Final Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
1995+ 1994 1993 1992++
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 9.66 $ 10.23 $ 10.21 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .38 .43 .45 .18
Net realized and unrealized gain (loss) on investments . .05 (.31) .05 .17
---------- ---------- ---------- ----------
Total From Investment Operations . . . . . . . . . . . . .43 .12 .50 .35
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.38) (.43) (.46) (.14)
Net realized gain on investments . . . . . . . . . . . . -- (.17) (.02) --
In excess of net realized gain on investments. . . . . . -- (.09) -- --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . (.38) (.69) (.48) (.14)
---------- ---------- ---------- ----------
LIQUIDATION VALUE. . . . . . . . . . . . . . . . . . . . . (9.71) -- -- --
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ -- $ 9.66 $ 10.23 $ 10.21
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . 4.99(d) 1.28 5.06 3.49
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
daily net assets (b) . . . . . . . . . . . . . . . . . .87(d)(e) .70 .57(c) .51
Operating expenses, gross, to average
daily net assets (b) . . . . . . . . . . . . . . . . . 1.29(d)(e) .96 .82 .77
Net investment income to average
daily net assets (b) . . . . . . . . . . . . . . . . . 5.19(d) 4.58 4.13(c) 4.53
Portfolio turnover (b) . . . . . . . . . . . . . . . . . 191.81(d) 279.07 69.09 96.54
Net assets, end of year ($000 omitted) . . . . . . . . . -- 25,720 35,474 55,118
Per share amount of fees waived ($ omitted). . . . . . . .0185(d)(e) .0244 .0280 .0104
</TABLE>
+ For the eleven months ended July 31, 1995.
++ For the period April 15, 1992 (commencement of operations) to August 31,
1992.
(a) Periods less than one year are not annualized.
(b) The ratios for the eleven months ended July 31, 1995 and the period ending
August 31, 1992 are annualized.
(c) The ratios for operating expenses, net, and net investment income for the
fiscal year ended August 31, 1993 were incorrectly reported as .64% and
4.62%, respectively.
(d) For the nine months of investment activity ended May 31, 1995.
(e) See Note 4.
6 Final Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
For the Eleven Months Ended July 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation as
of July 31, 1995. These financial statements report on one portfolio, The
Seven Seas Series Short Term Government Securities Fund (the "Fund"). The
Fund has undergone a planned liquidation and as of May 31, 1995, the Fund
ceased investment operations. A vote of the Board of Trustees was held on
July 17, 1995 to remove the Fund from the Master Trust Agreement that became
effective on July 31, 1995. The Investment Company is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company which was organized as a Massachusetts business
trust on October 3, 1987 and now operates under a First Amended and Restated
Master Trust Agreement dated October 13, 1993. The Investment Company's
master trust agreement permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest at a $.001 par
value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies were consistently followed by the Fund in the preparation of these
financial statements.
SECURITIES TRANSACTIONS: Securities transactions were recorded on a trade
date basis. Realized gains and losses from securities transactions were
recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income was recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original issue
discounts were accreted for both tax and financial reporting purposes. All
short- and long-term market premiums/discounts were amortized/accreted for
both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its net
investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
The Fund qualified as a regulated investment company and distributed all of
its taxable income. The Fund, accordingly, paid no federal income taxes and
no federal income tax provision was required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declared and recorded
dividends on net investment income daily and paid them monthly. Capital gain
distributions, if any, were generally declared and paid annually.
The timing and characterization of certain income and capital gains
distributions were determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As a
result, net investment income and net realized gain (or loss) from investment
transactions for a reporting period may have differed significantly from
distributions during such period. The differences
Final Annual Report 7
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the Eleven Months Ended July 31, 1995
between tax regulations and GAAP primarily related to investments in options,
futures, mortgage-backed securities, and certain securities sold at a loss.
Accordingly, the Fund may have periodically made reclassifications among
certain of its capital accounts without impacting its net asset value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, distribution,
shareholder servicing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative, insurance,
printing, and professional fees are allocated among all funds principally
based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection with
its organization and initial registration. These costs were deferred and
amortized ratably, until cessation of operations, over a 60 month period on a
straight-line basis.
3. SECURITIES TRANSACTIONS
For the nine months of investment activity ended May 31, 1995, purchases and
sales of US Government and Agency obligations, excluding short-term
investments and repurchase agreements, aggregated to $20,763,355 and
$42,959,587, respectively.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State Street
Bank and Trust Company (the "Adviser") under which the Adviser directed the
investment of the Fund in accordance with the investment objectives,
policies, and limitations. For these services, the Fund paid a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .50% of its
average daily net assets. For the eleven months ended July 31, 1995, the
Adviser voluntarily agreed to waive a portion of its advisory fee to the
Fund, which amounted to $27,916. For the period May 12, 1995 to July 31,
1995, the Adviser voluntarily agreed to reimburse the Fund for all expenses
in excess of 1.00% of average daily net assets on an annual basis. For this
period, reimbursements to the Fund amounted to $19,149.
The Investment Company has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. For the eleven
months ended July 31, 1995, the Adviser voluntarily waived a portion of its
custodial fee to the Fund, which amounted to $923.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"), a
wholly-owned subsidiary of the Adviser (collectively "the Agents"). The SSBSI
service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for Investment
Company shareholders, including services related to the purchase and
redemption of Investment Company shares. For these services, the funds pay
fees to the Agents in an amount that per annum is equal to .025% and .175% of
the average daily value of each fund's shares held by or for customers of
Adviser and SSBSI, respectively. These fees, in conjunction with other
distribution-related expenses, may not exceed .25% of the average daily value
of net assets on an annual basis, which includes a limit of .20% in
shareholder servicing fees for all providers.
8 Final Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SHORT TERM GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the Eleven Months Ended July 31, 1995
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also required,
pursuant to the Administration Agreement, to arrange and pay certain
promotional and sales costs of Investment Company shares. Russell Fund
Distributors, Inc. (the "Distributor"), a subsidiary of the Administrator, is
the distributor of the Investment Company shares. Under the Distribution
Plan, each fund may spend, and the Distributor may be reimbursed, up to .25%
of the average daily value of the net assets on an annual basis for
distribution-related and shareholder servicing expenses. If, in any calendar
month, the distribution expenses incurred by the Distributor exceed the
maximum amount of allowable reimbursement, the excess amounts may be carried
forward for subsequent reimbursement from the Investment Company. In no event
may excess amounts be carried forward more than two fiscal years from the
year when such expenses were incurred. The amounts related to distribution
and shareholder servicing fees are included in the accompanying Statement of
Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion and - .05%; over $1
billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Funds' Distributor on behalf of
the Fund (up to a maximum of 15% of the asset-based fee determined in (i));
(iii) out-of-pocket expenses; and (iv) start-up costs for new funds.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of the
board meetings attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. Effective
July 17, 1995, the annual retainer was increased to $44,000.
Final Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
10 Final Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 8
Matrix Equity Fund Financial Statements. . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . 16
Tax Information. . . . . . . . . . . . . . . . . . . . . . . 20
Fund Management and Service Providers. . . . . . . . . . . . 21
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operation of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Matrix Equity Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Douglas Holmes, Managing Director, has been the portfolio manager primarily
responsible for investment decisions regarding the Matrix Equity Fund since its
inception in May 1992. Mr. Holmes has been with State Street since 1984 and has
managed State Street's matrix portfolios for the past five years. There are four
other portfolio managers who work with Mr. Holmes in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
<TABLE>
<CAPTION>
[CHART]
GROWTH OF A $10,000 INVESTMENT
Yearly Periods S&P 500-Trademark-
Ending August 31 Matrix Equity Fund Index**
- ---------------- ------------------ ------------------
<S> <C> <C>
Inception* $10,000 $10,000
1992 $ 9,780 $10,098
1993 $12,152 $11,629
1994 $12,687 $12,262
1995 $15,074 $14,906
</TABLE>
For the fiscal year ended August 31, 1995, the Seven Seas Series Matrix Equity
Fund had a total return of 18.81% as compared to the S&P-Registered Trademark-
500 Index results of 21.56%. The S&P 500 outperformed the Fund because of the
large cap bias in the benchmark which was not mirrored in the Fund. However,
the Fund's return remained strong because the Fund was fully invested
throughout the period and the stock selection in the technology sector proved
successful.
The stock market rally over the past year has been dominated by large cap growth
stocks. However, this trend began to weaken as smaller cap stocks outperformed
larger cap stocks in June, July, and August of 1995. In the S&P 500 Index, the
technology sector was the best performing sector over the past fiscal year. Led
by Intel Corp., Microsoft and IBM, the sector returned a dramatic 47.81%. This
was followed closely by the health care sector which produced an equally
impressive return of 35.21%.
The market shocked a number of investors with the rise in stock prices starting
in December 1994, and a string of positive returns for nine straight months
until the fiscal year ended. In the last part of 1994 the consensus was that
most, if not all, of potential earnings were reflected in the market with the
Dow Jones Industrial Average at the 3700 level. Therefore, many believed that
the earnings reports would be less than spectacular and that the multiples were
already high. Generally, this consensus was inaccurate and the Matrix Fund
benefited from the pessimism of the majority.
SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- -------- -------- --------
<S> <C> <C>
1 Year $11,881 18.81%
Inception $15,074 13.15%+
</TABLE>
<TABLE>
<CAPTION>
STANDARD & POOR'S-Registered Trademark-
500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/95 $10,000 Return
- -------- -------- --------
<S> <C> <C>
1 Year $12,156 21.56%
Inception $14,906 12.72%+
</TABLE>
* The Fund commenced operations on May 4, 1992. Index comparison began May 1,
1992.
** The Standard & Poor's-Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard and Poor's
Corporation to best capture the price performance of a large cross-section
of the US publicly traded stock market. The Index is structured to
approximate the general distribution of industries in the US economy.
+ Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
Technology stocks had a spectacular return in the first eight months of 1995.
The Fund held a weight that was similar to the weight of technology stocks in
the S&P 500 Index. This neutral industry weight is applied across all
industries. The Fund's strong performance compared to the benchmark was achieved
by buying the best stocks on an industry-by-industry basis as opposed to
overweighting and underweighting sectors.
The Matrix ranking process ranks securities on both a value and a growth
measure. The combination of both these rankings create an expected return for
each stock. Historically, this expected return has been an accurate predictor of
returns which allowed the Fund to outperform the S&P 500 Index after all costs.
However, this past year our growth measure did not lead us to the best growth
stocks. The value measure remains accurate allowing us to pick value stocks
within a sector successfully.
In summary, this past year has demonstrated the benefit of using both growth and
value measures to select securities as well as the discipline of maintaining
characteristics and industry weights similar to the S&P 500 Index. The Fund was
able to benefit from the rise in the market as a whole and participated in the
advance of those specific areas, technology and large cap stocks, where the
greatest returns were realized.
-----------------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Matrix Equity Fund (the
"Fund"), as of August 31, 1995, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the three fiscal years in the period then ended and for the period May 4,
1992 (commencement of operations) to August 31, 1992. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period May 4, 1992 (commencement of
operations) to August 31, 1992 in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
COMMON STOCKS - 96.5%
BASIC INDUSTRIES - 7.2%
Allegheny Ludlum Corp. 5,800 $ 122
Arco Chemical Co. 2,600 125
Boise Cascade Corp. 21,900 939
Cleveland-Cliffs, Inc. 200 9
Consolidated Papers, Inc. 7,400 448
du Pont (E.I.) de Nemours & Co. 58,500 3,824
Kimberly-Clark Corp. 5,000 319
Magma Copper Co. New (a) 38,100 695
Morton International, Inc. 97,900 3,182
P.H. Glatfelter Co. 15,100 340
Phelps Dodge Corp. 1,100 70
Reynolds Metals Co. 900 54
Sonoco Products Co. 5,200 140
Temple-Inland, Inc. 32,400 1,677
Union Camp Corp. 38,000 2,161
Westvaco Corp. 4,700 207
--------
14,312
--------
CAPITAL GOODS - 7.8%
Browning-Ferris Industries, Inc. 56,200 1,890
Cummins Engine Co., Inc. 2,600 102
Dover Corp. 8,900 710
Emerson Electric Co. 38,600 2,755
General Electric Co. 30,000 1,766
Johnson Controls, Inc. 15,000 913
Millipore Corp. 118,600 4,136
Parker-Hannifin Corp. 59,900 2,374
TRINOVA Corp. 21,400 786
--------
15,432
--------
CONSUMER BASICS - 18.4%
Albertson's, Inc. 21,300 679
American Brands, Inc. 16,500 693
Amgen, Inc. (a) 26,600 1,273
Archer-Daniels-Midland Co. 18,874 314
Becton, Dickinson & Co. 3,600 203
Bristol-Myers Squibb Co. 82,200 5,641
Campbell Soup Co. 62,500 2,859
Clorox Co. 14,900 1,008
Coca-Cola Co. (The) 55,400 3,559
CPC International, Inc. 5,600 352
Heinz (H.J.) Co. 16,100 682
Hershey Foods Corp. 2,200 132
Johnson & Johnson 85,500 5,900
Medicine Shoppe International, Inc. 21,500 922
Merck & Co., Inc. 65,000 3,242
Mylan Laboratories, Inc. 7,950 182
PepsiCo, Inc. 5,900 267
Pfizer, Inc. 8,200 405
Philip Morris Cos., Inc. 33,500 2,500
Procter & Gamble Co. 22,300 1,547
Sara Lee Corp. 60,300 1,673
Snap-On Tools Corp. 53,900 2,210
UST Corp. 6,100 166
Whitman Corp. 2,400 48
--------
36,457
--------
CONSUMER DURABLES - 1.6%
Lancaster Colony Corp. 7,310 250
Leggett & Platt, Inc. 42,000 2,032
PACCAR, Inc. 16,400 800
--------
3,082
--------
CONSUMER NON-DURABLES - 6.8%
Anheuser-Busch Cos., Inc. 2,300 131
CPI Corp. 13,400 270
Dillard Department Stores, Inc.
Class A 14,800 457
Federated Department
Stores, Inc. (a) 136,100 3,675
Longs Drug Stores Corp. 300 11
Mattel, Inc. 71,600 2,076
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
Newell Co. 102,900 $ 2,573
Rite Aid Corp. 107,300 3,004
Ross Stores, Inc. 900 14
SuperValu, Inc. 3,600 107
Walgreen Co. 46,300 1,135
--------
13,453
--------
CONSUMER SERVICES - 3.2%
Hilton Hotels Corp. 53,000 3,525
King World Productions, Inc. (a) 17,200 654
Luby's Cafeterias, Inc. 21,100 419
Southwest Airlines Co. 52,800 1,366
Wendy's International, Inc. 16,100 316
--------
6,280
--------
ENERGY - 7.6%
Amoco Corp. 29,750 1,897
Atlantic Richfield Co. 27,810 3,035
Chevron Corp. 850 41
Exxon Corp. 84,900 5,837
Halliburton Co. 1,100 47
Mobil Corp. 39,900 3,800
Smith International, Inc. (a) 7,100 124
USX-Marathon Group 17,100 352
--------
15,133
--------
FINANCE - 11.4%
AFLAC, Inc. 43,900 1,794
Allstate Corp. 52,401 1,775
American General Corp. 20,500 723
Bank of Boston Corp. 16,400 722
BankAmerica Corp. 90,600 5,119
Bear Stearns Cos., Inc. 12,500 258
Chemical Banking Corp. 32,600 1,899
Chubb Corp. (The) 5,700 520
CIGNA CORP. 9,900 958
Edwards (A.G.), Inc. 21,200 517
Equitable Companies, Inc. 5,200 134
Federal National Mortgage Association 4,400 420
FINOVA Group, Inc. 300 12
First Bank System, Inc. 2,800 128
First Empire State Corp. 400 73
Franklin Resources, Inc. 37,200 2,046
GEICO Corp. 1,300 89
Golden West Financial Corp. 1,600 76
Marsh & McLennan Cos., Inc. 5,400 445
NationsBank Corp. 51,600 3,167
Reliastar Financial Corp. 17,600 669
SAFECO Corp. 100 6
SouthTrust Corp. 9,200 236
Star Banc Corp. 5,900 313
Transamerica Corp. 500 34
Wachovia Corp. 2,100 83
West One Bancorp 7,900 320
--------
22,536
--------
GENERAL BUSINESS - 7.3%
Automatic Data Processing, Inc. 41,600 2,704
Gannett Co., Inc. 10,300 551
Interpublic Group Cos., Inc. 45,200 1,757
SBC Communications, Inc. 94,200 4,769
Tribune Co. 37,100 2,486
Viacom, Inc. Class A (a) 3,200 156
Washington Post Co. Class B 6,900 1,982
--------
14,405
--------
TECHNOLOGY - 11.7%
AMP, Inc. 95,200 3,868
COMPAQ Computer Corp. (a) 12,000 573
Conner Peripherals, Inc. (a) 5,100 68
General Dynamics Corp. 57,400 3,021
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
Hewlett-Packard Co. 69,200 $ 5,536
Honeywell, Inc. 35,200 1,540
International Business Machines Corp. 35,100 3,628
Longview Fibre Co. 10,700 173
Northrop Grumman Corp. 38,100 2,319
Oracle Systems Corp. (a) 47,200 1,888
Texas Instruments, Inc. 1,300 97
Textron, Inc. 7,800 534
--------
23,245
--------
TRANSPORTATION - 3.3%
Conrail, Inc. 26,500 1,782
GATX Corp. 16,700 862
Illinois Central Corp. 17,200 660
Navistar International Corp. (a) 137,900 1,793
Tidewater, Inc. 61,100 1,512
--------
6,609
--------
UTILITIES - 10.2%
Ameritech Corp. 102,700 5,263
Bell Atlantic Corp. 4,600 275
BellSouth Corp. 14,300 983
Boston Edison Co. 13,000 333
Central & Southwest Corp. 9,100 223
Century Telephone Enterprises, Inc. 45,700 1,274
Coastal Corp. 3,100 102
Consolidated Edison Co. of New York, Inc. 90,000 2,543
Delmarva Power & Light Co. 900 20
DQE, Inc. 50,300 1,201
Ohio Edison Co. 47,700 1,032
Pacific Enterprises 3,900 94
Panhandle Eastern Corp. 42,300 1,058
San Diego Gas & Electric Co. 20,300 441
Sprint Corp. 80,800 2,867
Williams Cos. (The) 74,500 2,728
--------
20,437
--------
TOTAL COMMON STOCKS
(cost $171,496) 191,381
--------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 4.7%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $9,268 9,268
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,268) 9,268
--------
TOTAL INVESTMENTS
(identified cost $180,764)(c) - 101.2% 200,649
OTHER ASSETS AND LIABILITIES,
NET - (1.2%) (2,308)
--------
NET ASSETS - 100.0% $198,341
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) At August 31, 1995, the cost for federal income tax purposes was $180,815
and net unrealized appreciation for all securities was $19,834. This
consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $21,250 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $1,416.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<S> <C> <C>
ASSETS
Investments at market (identified cost $180,763,517)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . $200,648,593
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673,941
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,613,165
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,492
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,312
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,694
------------
209,006,197
LIABILITIES
Payables (Note 4):
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,024,294
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,104
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,708
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,299
Accrued distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,166
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,805
Other accrued expenses and payables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,406 10,665,585
------------ ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $198,340,612
------------
------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 877,194
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,131,638
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,885,076
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,234
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,432,470
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $198,340,612
------------
------------
Net asset value, offering and redemption price per share
($198,340,612 divided by 14,233,902 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.93
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year ended August 31, 1995
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,657,909
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,208
----------
4,681,117
EXPENSES (NOTES 2 AND 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,198,153
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,220
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,435
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,034
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,133
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,992
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,186
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,005
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,409
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 4,002
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,990
------------
Expenses before waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688,559
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (599,077) 1,089,482
------------ ------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,591,635
------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,350,812
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . 12,642,981
------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,993,793
------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,585,428
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,591,635 $ 2,204,020
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,350,812 41,495
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,642,981 2,098,460
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . 30,585,428 4,343,975
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,400,221) (1,781,846)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (672,007) (540,673)
In excess of net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (549,348)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . . 41,062,973 66,743,294
------------ ------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,576,173 68,215,402
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,764,439 62,549,037
------------ ------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$877,194 and $686,471, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $198,340,612 $130,764,439
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
1995 1994
---------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . 6,774,979 $ 84,324,212 6,487,061 $ 77,166,346
Fund shares issued to shareholders
in reinvestments of distributions. . . . . . . . . . . . . 306,609 3,699,510 218,434 2,594,638
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . (3,687,136) (46,960,749) (1,099,435) (13,017,690)
------------ ------------ ------------ ------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . 3,394,452 $ 41,062,973 5,606,060 $ 66,743,294
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period ended August 31 and other performance information derived from the financial
statements.
1995 1994 1993 1992++
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . $ 12.06 $ 11.95 $ 9.78 $ 10.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . .28 .24 .18 .05
Net realized and unrealized gain (loss) on investments . . 1.93 .28 2.17 (.27)
-------- -------- -------- --------
Total From Investment Operations . . . . . . . . . . . . . 2.21 .52 2.35 (.22)
-------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . (.28) (.23) (.18) --
Net realized gain on investments . . . . . . . . . . . . . (.06) (.09) -- --
In excess of net realized gain on investments. . . . . . . -- (.09) -- --
-------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . . (.34) (.41) (.18) --
-------- -------- -------- --------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . $ 13.93 $ 12.06 $ 11.95 $ 9.78
-------- -------- -------- --------
-------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . 18.81 4.41 24.24 (2.20)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
daily net assets (b) . . . . . . . . . . . . . . . . . . .68(c) .58 .60 .18
Operating expenses, gross, to average
daily net assets (b) . . . . . . . . . . . . . . . . . . 1.06(c) .96 1.25 1.90
Net investment income to average daily net assets (b). . . 2.25 2.16 2.13 2.69
Portfolio turnover (b) . . . . . . . . . . . . . . . . . . 129.98 127.20 57.65 None
Net assets, end of year ($000 omitted) . . . . . . . . . . 198,341 130,764 62,549 12,408
Per share amount of fees waived ($ omitted). . . . . . . . .0466(c) .0410 .0314 .0112
Per share amount of fees reimbursed ($ omitted). . . . . . -- -- .0225 .0202
</TABLE>
++ For the period May 4, 1992 (commencement of operations) to August 31, 1992.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1992 are annualized.
(c) See Note 4.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Matrix Equity Fund (the "Fund"). The Investment
Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company which was organized
as a Massachusetts business trust on October 3, 1987 and now operates under
a First Amended and Restated Master Trust Agreement dated October 13, 1993.
The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal income taxes and no federal income tax provision was required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in foreign-denominated investments, and certain securities sold
at a loss. Accordingly, the Fund may periodically make reclassifications
among certain of its capital accounts without impacting its net asset
value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
price. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding short-term
investments, aggregated to $240,075,456 and $204,221,208, respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33-1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which
are divided between the Fund and its lending agent and are included as
interest income to the Fund. Income generated from the investment of cash
collateral is also divided between the Fund and its lending agent and is
included as interest income to the Fund. All collateral received will equal
at least 100% of the market value of the loaned securities at the inception
of each loan. This collateral must be maintained at not less than 100% of
the market value of the loaned securities during the period of the loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the fiscal year ended August
31, 1995, the Adviser voluntarily agreed to waive one-half of its advisory
fee to the Fund. The Investment Company has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees to the Agents in an amount that per annum is equal to .025% and
.175% of the average daily value of all Fund shares held by or for
customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
of the average daily value of net assets on an annual basis, which includes
a limit of .20% in shareholder servicing fees for all providers.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts related to distribution and shareholder servicing fees are included
in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides with adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain distribution-
related expenses incurred by the Investment Company's Distributor on behalf
of the funds (up to a maximum of 15% of the asset-based fee determined in
(i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new funds.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of
$116,157 to SSBSI for the fiscal year ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
5. DIVIDENDS
On September 1, 1995, the Board of Trustees declared a dividend of $.0612
from net investment income, payable on September 12, 1995 to shareholders
of record September 5, 1995.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
TAX INFORMATION
August 31, 1995
The Fund paid distributions of $.0588 per share from net long-term capital gains
during its taxable year ended August 31, 1995. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $672,007 as capital gain dividends
for its taxable year ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617)654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
PAGE
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
S&P 500 Index Fund Financial Statements. . . . . . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 22
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 28
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark" is a registered trademark and
service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the S&P 500 Index Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James May, Investment Officer, has been the portfolio manager primarily
responsible for investment decisions regarding the S&P 500 Index Fund since May
1995. Mr. May has been an investment officer since January 1994 and a portfolio
manager in the US Structured Products Group of State Street since that time.
From 1991 to 1993, he served as an Investment Support Analyst in the US Passive
Services Group of State Street Global Advisors. There are four other portfolio
managers who work with Mr. May in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[Chart]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
YEARLY PERIODS
ENDED S&P 500 S&P 500-REGISTERED
AUGUST 31 INDEX FUND TRADEMARK- INDEX**
- -------------- ---------- -------------------
<S> <C> <C>
Inception* $10,000 $10,000
1993 $10,806 $10,831
1994 $11,377 $11,421
1995 $13,779 $13,883
</TABLE>
The Seven Seas Series S&P 500 Index Fund seeks to replicate the total return of
the Standard & Poor's-Registered Trademark- 500 Composite Stock Price Index. To
accomplish this objective, the Fund replicates the Index by holding each
security in the Index according to its capitalization weight relative to the
total market values of all the securities in the Index. This structure allows
the Fund performance to closely track the performance of the Index, although
Fund returns are net of expenses not found in the Index.
The S&P 500 Index is composed of 500 common stocks which represent approximately
75% of the market value of all US common stocks. Standard & Poor's Corporation
chooses those 500 stocks to capture the price performance of a large
cross-section of the US publicly traded stock market. As such, the Index is
structured to approximate the general distribution of industries in the US
economy and not necessarily the 500 largest companies.
The Fund closed the fiscal year with a 21.11% return as compared to the S&P 500
benchmark results of 21.56%. The Fund's deviation from the benchmark return can
primarily be attributed to expenses and trading costs.
The past year's rally pushed the Index to many new closing highs, culminating in
a new all-time high. Several factors may be responsible for the dramatic
turnaround and sustained growth in the US equity market. First, as the economy
slowed, many believed that the Federal
SEVEN SEAS SERIES
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 12,111 21.11%
Inception 13,779 12.77%+
</TABLE>
STANDARD & POOR'S-Registered Trademark-
500 COMPOSITE STOCK PRICE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 12,156 21.56%
Inception 13,883 13.09%+
</TABLE>
* The Fund commenced operations on December 30, 1992. Index comparison began
December 31, 1992.
** The Standard & Poor's-Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's
Corporation to best capture the price performance of a large cross-section of
the US publicly traded stock market. The Index is structured to approximate
the general distribution of industries in the US economy.
+ Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
Reserve Board would not continue the rate increases that dominated the headlines
through most of 1994. Second, the slowing US economy led many investors to
believe that inflation would remain in control. Third, after-tax corporate
profits were very strong. And fourth, record merger and acquisition activity
encouraged speculation in the marketplace.
The stock market rally over the past year has been dominated by large cap growth
stocks. However, this trend began to weaken as smaller cap stocks outperformed
larger cap stocks in June, July and August of 1995. In the S&P 500 Index, the
technology sector was the best performing sector over the past fiscal year. Led
by Intel Corp., Microsoft, and IBM (along with Lotus), the sector returned a
dramatic 47.81%. This was followed closely by the health care sector which
produced an equally impressive return of 35.21%.
The record merger and acquisition activity of the past year produced many
changes in the S&P 500 Index. Most notable was the acquisition of Lotus
Development by IBM, both S&P 500 constituents. Lotus was replaced in the Index
by Republic New York on July 3, 1995.
The Adviser believes the Fund has successfully fulfilled its objective to
closely match the return of the S&P 500 Index during the fiscal year ended
August 31, 1995.
------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
(1) "Standard & Poor's-Registered Trademark", "S&P-Registered Trademark", S&P
500-Registered Trademark", "Standard & Poor's 500" and "500" are trademarks
of Standard & Poor's Corporation and have been licensed for use by The Seven
Seas Series Fund. The Product is not sponsored, endorsed, sold or promoted
by S&P, and S&P makes no representation regarding the advisability of
investing in the Product.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series S&P 500 Index Fund (the
"Fund"), as of August 31, 1995, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the two fiscal years in the period then ended and for the period December 30,
1992 (commencement of operations) to August 31, 1993. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period December 30, 1992
(commencement of operations) to August 31, 1993 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
COMMON STOCKS - 95.0%
BASIC INDUSTRIES - 7.3%
Air Products & Chemicals, Inc. 14,200 $ 761
Alcan Aluminum, Ltd. 28,700 936
Alco Standard Corp. 7,000 564
Aluminum Co. of America 22,700 1,297
ARMCO, Inc. (a) 14,500 91
ASARCO, Inc. 4,500 146
Barrick Gold Corp. 44,300 1,124
Bemis Co., Inc. 5,900 171
Bethlehem Steel Corp. (a) 13,800 202
Boise Cascade Corp. 6,700 287
Champion International Corp. 11,600 657
Cincinnati Milacron, Inc. 4,100 136
Crown Cork & Seal Co., Inc. (a) 11,200 504
Cyprus Amax Minerals Co. 11,500 322
Dow Chemical Co. 34,200 2,531
du Pont (E.I.) de Nemours & Co. 68,800 4,498
Eastman Chemical Co. 10,325 667
Echo Bay Mines, Ltd. 13,900 144
Engelhard Corp. 17,425 492
Federal Paper Board, Inc. 6,100 242
First Mississippi Corp. 2,500 83
FMC Corp. New (a) 4,700 362
Freeport McMoRan Copper
& Gold, Inc. Class B (a) 24,600 575
Goodrich (B.F.) Co. 3,300 196
Grace (W.R.) & Co. 11,700 780
Great Lakes Chemical Corp. 8,100 536
Hercules, Inc. 14,500 807
Homestake Mining Co. 16,900 279
Illinois Tool Works, Inc. 14,600 894
Inco, Ltd. 15,400 539
Inland Steel Industries, Inc. 5,800 159
International Paper Co. 15,900 1,302
James River Corp. of Virginia 9,600 334
Kimberly-Clark Corp. 20,500 1,309
Mallinckrodt Group, Inc. 9,400 354
Mead Corp. 7,200 442
Minnesota Mining &
Manufacturing Co. 52,100 2,846
Monsanto Co. 14,600 1,385
Morton International, Inc. 18,900 614
Nalco Chemical Co. 8,500 298
Newmont Mining Corp. 10,812 470
Nucor Corp. 11,200 549
Phelps Dodge Corp. 8,300 526
Placer Dome, Inc. 29,700 776
Potlatch Corp. 3,700 147
PPG Industries, Inc. 26,300 1,124
Praxair, Inc. 17,300 450
Premark International, Inc. 7,900 414
Reynolds Metals Co. 8,000 478
Rohm & Haas Co. 8,600 514
Santa Fe Pacific Gold Corp. 16,960 206
Scott Paper Co. 19,300 895
Sigma Aldrich Corp. 6,300 299
Stone Container Corp. 13,100 285
Temple-Inland, Inc. 6,900 357
Union Camp Corp. 8,700 495
Union Carbide Corp. 17,400 618
USX-U.S. Steel Group 9,300 304
Westvaco Corp. 8,500 374
Willamette Industries, Inc. 6,500 446
Worthington Industries, Inc. 11,200 223
--------
39,816
--------
CAPITAL GOODS - 5.3%
Ball Corp. 3,600 122
Boston Scientific Corp. (a) 18,800 747
Briggs & Stratton Corp. 3,600 136
Browning-Ferris Industries, Inc. 27,200 915
Caterpillar, Inc. 25,500 1,712
Cooper Industries, Inc. 14,400 547
Crane Co. 4,300 155
Cummins Engine Co., Inc. 5,700 224
Deere & Co. 11,100 949
Dover Corp. 7,200 574
DSC Communications Corp. (a) 14,300 749
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Emerson Electric Co. 28,900 $ 2,063
Fluor Corp. 10,600 620
Foster Wheeler Corp. 4,700 173
General Electric Co. 211,700 12,464
General Signal Corp. 5,900 209
Giddings & Lewis, Inc. 4,200 69
Grainger (W.W.), Inc. 6,600 393
Harnischfeger Industries, Inc. 5,400 198
Ingersoll-Rand Co. 13,000 492
Johnson Controls, Inc. 5,600 341
Millipore Corp. 5,700 199
Morrison Knudsen Corp. 3,200 25
NACCO Industries, Inc. Class A 1,000 58
National Service Industries, Inc. 5,800 168
Pall Corp. 14,300 313
Parker-Hannifin Corp. 9,000 357
Raychem Corp. 5,500 241
Timken Co. 4,100 185
TRINOVA Corp. 3,800 140
Tyco International, Ltd. 9,600 568
Varity Corp. (a) 5,600 255
Westinghouse Electric Corp. 46,100 628
WMX Technologies, Inc. 61,700 1,812
Zurn Industries, Inc. 1,500 32
--------
28,833
--------
CONSUMER BASICS - 19.2%
Abbott Laboratories 99,300 3,848
Albertson's, Inc. 31,700 1,010
Allergan, Inc. 7,900 240
ALZA Corp. (a) 10,300 245
American Brands, Inc. 24,100 1,012
American Home Products Corp. 38,300 2,949
American Stores Co. 19,600 576
Amgen, Inc. (a) 33,800 1,618
Archer-Daniels-Midland Co. 69,175 1,150
Bard (C.R.), Inc. 6,400 198
Bausch & Lomb, Inc. 7,400 294
Baxter International, Inc. 35,600 1,388
Becton, Dickinson & Co. 8,300 468
Beverly Enterprises, Inc. (a) 12,300 163
Biomet, Inc. (a) 14,600 235
Black & Decker Corp. 11,800 382
Bristol-Myers Squibb Co. 63,100 4,330
Campbell Soup Co. 31,800 1,455
Clorox Co. 6,500 440
Coca-Cola Co. (The) 158,400 10,177
Colgate-Palmolive Co. 18,200 1,238
Columbia/HCA Healthcare Corp. 54,955 2,583
Community Psychiatric Centers 4,900 58
ConAgra, Inc. 31,500 1,193
Corning, Inc. 28,700 936
CPC International, Inc. 18,300 1,151
Dial Corp. (The) 11,200 269
Fleming Cos., Inc. 4,500 131
General Mills, Inc. 19,800 1,022
Giant Food, Inc. Class A 7,600 237
Gillette Co. 54,900 2,292
Great Atlantic &
Pacific Tea Co., Inc. 4,700 133
Heinz (H.J.) Co. 31,100 1,318
Hershey Foods Corp. 9,300 557
Johnson & Johnson 80,500 5,555
Kellogg Co. 28,000 1,890
Kroger Co. (a) 15,100 493
Lilly (Eli) & Co. 36,300 2,972
Manor Care, Inc. 7,900 256
Medtronic, Inc. 14,500 1,368
Merck & Co., Inc. 154,400 7,701
PepsiCo, Inc. 98,100 4,439
Pfizer, Inc. 78,600 3,881
Philip Morris Cos., Inc. 105,500 7,873
Pioneer Hi-Bred International, Inc. 10,600 454
Procter & Gamble Co. 85,700 5,945
Quaker Oats Co. 16,500 573
Ralston-Purina Group 12,500 650
Rubbermaid, Inc. 19,900 592
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Sara Lee Corp. 61,200 $ 1,698
Schering-Plough Corp. 46,000 2,145
Snap-On Tools Corp. 4,900 201
St. Jude Medical, Inc. (a) 5,700 339
Stanley Works 5,700 252
SYSCO Corp. 23,100 664
Tenet Healthcare Corp. (a) 24,700 392
U.S. Healthcare, Inc. 20,400 648
U.S. Surgical Corp. 6,900 175
Unilever NV 19,800 2,448
United Healthcare Corp. 22,100 934
Upjohn Co. 21,600 915
UST Corp. 24,700 673
Warner-Lambert Co. 17,200 1,554
Whitman Corp. 12,300 248
Winn-Dixie Stores, Inc. 9,900 589
Wrigley (Wm.), Jr. Co. 14,300 646
--------
104,459
--------
CONSUMER DURABLES - 2.7%
Bassett Furniture Industries, Inc. 1,600 40
Chrysler Corp. 45,700 2,462
Cooper Tire & Rubber Co. 10,500 273
Dana Corp. 13,400 400
Eaton Corp. 10,100 547
Echlin, Inc. 8,000 276
Fleetwood Enterprises, Inc. 7,300 143
Ford Motor Co. 127,700 3,911
General Motors Corp. 93,100 4,376
Genuine Parts Co. 15,200 599
Goodyear Tire & Rubber Co. 19,400 776
Maytag Corp. 14,600 226
Outboard Marine Corp. 2,200 47
PACCAR, Inc. 5,395 263
Whirlpool Corp. 9,000 491
Zenith Electronics Corp. (a) 6,400 53
--------
14,883
--------
CONSUMER NON-DURABLES - 6.4%
Alberto Culver Co. Class B 3,800 108
Anheuser-Busch Cos., Inc. 32,700 1,868
Avon Products, Inc. 8,600 607
Brown Group, Inc. 2,000 37
Brown-Forman Distillers, Inc.
Class B 8,500 315
Brunswick Corp. 11,900 239
Charming Shoppes, Inc. 12,300 65
Circuit City Stores, Inc. 11,900 411
Coors (Adolph) Co. Class B 4,000 67
Dayton Hudson Corp. 9,200 673
Dillard Department Stores, Inc.
Class A 14,000 432
Eastman Kodak Co. 42,200 2,432
Fruit of the Loom, Inc. Class A (a) 9,300 219
Gap, Inc. 18,000 578
Handleman Co. 3,500 33
Hasbro, Inc. 10,500 340
Home Depot, Inc. (The) 58,966 2,351
International Flavors &
Fragrances, Inc. 14,200 680
Jostens, Inc. 5,700 137
K mart Corp. 56,900 775
Limited, Inc. (The) 45,600 844
Liz Claiborne, Inc. 8,600 196
Longs Drug Stores, Inc. 2,900 107
Lowe's Cos., Inc. 20,400 678
Mattel, Inc. 27,706 803
May Department Stores Co. 31,200 1,322
Melville Corp. 13,400 447
Mercantile Stores, Inc. 4,300 197
Newell Co. 19,800 495
NIKE, Inc. Class B 9,100 843
Nordstrom, Inc. 10,200 418
Penney (J.C.) Co., Inc. 29,200 1,321
Pep Boys-Manny, Moe & Jack 7,500 206
Polaroid Corp. 5,500 240
Price/Costco, Inc. (a) 24,400 412
Reebok International, Ltd. 10,000 355
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Rite Aid Corp. 11,800 $ 330
Russell Corp. 5,000 138
Seagram Co., Ltd. 47,600 1,761
Sears Roebuck & Co. 49,600 1,606
Springs Industries, Inc. 2,500 108
Stride Rite Corp. 5,800 65
SuperValu, Inc. 9,000 267
TJX Cos., Inc. 7,800 98
Toys "R" Us, Inc. (a) 34,700 902
V.F. Corp. 8,100 443
Wal-Mart Stores, Inc. 286,800 7,062
Walgreen Co. 31,400 769
Woolworth Corp. 16,500 221
--------
35,021
--------
CONSUMER SERVICES - 1.9%
AMR Corp. (a) 9,500 670
Bally Entertainment Group (a) 5,600 68
Darden Restaurants, Inc. (a) 19,400 199
Delta Air Lines, Inc. 6,400 476
Disney (Walt) Co. 64,800 3,637
Harrah's Entertainment, Inc. 12,900 411
Hilton Hotels Corp. 6,000 399
King World Productions, Inc. (a) 4,700 179
Luby's Cafeterias, Inc. 2,800 56
Marriot International, Inc. 15,400 547
McDonald's Corp. 86,200 3,146
Ryan's Family Steak Houses, Inc. (a) 5,700 41
Shoney's, Inc. (a) 5,000 58
Southwest Airlines Co. 18,000 466
USAir Group, Inc. (a) 6,400 52
Wendy's International, Inc. 12,800 250
--------
10,655
--------
ENERGY - 8.7%
Amerada Hess Corp. NPV 11,700 554
Amoco Corp. 61,800 3,940
Ashland, Inc. 7,500 246
Atlantic Richfield Co. 20,475 2,234
Baker Hughes, Inc. 18,500 416
Burlington Resources, Inc. 15,700 638
Chevron Corp. 81,100 3,923
Dresser Industries, Inc. 22,800 547
Exxon Corp. 155,200 10,670
Halliburton Co. 14,600 619
Helmerich & Payne, Inc. 2,700 77
Kerr-McGee Corp. 6,300 347
Louisiana Land & Exploration Co. 4,200 161
McDermott International, Inc. 6,300 143
Mobil Corp. 49,300 4,696
NorAm Energy Corp. 15,200 108
Occidental Petroleum Corp. 39,800 866
Oryx Energy Co. (a) 12,400 167
Pennzoil Co. 5,700 251
Phillips Petroleum Co. 32,900 1,082
Pittston Services Group 5,400 137
Rowan Cos., Inc. (a) 8,400 68
Royal Dutch Petroleum Co. - ADR 66,900 7,978
Santa Fe Energy Resources, Inc. (a) 11,100 105
Schlumberger, Ltd. 30,900 1,993
Sun Co., Inc. 8,555 228
Tenneco, Inc. 22,900 1,111
Texaco, Inc. 33,100 2,143
Unocal Corp. 31,200 909
USX-Marathon Group 37,600 776
Western Atlas, Inc. (a) 6,400 289
--------
47,422
--------
FINANCE - 11.8%
Aetna Life & Casualty Co. 14,100 962
Ahmanson (H.F.) & Co. 14,500 344
Alexander & Alexander
Services, Inc. 5,800 134
Allstate Corp. 57,294 1,941
American Express Co. 61,500 2,483
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
American General Corp. 26,300 $ 927
American International Group, Inc. 59,050 4,761
Banc One Corp. 50,357 1,693
Bank of Boston Corp. 14,200 625
Bank of New York Co., Inc. 24,450 1,064
BankAmerica Corp. 46,400 2,622
Bankers Trust New York Corp. 9,800 675
Barnett Banks, Inc. 12,000 686
Beneficial Corp. 6,500 319
Boatmen's BancShares, Inc. 15,500 574
Chase Manhattan Corp. 22,700 1,305
Chemical Banking Corp. 30,700 1,788
Chubb Corp. (The) 11,100 1,013
CIGNA Corp. 9,200 890
Citicorp 49,400 3,279
CoreStates Financial Corp. 18,000 666
Dean Witter, Discover & Co. 21,493 1,096
Federal Home Loan Mortgage Corp. 23,100 1,484
Federal National Mortgage
Association 33,900 3,233
First Chicago Corp. 10,900 691
First Fidelity Bancorp 10,100 660
First Interstate Bancorp 9,200 879
First Union Corp. 21,700 1,088
Fleet Financial Group, Inc. 17,600 651
General Re Corp. 10,500 1,561
Golden West Financial Corp. 7,600 363
Great Western Financial Corp. 16,700 390
Household International Corp. 12,000 674
Jefferson-Pilot Corp. 6,100 384
KeyCorp 29,699 921
Lincoln National Corp. 12,100 520
Loews Corp. 7,200 946
Marsh & McLennan Cos., Inc. 9,000 741
MBNA Corp. 18,650 662
Mellon Bank Corp. 18,700 886
Merrill Lynch & Co., Inc. 21,600 1,245
Morgan (J.P.) & Co., Inc. 23,900 1,742
National City Corp. 18,400 547
NationsBank Corp. 34,600 2,124
NBD Bancorp, Inc. 20,600 736
Norwest Corp. 41,300 1,244
PNC Bank Corp. 28,900 759
Republic New York Corp. 6,600 371
SAFECO Corp. 8,000 517
Salomon, Inc. 13,300 510
Shawmut National Corp. 16,100 521
St. Paul Cos., Inc. 10,800 586
SunTrust Banks, Inc. 14,500 890
Torchmark Corp. 8,700 348
Transamerica Corp. 8,700 592
Travelers, Inc. 40,792 1,958
U.S. Bancorp of Oregon 12,100 346
UNUM Corp. 8,900 427
USF & G Corp. 11,200 203
USLIFE Corp. 2,600 112
Wachovia Corp. 21,300 847
Wells Fargo & Co. 6,200 1,155
--------
64,361
--------
GENERAL BUSINESS - 4.6%
American Greetings Corp. Class A 8,800 271
Automatic Data Processing, Inc. 18,100 1,177
Block (H&R) Co., Inc. 13,000 507
Capital Cities/ABC, Inc. 19,600 2,254
CBS, Inc. 7,800 622
Comcast Corp. Special Class A 29,900 639
Computer Sciences Corp. (a) 6,900 416
CUC International, Inc. (a) 21,500 734
Deluxe Corp. 10,300 322
Donnelley (R.R.) & Sons Co. 19,100 726
Dow Jones & Co., Inc. 11,900 436
Dun & Bradstreet Corp. 21,600 1,250
Ecolab, Inc. 7,500 205
First Data Corp. 15,300 893
Gannett Co., Inc. 17,900 958
Harcourt General, Inc. 9,400 391
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Harland (John H.) Co. 3,500 $ 77
Interpublic Group Cos., Inc. 10,000 389
Knight-Ridder, Inc. 6,100 343
McGraw-Hill, Inc. 6,300 496
Meredith Corp. 3,300 130
Moore Corp., Ltd. 12,300 257
New York Times Co. Class A 11,700 291
Ogden Corp. 6,400 149
Safety-Kleen Corp. 7,700 104
SBC Communications, Inc. 75,600 3,827
Service Corp. International 12,000 420
Tele-Communications, Inc. Class A (a) 83,300 1,531
Time Warner, Inc. 47,000 1,980
Times Mirror Co. Series A 13,800 423
Tribune Co. 8,100 542
Viacom, Inc. Class B (a) 44,511 2,163
--------
24,923
--------
MISCELLANEOUS - 0.4%
ITT Corp. 13,400 1,603
Providian Corp. 12,100 464
--------
2,067
--------
SHELTER - 0.8%
Armstrong World Industries, Inc. 5,200 298
Centex Corp. 3,800 111
Georgia Pacific Corp. 11,100 999
Kaufman & Broad Home Corp. 3,700 49
Louisiana Pacific Corp. 13,200 314
Masco Corp. 19,900 557
Owens-Corning Fiberglas Corp. (a) 5,900 232
Pulte Corp. 3,400 92
Sherwin-Williams Co. 10,600 380
Weyerhaeuser Co. 26,200 1,206
--------
4,238
--------
TECHNOLOGY - 13.1%
Advanced Micro Devices, Inc. 12,500 422
Allied-Signal, Inc. 36,300 1,611
Amdahl Corp. (a) 14,800 135
AMP, Inc. 26,432 1,074
Andrew Corp. (a) 4,575 266
Apple Computer, Inc. 15,600 671
Applied Materials, Inc. (a) 10,700 1,113
Autodesk, Inc. 5,900 271
Avery Dennison Corp. 6,500 267
Boeing Co. 42,400 2,703
Cabletron Systems, Inc. (a) 9,000 476
Ceridian Corp. (a) 5,400 236
Cisco Systems, Inc. (a) 33,200 2,175
COMPAQ Computer Corp. (a) 33,400 1,595
Computer Associates
International, Inc. 20,100 1,397
Cray Research, Inc. (a) 2,500 58
Data General Corp. (a) 4,100 40
Digital Equipment Corp. (a) 18,100 756
EG&G, Inc. 6,600 125
General Dynamics Corp. 8,400 442
Harris Corp. 5,300 305
Hewlett-Packard Co. 63,600 5,088
Honeywell, Inc. 16,600 726
Intel Corp. 103,300 6,340
Intergraph Corp. (a) 5,200 64
International Business
Machines Corp. 72,500 7,495
Lockheed Martin Corp. 24,591 1,497
Loral Corp. 10,400 569
McDonnell Douglas Corp. 14,000 1,124
Micron Technology, Inc. 25,400 1,953
Microsoft Corp. (a) 72,500 6,697
Motorola, Inc. 73,400 5,487
National Semiconductor Corp. (a) 15,200 429
Northern Telecom, Ltd. 32,300 1,187
Northrop Grumman Corp. 6,400 390
Novell, Inc. (a) 46,700 841
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Oracle Systems Corp. (a) 53,450 $ 2,138
Perkin-Elmer Corp. 5,500 188
Pitney Bowes, Inc. 19,200 780
Raytheon Co. 15,700 1,270
Rockwell International Corp. 27,200 1,217
Scientific-Atlanta, Inc. 9,600 192
Shared Medical Systems 2,600 96
Silicon Graphics, Inc. (a) 20,200 853
Sun Microsystems, Inc. (a) 11,500 663
Tandem Computers, Inc. (a) 15,800 194
Tandy Corp. 9,300 578
Tektronix, Inc. 4,000 183
Teledyne, Inc. 7,200 171
Tellabs, Inc. (a) 11,000 514
Texas Instruments, Inc. 23,000 1,722
Textron, Inc. 10,300 706
Thomas & Betts Corp. 2,400 162
TRW, Inc. 7,800 607
Unisys Corp. (a) 21,300 170
United Technologies Corp. 15,700 1,308
Xerox Corp. 13,700 1,653
--------
71,390
--------
TRANSPORTATION - 1.4%
Burlington Northern, Inc. 11,700 810
Conrail, Inc. 10,000 673
Consolidated Freightways, Inc. 6,700 173
CSX Corp. 13,400 1,106
Federal Express Corp. (a) 7,400 531
Laidlaw, Inc. Class B 34,200 308
Navistar International Corp. (a) 10,050 131
Norfolk Southern Corp. 16,600 1,174
Roadway Services, Inc. 4,800 262
Ryder System, Inc. 10,800 262
Santa Fe Southern Pacific Corp. (a) 18,883 536
Union Pacific Corp. 26,200 1,715
Yellow Corp. 2,900 40
--------
7,721
--------
UTILITIES - 11.4%
Airtouch Communications, Inc. (a) 61,100 1,986
Alltel Corp. 23,400 661
American Electric Power Co., Inc. 23,100 788
Ameritech Corp. 68,800 3,526
AT&T Corp. 197,700 11,170
Baltimore Gas & Electric Co. 19,000 499
Bell Atlantic Corp. 54,200 3,238
BellSouth Corp. 61,800 4,249
Carolina Power & Light Co. 19,500 597
Central & Southwest Corp. 24,000 588
CINergy Corp. 19,226 493
Coastal Corp. 12,700 416
Columbia Gas System, Inc. (a) 5,900 208
Consolidated Edison Co.
of New York, Inc. 29,700 839
Consolidated Natural Gas Co. 11,600 448
Detroit Edison Co. 18,000 551
Dominion Resources, Inc. 21,400 773
Duke Power Co. 25,900 1,052
Eastern Enterprises, Inc. 2,600 80
Enron Corp. 32,100 1,079
ENSERCH Corp. 8,000 131
Entergy Corp. 29,100 698
FPL Group, Inc. 23,500 914
General Public Utilities Corp. 15,200 435
GTE Corp. 120,800 4,424
Houston Industries, Inc. 16,500 699
MCI Communications Corp. 86,700 2,081
Niagara Mohawk Power Corp. 17,900 215
NICOR, Inc. 6,500 167
Northern States Power Co. 8,300 354
NYNEX Corp. 52,800 2,376
Ohio Edison Co. 19,400 420
ONEOK, Inc. 3,000 66
Pacific Enterprises 10,400 250
Pacific Gas & Electric Co. 54,900 1,578
Pacific Telesis Group 54,100 1,535
PacifiCorp. 35,200 638
Panhandle Eastern Corp. 19,400 485
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
------ ------
<S> <C> <C>
Peco Energy Co. 28,300 $ 753
Peoples Energy Corp. 4,000 109
Public Service Enterprise
Group, Inc. 31,200 858
SCE Corp. 57,100 949
Sonat, Inc. 10,700 340
Southern Co. 84,900 1,794
Sprint Corp. 44,500 1,580
Texas Utilities Co. 28,800 1,001
U.S. West, Inc. 58,400 2,540
Unicom Corp. 26,600 748
Union Electric Co. 12,400 442
Williams Cos. (The) 12,527 458
--------
62,279
--------
TOTAL COMMON STOCKS
(cost $451,513) 518,068
--------
PREFERRED STOCKS - 0.0%
Teledyne, Inc. Series E 72 1
--------
TOTAL PREFERRED STOCKS
(cost $1) 1
--------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 3.0%
Franklin US Treasuries
Money Market Fund (b) $ 14,536 14,536
United States Treasury Bills (b)(c)(d)
5.400% due 10/19/95 50 49
5.410% due 10/19/95 45 45
5.415% due 10/19/95 160 159
5.425% due 10/19/95 300 298
5.430% due 10/19/95 225 223
5.440% due 10/19/95 930 923
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $16,233) 16,233
--------
TOTAL INVESTMENTS
(identified cost $467,747)(e) - 98.0% 534,302
OTHER ASSETS AND LIABILITIES,
NET - 2.0% 10,898
--------
NET ASSETS - 100.0% $545,200
--------
--------
</TABLE>
(a) Non-income-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity.
(d) Collateral for open futures contracts.
(e) At August 31, 1995, the cost for federal income tax purposes was $469,225
and net unrealized appreciation for all securities was $65,078. This
consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $71,522 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $6,444.
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
FUTURES CONTRACTS AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER UNREALIZED
OF APPRECIATION
CONTRACTS (000)
--------- ------------
<S> <C> <C>
FUTURES CONTRACTS (NOTES 2 AND 3)
S&P 500 Financial Futures Contract
Expiration date 12/95 96 $ 1,166
--------
Total Unrealized Appreciation on
Open Futures Contracts Purchased (*) $ 1,166
--------
--------
</TABLE>
(*) At August 31, 1995, United States Treasury Bills valued at $1,658 with a par
value of $1,670 were held as collateral by the custodian in connection with
open futures contracts held by the Fund.
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $467,747,284)(Note 2) . . . . . . . . . $534,302,413
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,621,496
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,009,892
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,652,972
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . 15,012
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,587
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . 16,245
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . 76,025
------------
545,707,642
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . $ 405,464
Accrued administrative fees. . . . . . . . . . . . . . . . . . 11,721
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . 49,265
Accrued distribution fees. . . . . . . . . . . . . . . . . . . 17,926
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . 16,546
Other accrued expenses . . . . . . . . . . . . . . . . . . . . 7,194 508,116
------------ ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $545,199,526
------------
------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . $3,131,469
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . 7,877,260
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,555,129
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,025
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . 42,546
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 466,427,097
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $545,199,526
------------
------------
Net asset value, offering and redemption price per share
($545,199,526 divided by 42,546,107 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . $12.81
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $59,079) . . . . . . . . . . . . . $ 10,702,853
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872,679
------------
11,575,532
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . $ 391,746
Administrative fees. . . . . . . . . . . . . . . . . . . . . . 115,292
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 156,463
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . 153,822
Professional fees. . . . . . . . . . . . . . . . . . . . . . . 23,251
Registration fees. . . . . . . . . . . . . . . . . . . . . . . 94,079
Shareholder servicing fees . . . . . . . . . . . . . . . . . . 103,181
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . 76,457
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . 17,230
Amortization of deferred organization expenses . . . . . . . . 5,582
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 11,771
------------
Expenses before waivers. . . . . . . . . . . . . . . . . . . . 1,148,874
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . (391,746) 757,128
------------ ------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,818,404
------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . 6,220,503
Futures contracts (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . 4,235,443
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,483,111
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580,200
------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . 61,519,257
------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . $ 72,337,661
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FISCAL YEARS ENDED AUGUST 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,818,404 $ 8,416,400
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,220,503 1,106,397
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,235,443 (249,725)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,483,111 9,062,722
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580,200 424,475
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . 72,337,661 18,760,269
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,950,577) (7,633,274)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,022,577) (2,008,868)
In excess of net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . . -- (1,570,658)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . 122,123,121 115,498,720
------------ ------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,487,628 123,046,189
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,711,898 238,665,709
------------ ------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$3,131,469 and $2,256,712, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . $545,199,526 $361,711,898
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1995 1994
--------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . . . 29,817,446 $ 349,805,925 13,065,144 $137,699,362
Fund shares issued to shareholders
in reinvestments of distributions . . . . . . . . . . 978,683 10,716,644 1,005,728 10,655,008
Fund shares redeemed . . . . . . . . . . . . . . . . . (21,450,886) (238,399,448) (3,126,460) (32,855,650)
------------ ------------- ----------- ------------
Net increase (decrease). . . . . . . . . . . . . . . . 9,345,243 $ 122,123,121 10,944,412 $115,498,720
------------ ------------- ----------- ------------
------------ ------------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each fiscal year or period ended August 31 and other
performance information derived from the financial statements.
<TABLE>
<CAPTION>
1995 1994 1993++
--------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 10.89 $ 10.72 $ 10.00
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .29 .26 .15
Net realized and unrealized gain on investments. . . 1.95 .29 .65
--------- --------- ---------
Total From Investment Operations . . . . . . . . . . 2.24 .55 .80
--------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . (.29) (.26) (.08)
Net realized gain on investments . . . . . . . . . . (.03) (.07) --
In excess of net realized gain on investments. . . . -- (.05) --
--------- --------- ---------
Total Distributions. . . . . . . . . . . . . . . . . (.32) (.38) (.08)
--------- --------- ---------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 12.81 $ 10.89 $ 10.72
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . 21.11 5.29 8.06
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
daily net assets (b) . . . . . . . . . . . . . . . .19(c) .15 .15
Operating expenses, gross, to average
daily net assets (b) . . . . . . . . . . . . . . . .29(c) .25 .35
Net investment income to average daily net assets (b) 2.76 2.69 3.02
Portfolio turnover (b) . . . . . . . . . . . . . . . 38.56 7.97 48.10
Net assets, end of year ($000 omitted) . . . . . . . 545,200 361,712 238,666
Per share amount of fees waived ($ omitted). . . . . .0107(c) .0030 .0027
Per share amount of fees reimbursed ($ omitted). . . -- .0067 .0071
</TABLE>
++ For the period December 30, 1992 (commencement of operations) to August 31,
1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1993 are annualized.
(c) See Note 4.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series S&P 500 Index Fund (the "Fund"). The Investment
Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company which was organized
as a Massachusetts business trust on October 3, 1987 and now operates under
a First Amended and Restated Master Trust Agreement dated October 13, 1993.
The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of these
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities, fixed-income securities and options are valued
on the basis of the closing bid price. Futures contracts are valued on the
basis of the last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
AUGUST 31, 1995
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal taxes and no federal income tax provision was required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in options, futures,
foreign denominated investments, and certain securities sold at a loss.
Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting its net asset value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
DERIVATIVES: Effective September 1, 1994, the Fund has adopted the
provisions of Statement of Financial Accounting Standards (SFAS) 119
"Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments."
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
AUGUST 31, 1995
To the extent permitted by the investment objectives, restrictions and
policies set forth in the Fund's Prospectus and Statement of Additional
Information, the Fund may participate in various derivative-based
transactions. Derivative securities are instruments or agreements whose
value is derived from an underlying security or index. These instruments
offer unique characteristics and risks that assist the Fund to meet its
investment objective.
The Fund typically uses derivatives for cash equitization. Cash
equitization is a technique that is used by the Fund through the use of
options and futures to earn "market-like" returns with the Fund's excess
and liquidity reserve cash balances. By purchasing certain instruments, a
fund may more effectively achieve the desired portfolio characteristics
that allow the fund to meet its investment objective. The Fund uses futures
and options contracts solely for the purpose of cash management. The
primary risks associated with the use of derivatives are generally
categorized as market risk.
FUTURES: The Fund is currently utilizing exchange-traded futures contracts.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Fund and the prices of futures contracts and the possibility of
an illiquid market. Futures contracts are valued based upon their quoted
daily settlement prices; changes in initial settlement value are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding short-term
investments, futures contracts and repurchase agreements, aggregated to
$272,671,719 and $142,907,205 respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
fiscal year ended August 31, 1995, were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
------------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
--------- -------------
<S> <C> <C>
Outstanding at August 31, 1994 56 $ 12,714,150
Contracts opened 682 175,063,975
Contracts closed (642) (161,706,550)
--------- -------------
Outstanding at August 31, 1995 96 $ 26,071,575
--------- -------------
--------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each contract
was opened.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3% of
its total assets to certain brokers. The Fund receives cash (US currency) and
securities issued or guaranteed by the US Government or
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
AUGUST 31, 1995
its agencies as collateral against the loaned securities. To the extent
that a loan is secured by cash collateral, such collateral shall be
invested in short-term debt securities. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and its lending agent, and are
included as interest income to the Fund. Income generated from the
investment of cash collateral is also divided between the Fund and its
lending agent, and is included as interest income to the Fund. All
collateral received will equal at least 100% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Consequently, loans are
made only to borrowers which are deemed to be of good financial standing.
As of the fiscal year ended August 31, 1995, there were no securities out
on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .10% of its average daily net assets. The Investment Company has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
For the fiscal year ended August 31, 1995, the Adviser voluntarily agreed
to waive up to the full amount of its advisory fee to the extent that total
expenses exceed .15% of its average daily net assets on an annual basis.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees to the Agents, in an amount that per annum is equal to .025% and
.175% of the average daily value of all Fund shares held by or for
customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
of the average daily value of net assets on an annual basis, which includes
a limit of .20% in shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
AUGUST 31, 1995
forward for subsequent reimbursement from the Investment Company. In no
event may excess amounts be carried forward more than two fiscal years from
the year when such expenses were incurred. The amounts related to
distribution and shareholder servicing fees are included in the
accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain distribution-
related expenses incurred by the Investment Company's Distributor on behalf
of the Fund (up to a maximum of 15% of the asset-based fee determined in
(i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new funds.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of
$74,061 to SSBSI for the fiscal year ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
5. DIVIDENDS
On September 1, 1995, the Board of Trustees declared a dividend of $.0733
from net investment income, payable on September 12, 1995, to shareholders
of record September 5, 1995.
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
TAX INFORMATION
AUGUST 31, 1995
The Fund paid distributions of $.0167 per share from net long-term capital gains
during its taxable year ended August 31, 1995. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $586,000 as capital gain dividends
for its taxable year ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 754-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
28 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 8
Small Cap Fund Financial Statements. . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . 16
Additional Information . . . . . . . . . . . . . . . . . . . 21
Tax Information. . . . . . . . . . . . . . . . . . . . . . . 22
Fund Management and Service Providers. . . . . . . . . . . . 23
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Small Cap Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Jeffrey Adams, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Small Cap Fund
since December 1994. Mr. Adams has been with State Street since 1990, as a
portfolio manager for the past three years, and as an account administrator for
two years prior to that. There are four other portfolio managers who work with
Mr. Adams in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Yearly Periods Small Cap S&P-Registered Trademark- Russell 2000-Registered
Ended August 31 Fund Midcap 400 Index** Trademark- Index++
- --------------- --------- ------------------------- -----------------------
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1992 $10,090 $10,245 $10,055
1993 $12,478 $12,751 $13,321
1994 $12,964 $13,341 $14,111
1995 $16,859 $16,077 $17,045
</TABLE>
The strategy as well as the objective of the Seven Seas Series Small Cap Fund
went through significant changes in 1994. The Fund originated in July 1992 as
a MidCap Index fund with an objective of tracking the S&P-Registered
Trademark- MidCap Index. Pursuant to a shareholder vote on November 22, 1994,
the Fund changed its strategy to an active small cap process, with an
objective of outperforming the Russell 2000 Index-Registered Trademark-. The
Fund has been very successful against the new benchmark since the change,
outperforming the Russell 2000 benchmark by 8.4% for year-to-date 1995.
The Fund outperformed the Russell 2000 Index in the first calendar quarter of
1995 by 4.7% and in the second calendar quarter of 1995 by 1.4%. A large part of
the performance can be attributed to the Fund's investment in the technology
sector. Although the Fund is not overweighted in technology, our stock selection
abilities within this sector proved better than the market.
The characteristics of the Fund are intended to be similar to that of the
Russell 2000 Index. When building the portfolio, the strategy exploits what has
been a powerful stock selection process by purchasing the best stocks within
each industry and by minimizing macroeconomic bets such as movements in interest
rates, industry timing and style rotation bets. The investment approach
identifies attractive equities based on fundamental changes in earnings
expectations. The universe of stocks is comprised of issues found in the Russell
2000 Index.
<TABLE>
<CAPTION>
SEVEN SEAS SERIES
SMALL CAP FUND
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 13,004 30.04%
Inception 16,859 17.93%+
</TABLE>
<TABLE>
<CAPTION>
STANDARD & POOR'S-Registered Trademark-
MIDCAP 400 INDEX
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 12,050 20.50%
Inception 16,077 16.18%+
</TABLE>
<TABLE>
<CAPTION>
RUSSELL 2000 INDEX-Registered Trademark-
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 12,079 20.79%
Inception 17,045 18.34%+
</TABLE>
*The Fund commenced operations on July 1, 1992. Index comparison began July 1,
1992.
**The Standard & Poor's -Registered Trademark- MidCap 400 Index is composed of
400 domestic stocks chosen for market size, liquidity and industry group
representation. It is a market-weighted index (stock price times shares
outstanding), with each stock affecting the Index in proportion to its market
value.
++The Russell 2000-Registered Trademark- Index is comprised of the 2,000
smallest securities in the Russell 3000 Index, representing approximately 7%
of the Russell 3000 total market capitalization. The Index is reconstituted
annually.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
The market over the past year has had an extraordinary run. Healthy corporate
earnings coupled with reduced fears of inflation have contributed to the
majority of market optimism. Early 1995 saw larger capitalization issues (S&P
500) outperform smaller capitalization issues (Russell 2000) by 5.8% with most
of the outperformance coming from the first quarter. In July 1995, small cap
stocks rebounded, producing a total return of 5.8% (Russell 2000) versus the S&P
500 return of 3.4%, narrowing the spread between small and large capitalization
issues.
----------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Small Cap Fund (formerly The
Seven Seas Series S&P Midcap Index Fund)(the "Fund"), as of August 31, 1995, and
the related statement of operations for the fiscal year then ended, the
statements of changes in net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period July 1, 1992 (commencement of
operations) to August 31, 1992. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period July 1, 1992 (commencement of
operations) to August 31, 1992 in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
COMMON STOCKS - 98.2%
BASIC INDUSTRIES - 7.1%
Amcast Industrial Corp. 4,100 $ 78
Brush Wellman, Inc. 2,800 57
Chesapeake Corp. 8,900 324
Cleveland-Cliffs, Inc. 3,600 163
Commercial Metals Co. 900 25
Cytec Industries, Inc. (a) 3,900 236
First Mississippi Corp. 6,700 222
Magma Copper Co. (a) 13,700 250
Mueller Industries, Inc. (a) 500 28
Sterling Chemicals, Inc. (a) 25,200 261
--------
1,644
--------
CAPITAL GOODS - 3.1%
Allied Products Corp. 5,400 117
Belden, Inc. 2,200 61
Harnischfeger Industries, Inc. 9,100 334
Kennametal, Inc. 2,200 84
Novellus Systems, Inc. (a) 400 29
Tennant Co. 400 10
United Waste Systems, Inc. (a) 2,000 78
--------
713
--------
CONSUMER BASICS - 14.1%
A. L. Pharma, Inc. Class A 7,800 164
Apria Healthcare Group, Inc. (a) 5,800 160
Bergen Brunswig Corp. Class A 14,760 308
Bindley Western Industries, Inc. 800 12
Casey's General Stores, Inc. 11,900 235
Chemed Corp. 100 4
Church and Dwight Co., Inc. 5,600 128
Community Psychiatric Centers 47,600 559
Cross (A.T.) Co. Class A 3,800 60
Dekalb Genetics Corp. Class B 1,500 60
Flowers Industries, Inc. 17,300 357
Healthwise America, Inc. (a) 3,500 95
Invacare Corp. 7,500 319
Medicine Shoppe International, Inc. 3,000 129
National Health Investors, Inc. 5,600 162
Pacific Physician Services, Inc. (a) 6,900 117
Ruddick Corp. 3,500 94
Smith's Food & Drug Centers, Inc.
Class B 2,400 45
Surgical Care Affiliates, Inc. 3,200 70
Ultratech Stepper, Inc. (a) 2,200 87
Watson Pharmaceuticals, Inc. (a) 3,100 126
--------
3,291
--------
CONSUMER DURABLES - 4.3%
Arctco, Inc. 3,500 48
Borg-Warner Automotive, Inc. 10,400 309
Carlisle Cos., Inc. 2,500 102
Coachmen Industries, Inc. 3,600 58
Oakwood Homes Corp. 3,600 115
Outboard Marine Corp. 5,300 113
Skyline Corp. 1,900 33
Toro Co. 5,800 174
Walbro Corp. 1,000 23
Winnebago Industries, Inc. 3,400 29
--------
1,004
--------
CONSUMER NON-DURABLES - 8.3%
CompUSA, Inc. (a) 20,600 762
Fieldcrest Cannon, Inc. (a) 900 21
Hills Store Co. (a) 1,000 14
Oshkosh B' Gosh, Inc. Class A 2,500 44
PeopleSoft, Inc. (a) 6,600 455
Service Merchandise Co., Inc. 36,900 263
Springs Industries, Inc. 6,400 276
Tiffany & Co. 2,200 94
--------
1,929
--------
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
CONSUMER SERVICES - 3.0%
Alaska Air Group, Inc. (a) 100 $ 2
Applebee's International, Inc. 18,100 541
GC Companies, Inc. (a) 3,100 104
Marcus Corp. 1,900 59
--------
706
--------
ENERGY - 4.2%
Barrett Resources Corp. (a) 5,590 120
Brown (Tom), Inc. (a) 4,500 60
Camco International, Inc. 8,100 184
Indresco, Inc. (a) 14,900 250
Smith International, Inc. (a) 21,500 376
--------
990
--------
FINANCE - 16.9%
Allied Group, Inc. 1,300 41
American Bankers
Insurance Group, Inc. 13,600 471
Amfed Financial, Inc. 3,000 91
Anchor Bancorp., Inc. 2,000 76
CCB Financial Corp. 2,400 114
City National Corp. 6,100 80
CMAC Investment Corp. 5,300 268
Coastal Bancorp, Inc. 400 7
Irwin Financial Corp. 500 17
Loyola Capital Corp. 5,700 200
MAF Bancorp, Inc. 660 16
Magna Group, Inc. 2,100 48
Money Store, Inc. 7,200 470
Orion Capital Corp. 2,600 109
Peoples Heritage Financial Group 13,600 274
Protective Life Corp. 11,200 319
Quick & Reilly Group, Inc. (The) 1,750 65
Resource Bancshares
Mortgage Group (a) 2,426 38
Security Capital Corp. (a) 3,400 180
Summit Bancorporation 5,400 134
TCF Financial Corp. 11,400 633
Zions Bancorp 5,200 286
--------
3,937
--------
GENERAL BUSINESS - 5.3%
American Business Products, Inc. 2,700 51
Arch Communications Group, Inc. (a) 1,800 49
Bowne & Co., Inc. 4,100 74
Gymboree Corp. (a) 2,100 63
Logicon, Inc. 5,700 314
Medaphis Corp. (a) 500 11
Media General, Inc. Class A 5,800 209
National Data Corp. 4,700 121
PHH Group, Inc. 4,700 205
SunGard Data Systems (a) 5,000 135
--------
1,232
--------
MISCELLANEOUS - 1.2%
Federal Realty Investment Trust 12,700 278
J.P. Realty, Inc. 500 10
--------
288
--------
SHELTER - 6.3%
Champion Enterprises, Inc. (a) 18,200 309
Fastenal Co. 3,200 105
Lennar Corp. 20,900 405
Toll Brothers, Inc. (a) 36,500 653
--------
1,472
--------
TECHNOLOGY - 17.5%
Allen Group, Inc. (The) 15,800 515
Altera Corp. (a) 3,100 193
Cadence Design Systems, Inc. (a) 16,600 602
Conner Peripherals, Inc. (a) 12,200 163
Cypress Semiconductor Corp. (a) 4,400 201
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
In Focus Systems, Inc. (a) 4,800 $ 148
Integrated Circuit Systems, Inc. (a) 10,600 172
KEMET Corp. (a) 10,500 596
Kulicke & Soffa Industries, Inc. (a) 18,400 713
Symbol Technologies, Inc. (a) 15,300 532
Thiokol Corp. 4,200 146
Wyle Laboratories 2,500 96
--------
4,077
--------
TRANSPORTATION - 0.5%
American President Cos., Ltd. 1,900 56
M.S. Carriers, Inc. (a) 2,700 49
--------
105
--------
UTILITIES - 6.4%
California Energy, Inc. (a) 12,300 257
Central Hudson Gas
& Electric Corp. 5,400 150
Central Maine Power Co. 2,400 28
CILCORP, Inc. 3,000 107
Eastern Enterprises, Inc. 12,000 368
New Jersey Resources Corp. 3,000 72
ONEOK, Inc. 7,100 155
Piedmont Natural Gas Co., Inc. 7,200 147
Sierra Pacific Resources 10,100 216
--------
1,500
--------
TOTAL COMMON STOCKS
(cost $19,696) 22,888
--------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(OOO) (000)
--------- --------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 1.1%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 250 $ 250
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $250) 250
--------
TOTAL INVESTMENTS
(identified cost $19,946)(c) - 99.3% 23,138
OTHER ASSETS AND LIABILITIES
NET - 0.7% 163
--------
NET ASSETS - 100.0% $ 23,301
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) At August 31, 1995, the cost for federal income tax purposes was the same
as shown above and net unrealized appreciation for all securities was
$3,191. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$3,466 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $275.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $19,946,074)(Note 2). . . . . . . . . . . . . . . $ 23,137,554
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,578
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,000
From Adviser (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,869
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,555
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . 6,833
--------------
23,364,389
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . $ 3,002
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . 550
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . 47,620
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . 5,717
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . 1,670
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 4,388 62,947
------------- --------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,301,442
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,655
Accumulated distributions in excess of net realized gain . . . . . . . . . . . . . . . . (112,206)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . 3,191,480
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,616
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,157,897
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,301,442
--------------
--------------
Net asset value, offering and redemption price per share
($23,301,442 divided by 1,616,022 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . $14.42
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209,382
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,509
--------------
228,891
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,087
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . 3,463
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,383
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . 25,754
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . 22,555
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . 22,456
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . 6,245
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . 9,819
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 860
Amortization of deferred organization expenses . . . . . . . . . . . 3,732
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,504
------------
Expenses before waivers and reimbursement. . . . . . . . . . . . . . 202,858
Expenses waived. . . . . . . . . . . . . . . . . . . . . . . . . . . (20,704)
Expenses reimbursed by Adviser . . . . . . . . . . . . . . . . . . . (57,869) 124,285
------------ --------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,606
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,859
Futures contracts (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,880)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . 3,176,878
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,198,857
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . $ 3,303,463
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 104,606 $ 576,350
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,859 1,620,828
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . (24,880) --
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . 3,176,878 (1,351,864)
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . . 3,303,463 845,314
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (156,946) (613,322)
Net realized gain on investments . . . . . . . . . . . . . . . . . . (1,255,304) (1,766,399)
In excess of net realized gain on investments. . . . . . . . . . . . (112,206) --
Increase (decrease) in net assets from Fund share transactions . . . . (4,193,484) (7,564,422)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . (2,414,477) (9,098,829)
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 25,715,919 34,814,748
-------------- --------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$62,655 and $115,070, respectively) . . . . . . . . . . . . . . . . . $ 23,301,442 $ 25,715,919
-------------- --------------
-------------- --------------
</TABLE>
FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
1995 1994
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . 1,602,127 $ 20,263,993 845,335 $ 10,101,378
Fund shares issued to shareholders
in reinvestments of distributions. . . . . . . . 137,019 1,512,935 176,900 2,096,569
Fund shares redeemed . . . . . . . . . . . . . . . (2,287,103) (25,970,412) (1,701,816) (19,762,369)
------------ --------------- -------------- --------------
Net increase (decrease). . . . . . . . . . . . . . (547,957) $ (4,193,484) (679,581) $ (7,564,422)
------------ --------------- -------------- --------------
------------ --------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31 and other performance information
derived from the financial statements.
<TABLE>
<CAPTION>
1995+ 1994 1993 1992++
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 11.88 $ 12.24 $ 10.09 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .13 .21 .22 .04
Net realized and unrealized gain on investments. . . 3.19 .24 2.14 .05
----------- ----------- ----------- -----------
Total From Investment Operations . . . . . . . . . . 3.32 .45 2.36 .09
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . (.15) (.21) (.21) --
Net realized gain on investments . . . . . . . . . . (.58) (.60) -- --
In excess of net realized gain on investments. . . . (.05) -- -- --
----------- ----------- ----------- -----------
Total Distributions. . . . . . . . . . . . . . . . . (.78) (.81) (.21) --
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 14.42 $ 11.88 $ 12.24 $ 10.09
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . 30.04 3.90 23.66 .90
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
daily net assets (b). . . . . . . . . . . . . . . . .97(c) .30 .25 .25
Operating expenses, gross, to average
daily net assets (b). . . . . . . . . . . . . . . . 1.58(c) .81 1.18 1.71
Net investment income to average daily net
assets (b) . . . . . . . . . . . . . . . . . . . . .81 1.73 1.85 2.55
Portfolio turnover (b) . . . . . . . . . . . . . . . 192.88 44.86 81.14 4.59
Net assets, end of year ($000 omitted) . . . . . . . 23,301 25,716 34,815 9,392
Per share amount of fees waived ($ omitted). . . . . .0261(c) .0046 .0083 .0021
Per share amount of fees reimbursed ($ omitted). . . .0730(c) .0582 .1040 .0226
</TABLE>
+ Prior to November 22, 1994, the Fund was passively managed as the S&P
Midcap Index Fund.
++ For the period July 1, 1992 (commencement of operations) to August 31,
1992.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1992 are annualized.
(c) See Note 4.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Small Cap Fund (the "Fund"). Prior to November 22,
1994, the Fund was passively managed under the name of The Seven Seas
Series S&P Midcap Index Fund. Effective November 23, 1994, the name and
investment objective of the Fund was changed pursuant to a shareholder
vote. The Investment Company is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment
company which was organized as a Massachusetts business trust October 3,
1987 and now operates under a First Amended and Restated Master Trust
Agreement dated October 13, 1993. The Investment Company's master trust
agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
Futures contracts are valued on the basis of last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost", a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal income taxes and no federal income tax provision was required. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $111,161, incurred from November 1, 1994 to August 31, 1995
and treat it as arising in fiscal year 1996.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in foreign denominated investments, redemptions in kind, and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1995:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT DISTRIBUTIONS IN EXCESS PAID-IN
INCOME OF NET REALIZED GAIN CAPITAL
-------------------- -------------------------- --------------------
<S> <C> <C>
$ (75) $ 132,673 $ (132,598)
</TABLE>
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
FUTURES: The Fund may utilize futures contracts to a limited extent. The
primary risks associated with the use of futures contracts are an imperfect
correlation between the change in market value of the securities held by
the Fund and the prices of futures contracts, and the possibility of an
illiquid market. Futures contracts are valued based upon their quoted daily
settlement prices; changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated
at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For for the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding short-term
investments and futures contracts, aggregated to $23,594,064 and
$29,218,559 respectively.
The sale of investment securities, including the market value of securities
relating to redemptions in-kind transactions during the period was
$18,994,918, upon which the Fund recognized a net realized loss of
$161,974.
FUTURES TRANSACTIONS: Fund transactions in futures contracts for the fiscal
year ended August 31, 1995, were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
-------------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
----------- -------------
<S> <C> <C>
Outstanding at August 31, 1994 -- --
Contracts opened 34 $ 2,885,425
Contracts closed (34) (2,885,425)
----------- ------------
Outstanding at August 31, 1995 -- $ --
----------- ------------
----------- ------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each contract
was opened.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which
are divided between the Fund and its lending agent, and are included as
interest income to the Fund. Income generated from the investment of cash
collateral is also divided between the Fund and its lending agent, and is
included as interest income to the Fund. All collateral received will equal
at least 100% of the market value of the loaned securities at the inception
of each loan. This collateral must be maintained at not less than 100% of
the market value of the loaned securities during the period of the loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company ("The Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objective, policies, and limitations. From the inception date of the Fund
to November 22, 1994, the Fund paid a fee to the Adviser at the annual rate
of .20% of its average daily net assets. Effective November 23, 1994,
pursuant to a shareholder vote, the Fund pays a fee to the Adviser
calculated daily and paid monthly, at an annual rate of .75% of its average
daily net assets.
For the period September 1, 1994 to November 22, 1994, the Adviser
voluntarily agreed to waive up to the full amount of its advisory fee of
.20% to the extent that total expenses exceed .25% of the average daily net
assets on an annual basis. For the period November 23, 1994 to March 9,
1995, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee of .75% to the extent that total expenses exceed 1.00% of the
average daily net assets on an annual basis. Effective March 9, 1995, the
Adviser voluntarily agreed to reimburse the Fund for all expenses in excess
of 1.00% of average daily net assets on an annual basis. The aggregate
amount of these waivers by the Adviser was $17,654 for the fiscal year
ended August 31, 1995.
For the period September 1, 1994 to November 22, 1994 the Adviser
voluntarily agreed to waive a portion of its custodial service fees which
amounted to $3,050. The Investment Company has contracts with the Adviser
to provide custody, shareholder servicing and transfer agent services to
the Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
to the Agents in an amount that per annum is equal to .025% and .175% of
the average daily value of all Fund shares held by or for customers of the
Adviser and SSBSI, respectively. These fees, in conjunction with other
distribution-related expenses, may not exceed .25% of the average daily
value of net assets on an annual basis, which includes a limit of .20% in
shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts related to distribution and shareholder servicing fees are included
in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain distribution-
related expenses incurred by the Investment Company's Distributor on behalf
of the funds (up to a maximum of 15% of the asset-based fee determined in
(i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new funds.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of
$11,696 to SSBSI for the fiscal year ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective September 17, 1995, the annual retainer was increased to $44,000.
5. DIVIDENDS
On September 1, 1995, the Board of Trustees declared a dividend of $0.0134
from net investment income payable on September 12, 1995, to shareholders
of record on September 5, 1995.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
ADDITIONAL INFORMATION
August 31, 1995
On November 4, 1995, a special meeting of the shareholders of the Fund was held
for the purpose of voting on the following matter:
To approve or disapprove a proposal to amend the investment objective, advisory
agreement, and Fund name.
The proposal was approved and the details of the vote are as follows:
NUMBER OF % OF OUTSTANDING % OF SHARES
VOTE SHARES SHARES (QUORUM) VOTED
------------------ ------------- ------------------ --------------
Affirmative 328,483 57% 96%
Against 14,464 3% 4%
Abstain 229,923 -- --
------------- ------------------ --------------
Total 572,870 60% 100%
------------- ------------------ --------------
------------- ------------------ --------------
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
TAX INFORMATION
August 31, 1995
The Fund paid distributions of $.2669 per share from net long-term capital gains
during its taxable year ended August 31, 1995. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $578,783 as capital gain dividends
for its taxable year ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Active International Fund Financial Statements . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 18
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 24
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the recently opened Active
International Fund: an equity investment in the developed foreign countries
designed to provide maximum total return, primarily through capital
appreciation. I hope you find this information to be a useful tool as you review
your overall investment strategy.
Over the past fiscal year, additional funds including this Fund opened for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience
of our professional staff. Portfolio managers work together to develop
and enhance the techniques that drive our investment processes. The
result is that the portfolios we manage benefit from the knowledge
of the entire team.
Mr. Robert Rubano, Assistant Vice President, has been the portfolio
manager primarily responsible for investment decisions regarding the
Active International Fund since its inception in March 1995. Mr. Rubano
has been with State Street since 1990 as a portfolio manager of active
international funds. There are seven other portfolio managers who
work with Mr. Rubano in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Yearly Periods
Ended
August 31 Active International MSCI EAFE Index **
- -------------- -------------------- ------------------
<S> <C> <C>
Inception* $10,000 $10,000
1995 $10,890 $10,951
</TABLE>
The Seven Seas Series Active International Fund commenced operations on March 7,
1995 with a net asset value of $10.00 per share. The Fund achieved its objective
"to provide capital growth by investing primarily in securities of foreign
investors," as it finished the fiscal year with a price of $10.89, an increase
of 8.90%. This compares favorably with the MSCI EAFE Index**, which rose 9.51%
from March 1 through August 31, 1995, with 3% of that rise occurring in the
first week of March when the Fund was not yet in existence.
Turbulence in Japan has been the main international event thus far in 1995.
Although Japan's currency, the yen, is back to its December 1994 level of 99 yen
to the dollar, it had at one point surged to a post-World War II high of 80 in
mid-April. This dramatic rise and subsequent return closer to fair value sent
the stock market on a roller coaster ride. In anticipation of the yen's fall,
the Fund hedged the portfolio's yen exposure (into US$) as we believed the yen
peaked. The Fund places a hedge on a currency by selling the currency forward
for settlement at a later date. This effectively reduces risk of a currency
declining and hurting the Fund's returns. We still believe the yen is over
valued and are maintaining our hedged position.
In addition to the tremors from the yen, the aftershock from the Kobe earthquake
was still being felt, as the cost of reconstruction threatened any economic
growth stimulus. Exacerbating the situation
SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ ------------ --------
<S> <C> <C>
Inception $ 10,890 8.90%+
</TABLE>
MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA, FAR EAST INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ ------------ --------
<S> <C> <C>
Inception $ 10,951 9.51%+
</TABLE>
*The Fund commenced operations on March 7, 1995. Index comparison began March 1,
1995.
**Morgan Stanley Capital International Europe, Australia, Far East Index is an
index composed of an arithmetic, market value-weighted average of the
performance of over 1,100 securities listed on the stock exchanges of the
countries of Europe, Australia, and the Far East. The Index is calculated on a
total-return basis, which includes reinvestment of gross dividends before
deduction of withholding taxes.
+Total returns for periods less than one year are not annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
was the collapse of Barings' Bank and its ripple effect through the Japanese
stock market. These events have combined to drive the Japanese market down over
5% through this fiscal year end to levels which, in contrast to the yen, have
reinforced our belief that Japanese securities are undervalued. Coupled with an
interest rate cut to below 1%, the Japanese market also offers some exciting
prospects for growth. Thus, we have been increasing our overweight position to
the Japanese equity market through the last fiscal quarter.
Elsewhere, in Europe, the Fund benefited from its overweight position to Norway,
compared to the MSCI EAFE Index, as the market there rose 10% from the Fund's
inception through its fiscal year end in August. We remain excited about the
growth potential of this small, oil-exporting Scandinavian country and are
maintaining our overweight position. At the beginning of June we established an
overweight to Italy, where the political situation has stabilized and the
prospects have improved for more meaningful pension reform. The Fund was
rewarded for this move, as Italy posted a 2% gain during the last fiscal quarter
for the Fund while the MSCI EAFE Index was flat. Also, back on the currency
front, the Fund received a boost from the Deutsche mark hedge put on in the
beginning of May. Since that time, the Deutsche mark has dropped over 6%
relative to the dollar. Like the yen hedge described earlier, this hedging
strategy is of a defensive nature.
Finally, the Fund's position in Latin America proved beneficial, particularly in
Brazil where the market was up over 26% since the Fund's opening. We remain
bullish on the Brazilian market as the success of the new economic plan there is
becoming increasingly more evident by the boom in consumerism and reduced
inflation.
The future direction of the international markets depends heavily on Washington
and its position on the dollar, as decisions here have an enormous impact on
exporters around the world. In most of the world's other major economies,
recoveries have begun significantly later than here at home, thus they stand to
gain more momentum in the next couple of years. In fact, growth for the Group of
Seven industrialized countries (Canada, France, Germany, Italy, Japan, United
Kingdom and the United States) is expected to be in the area of 2.5-3.0%,
annualized. With the world's money supply growth expected to be slow and
inflation under control in most parts of the world, we would expect a generally
favorable impact on financial assets.
----------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Active International Fund (the
"Fund"), as of August 31, 1995, and the related statement of operations, the
statement of changes in net assets and the financial highlights for the period
March 7, 1995 (commencement of operations) to August 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1995 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Fund as of August 31, 1995, the results of its operations, the changes in
its net assets and the financial highlights for the period March 7, 1995
(commencement of operations) to August 31, 1995 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
COMMON STOCKS - 77.2%
AUSTRIA - 1.3%
Fotex (Regd) (a) 22,000 $ 27
Oester Elektrizita Class A 1,100 75
OMV AG (a) 920 88
Perlmooser Zementwerke AG 970 75
Steyr-Daimler-Puch (a) 3,100 56
--------
321
--------
BRAZIL - 2.3%
Brazil Fund, Inc. 19,200 489
Sider Nacional cia NPV 1,152,000 26
Telecomunicacoes Brasileiras NPV 1,680,000 62
--------
577
--------
FRANCE - 9.1%
La Rochette (a) 15,100 150
Alcatel Alsthom 361 36
Banque Nationale Paris 809 33
CGIP 669 143
Christian Dior 2,650 234
Cie de St. Gobain 348 44
Credit National 3,090 216
Enterprise Jean Lefebvre SA 2,050 134
Gascogne 1,523 160
Groupe Andre SA (a) 2,150 183
Guyenne et Gascogne 100 26
Peugeot SA 1,300 172
Rhone-Poulenc SA Class A - ADR 1,687 35
Sanofi SA 3,042 188
Societe Nationale Elf d'Aquitaine 3,469 254
UFB Locabail (a) 2,900 233
Usinor Sacilor (a) 3,362 55
--------
2,296
--------
GERMANY - 7.5%
Allianz AG Holding 1996 Warrants (a) 50 48
AMB - Aachener &
Muenchener Beteiligung (Regd) 200 134
Bankgesell Berlin 350 91
BASF AG 950 213
Bayer Hypotheken & Wechsell Bank 250 61
BHF - Bank AG 2,500 64
Daimler-Benz AG 100 49
DBV Holding AG (Regd) 550 197
Degussa AG 50 16
Holsten Brauere AG 1,000 252
IKB Deutsche Industriebank AG 800 150
Kolbenschmidt AG (a) 1,400 209
Siemens AG 400 204
Thyssen AG (a) 900 176
VEBA AG 500 19
--------
1,883
--------
HONG KONG - 3.6%
Great Eagle Holdings 69,000 141
Hong Kong Electric 25,500 88
Hong Kong Telecommunications 67,200 122
Jardine International Motor 148,000 155
Tai Cheung Holdings (a) 162,000 140
Wing Lung Bank (a) 18,200 106
Yue Yuen Industrial 586,000 150
--------
902
--------
ITALY - 1.7%
Assicurazioni Generali SPA 2,000 48
Banco Ambrosiano
Veneto di Risp 13,300 18
Danieli & Co. di Risp 14,000 42
Fiat SPA di Risp 29,000 62
Istituto Mobiliare Italiano 7,000 45
Montefibre di Risp (a) 44,300 25
R.A.S. di Risp 9,000 57
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
Recordati di Risp (a) 14,000 $ 47
Stet di Risp 19,000 46
Telecom Italia di Risp 20,000 26
Telecom Italia Mobile
S.P.A. - di Risp (a) 20,000 20
--------
436
--------
JAPAN - 33.1%
Aichi Machine Industries (a) 23,000 137
Amada Co., Ltd. 13,000 135
Amada Sonoike Co. 37,000 231
Bunka Shutter Co. (a) 54,000 307
Citizen Watch Co., Ltd. (a) 28,000 213
Dai-Ichi Katei Denki (a) 35,000 163
Daidoh, Ltd. (a) 17,000 142
Daikyo, Inc. 44,000 355
Daishinku Corp. 17,000 212
Gun-Ei Chemical Industry Co. (a) 52,000 260
Gunze Limited 29,000 165
Hitachi, Ltd. 40,000 438
Hokkaido Takushoku Bank, Ltd. 96,000 297
Ines Corp. (a) 23,000 273
Keiyo Bank, Ltd. 6,000 34
Kumagai Gumi Co. 22,000 105
Marudai Food Co. 48,000 343
Matsushita Electric
Industrial Co., Ltd. 6,000 94
Nichiei Construction (a) 23,000 226
Nichimo Co. (a) 12,000 50
Nippon Trust Bank (a) 61,000 246
Nippon Valqua Industries (a) 34,000 148
Nisshinbo Industries, Inc. 7,000 63
Nissho Corp. 15,000 158
Okabe Co. 21,000 160
Orient Corp. (a) 19,000 92
Pioneer Electronics Corp. 13,000 249
Renown, Inc. (a) 105,000 338
Ryosan Co. (a) 9,000 256
Sanyo Special Steel Co. 78,000 330
Settsu Corp. (a) 109,000 338
Sogo Co. (a) 29,000 110
Sumisho Computer
Systems Corp. (a) 15,000 186
Sumitomo Realty & Development 42,000 308
Suntelephone Co. 36,000 247
Suzutan Co. (a) 19,000 143
SXL Corp. 12,000 124
Tokyo Electric Co., Ltd. (a) 64,000 298
Toyota Motor Corp. 2,000 40
Yamato Kogyo Co. (a) 38,000 319
--------
8,333
--------
NETHERLANDS - 3.0%
DSM NV (BR) 1,359 112
International Nederlanden CVA 1,168 64
KLM 1,171 39
Koninklijke Hoogovens CVA 3,112 127
Nutricia Verenigde Bedrijven CVA 1,057 70
Royal Dutch Petroleum Co. (BR) 2,189 260
Royal PTT Nederland NV 1,878 65
Stad Rotterdam 453 12
Unilever NV CVA 170 21
--------
770
--------
NORWAY - 2.3%
Aker AS Series B 4,400 56
Bergesen DY AS Series B 1,400 35
Det Norske Luftfartselskap AS
Series B 1,300 65
Hafslund Nycomed AS
Series B Free 2,889 68
Kvaerner Industries AS Series B Free 900 33
Leif Hoegh & Co. AS 1,200 19
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
Norsk Hydro AS 5,600 $ 237
Norske Skogindustrier AS Class A 1,100 35
Saga Petroleum AS 3,700 46
--------
594
--------
PORTUGAL - 0.1%
Portucel Industrial SA (a) 2,300 17
--------
SINGAPORE - 5.1%
Development Bank of Singapore, Ltd.
(Alien Market) 26,000 296
Far East Levingston 19,000 83
Keppel Bank 29,000 80
Keppel Corp. 2,000 16
Metro Holdings, Ltd. 56,400 252
Neptune Orient Lines, Ltd. 163,000 198
Singapore Airlines, Ltd.
(Alien Market) 17,000 144
Singapore Land 3,000 17
United Industrial Corp., Ltd. 228,000 209
--------
1,295
--------
SOUTH KOREA - 1.4%
Korea International Trust - IDR (a) 7* 343
--------
SPAIN - 0.4%
Banco Central Hispano
Americano SA (Regd) 950 20
Dragados y Construcciones SA 1,300 21
Repsol SA 400 12
Telefonica de Espana 1,100 15
Union Electrica Fenosa 6,750 31
--------
99
--------
SWITZERLAND - 2.6%
Baloise Holdings (Regd) 10 20
Bobst AG (BR) 20 31
Ciba Geigy AG (BR) 75 53
Gotthard Bank 55 28
Hero (BR) 55 26
Magazine Zum Globus 50 30
Nestle SA (Regd) 65 66
Pargesa Holdings SA (BR) 25 30
Roche Holdings Genusscheine
AG NPV 20 134
Sandoz AG (Regd) 140 101
Schweiz Bankgesellsch (BR) 45 40
Schweiz Bankverein (Regd) 380 65
Winterthur (Regd) 45 27
--------
651
--------
UNITED KINGDOM - 3.7%
Abbey National PLC 5,200 43
Amstrad PLC 12,600 51
ASDA-MFI Group PLC 30,800 52
Associated British Foods PLC 3,800 43
Barclays Bank PLC 1,700 19
British Steel PLC 14,800 42
British Telecommunications PLC 2,400 15
Burton Group PLC 46,400 73
Cable & Wireless PLC 12,100 79
Fisons PLC 6,600 26
General Accident PLC 3,500 32
Greenalls Group PLC 5,400 42
Hammerson Property PLC (a) 7,600 42
Lonrho PLC 15,100 38
Northumbrian Water PLC 2,500 35
Royal Bank of Scotland Group PLC 5,800 42
Royal Insurance Co., Ltd. PLC 8,100 42
Severn Trent Water PLC 4,600 45
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
Smith & Nephew PLC 14,776 $ 44
Taylor Woodrow PLC 20,600 37
Yorkshire Water PLC 8,700 82
--------
924
--------
TOTAL COMMON STOCKS
(cost $19,370) 19,441
--------
PREFERRED STOCKS - 3.8%
AUSTRIA - 1.2%
Bank Austria AG (a) 2,700 121
Creditanstalt-Bankverein 2,120 109
EA Generali AG 500 81
--------
311
--------
BRAZIL - 0.6%
Banco Nacional SA NPV 871,000 15
Electrobras Series B NPV 224,000 62
Petroleo Brasileiro SA NPV 255,000 25
Sider Riograndense NPV 765,000 17
Vale do Rio Doce (cia) NPV 193,000 30
--------
149
--------
GERMANY - 2.0%
Dyckerhoff AG 200 55
RWE AG (a) 850 231
Volkswagen AG 900 208
--------
494
--------
TOTAL PREFERRED STOCKS
(cost $903) 954
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Amount Value
(000) (000)
-------- --------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.4%
Federal Home Loan Bank
Discount Note (b)
5.700% due 09/01/95 $ 620 $ 620
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $620) 620
--------
TOTAL INVESTMENTS
(identified cost $20,893)(c) - 83.4% 21,015
OTHER ASSETS AND LIABILITIES,
NET - 16.6% 4,171
--------
NET ASSETS - 100.0% $25,186
--------
--------
</TABLE>
(a) Non-income-producing security.
(b) Rate noted is yield-to-maturity.
(c) At August 31, 1995, the cost for federal income tax purposes was the same
as shown above and net unrealized appreciation for all securities was $122.
This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$748 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $626.
* Reflected in units. 1 IDR Unit = 1000 Shares.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------------------------- -------- ---------
<S> <C> <C>
Basic Industries 10.0% $ 2,528
Capital Goods 12.5 3,148
Consumer Basics 5.9 1,476
Consumer Durable Goods 4.1 1,029
Consumer Non-Durables 8.6 2,162
Consumer Services 1.0 247
Energy 5.6 1,412
Finance 13.5 3,404
General Business 1.8 454
Miscellaneous 6.9 1,736
Shelter 2.6 653
Technology 3.3 833
Transportation 1.0 252
Utilities 4.2 1,061
Short-Term Investments 2.4 620
-------- --------
Total Investments 83.4 21,015
Other Assets and Liabilities, Net 16.6 4,171
-------- --------
NET ASSETS 100.0% $ 25,186
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $20,892,805)(Note 2). . . . . . . . . . . . . . . $ 21,014,842
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,310
Foreign currency holdings (identified cost $227,595) . . . . . . . . . . . . . . . . . . 221,995
Forward foreign currency exchange contracts (cost $8,869,799)(Notes 2 and 5) . . . . . . 8,869,799
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,729
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,737
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 39,752
---------------
33,173,298
LIABILITIES
Payables (Note 4):
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,043
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . . . 1,065
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 20,406
Accrued shareholder servicing fees . . . . . . . . . . . . . . . . . . 464
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . . . 161
Accrued organization fees (Note 2) . . . . . . . . . . . . . . . . . . 35,108
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 23,961
Forward foreign currency exchange contracts
(cost $8,869,799)(Notes 2 and 5) . . . . . . . . . . . . . . . . . . . 7,905,588 7,987,796
--------------- ---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,185,502
---------------
---------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,810
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . (9,108)
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,037
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . 957,713
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,314
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,062,736
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,185,502
---------------
---------------
Net asset value, offering and redemption price per share
($25,185,502 divided by 2,313,570 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . $10.89
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF OPERATIONS
For the Period March 7, 1995 (Commencement of Operations)
to August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $20,686) . . . . . . . . . . . . . . . . . . $ 135,050
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,964
---------------
180,014
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,488
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,720
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,471
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,988
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,196
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,434
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . 1,550
Amortization of deferred organization expenses . . . . . . . . . . . . . 4,248
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,685
---------------
Expenses before waivers. . . . . . . . . . . . . . . . . . . . . . . . . 158,780
Expenses waived. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,833) 110,947
--------------- ---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,067
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,108)
Foreign currency-related transactions (Notes 2 and 3). . . . . . . . . . . . . . . . . . (21,718)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,037
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 957,713
---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,048,924
---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . $ 1,117,991
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period March 7, 1995 (Commencement of Operations)
to August 31, 1995
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,067
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,108)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . (21,718)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,037
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . 957,713
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . 1,117,991
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . 24,067,511
-------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 25,185,502
Net assets at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . --
-------------
NET ASSETS AT END OF PERIOD
(including undistributed net investment income of $49,810) . . . . . . . . . . . $ 25,185,502
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
Shares Amount
------------- -------------
<S> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,340,535 $ 24,359,411
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (26,965) (291,900)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . 2,313,570 $ 24,067,511
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the fiscal period ended August 31 and other performance
information derived from the financial statements.
1995++
--------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . .03
Net realized and unrealized gain (loss) on investments . . . . . . .86
--------
Total From Investment Operations . . . . . . . . . . . . . . . . . .89
--------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 10.89
--------
--------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . 8.90
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets (b)(c). . . . 1.79
Operating expenses, gross, to average daily net assets (b)(c). . . 2.56
Net investment income to average daily net assets (b). . . . . . . 1.11
Portfolio turnover (b) . . . . . . . . . . . . . . . . . . . . . . 7.17
Net assets, end of period ($000 omitted) . . . . . . . . . . . . . 25,186
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . .0207
</TABLE>
++ For the period March 7, 1995 (commencement of operations) to August 31,
1995.
(a) Periods less than one year are not annualized.
(b) Annualized.
(c) See Note 4.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation as
of August 31, 1995. These financial statements report on one portfolio, The
Seven Seas Series Active International Fund (the "Fund"), which commenced
operations on March 7, 1995. The Investment Company is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company which was organized as a Massachusetts business
trust on October 3, 1987 and now operates under a First Amended and Restated
Master Trust Agreement dated October 13, 1993. The Investment Company's
master trust agreement permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest at a $.001 par
value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are followed by the Fund in the preparation of these financial
statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
fair market value of such securities.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its net
investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no federal
income taxes and no federal income tax provision was required. As permitted
by tax regulations, the Fund intends to defer a net realized capital loss of
$30,278, incurred from March 7, 1995 to August 31, 1995 and treat it as
arising in fiscal year 1996.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any, are
generally declared and paid annually. An additional distribution may be paid
by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles ("GAAP"). As a
result, net investment income and net realized gain (or loss) on investment
and foreign currency-related transactions for a reporting period may differ
significantly from distributions during such period. The differences between
tax regulations and GAAP primarily relate to investments in options, futures,
forward contracts, passive foreign investment companies, foreign-denominated
investments, and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative, insurance,
and professional fees are generally allocated among all funds principally
based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities; sales
of foreign currencies; currency gains or losses realized between the trade
and settlement dates on securities transactions; the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
fund's books; and the US dollar equivalent of the amounts actually received
or paid. Net unrealized gains or losses from foreign currency-related
transactions arise from changes in the value of assets and liabilities, other
than investments in securities, at fiscal year-end, resulting from changes in
the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to at
least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
INVESTMENT IN INTERNATIONAL MARKETS: Investing in international markets may
involve special risks and considerations not typically associated with
investing in the United States. These risks include revaluation of
currencies, future adverse political and economic developments and liquidity
concerns resulting from thinner markets. Moreover, securities issued in these
markets may be less liquid and their prices more volatile than those of
comparable securities in the United States.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the period March 7, 1995 (commencement of
operations) to August 31, 1995, purchases and sales of investment securities,
excluding short-term investments, aggregated to $20,721,953 and $440,041,
respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US currency)
and securities issued or guaranteed by the US Government or its agencies as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested in short-term
debt securities. To the extent that a loan is secured by non-cash collateral,
brokers pay the Fund negotiated lenders' fees, which are divided between the
Fund and its lending agent and are included as interest income to the Fund.
Income generated from the investment of cash collateral is also divided
between the Fund and its lending agent and is included as interest income to
the Fund. All collateral received will equal at least 100% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Consequently, loans are made
only to borrowers which are deemed to be of good financial standing. As of
the fiscal year ended August 31, 1995, there were no securities out on loan.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State Street
Bank and Trust Company (the "Adviser") under which the Adviser directs the
investments of the Fund in accordance with its investment objective,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .75% of its
average daily net assets. For the period March 7, 1995 (commencement of
operations) to August 31, 1995, the Adviser voluntarily agreed to waive up to
the full amount of its advisory fee to the extent that total expenses
exceeded 1.00% on an annual basis. For this period, waivers by the Adviser
amounted to $46,488.
The Investment Company has contracts with the adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. For the period
March 7, 1995 (commencement of operations) to August 31, 1995, the Adviser
voluntarily agreed to waive a portion of its custodial services fees to the
Fund which amounted to $843.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"), a
wholly-owned subsidiary of the Adviser (collectively "the Agents"). The SSBSI
service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for Investment
Company shareholders, including services related to the purchase and
redemption of Investment Company shares. For these services, the Fund pays
fees to the Agents in an amount that per annum is equal to .025% and .175% of
the average daily value of all Fund shares held by or for customers of the
Adviser and SSBSI, respectively. These fees, in conjunction with other
distribution-related expenses, may not exceed .25% of the average daily value
of net assets on an annual basis, which includes a limit of .20% in
shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also required,
pursuant to the Administration Agreement, to arrange and pay certain
promotional and sales costs of Investment Company shares. Russell Fund
Distributors, Inc. (the "Distributor"), a subsidiary of the Administrator, is
the distributor of the Investment Company shares. Under the Distribution
Plan, each fund may spend, and the Distributor may be reimbursed, up to .25%
of the average daily value of the net assets on an annual basis for
distribution-related and shareholder servicing expenses. If, in any calendar
month, the distribution expenses incurred by the Distributor exceed the
maximum amount of allowable reimbursement, the excess amounts may be carried
forward for subsequent reimbursement from the Investment Company. In no event
may excess amounts be carried forward more than two fiscal years from the
year when such expenses were incurred. The amounts related to distribution
and shareholder servicing fees are included in the accompanying Statement of
Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
by the Administrator pursuant to the Administration Agreement: (i) an annual
fee, payable monthly on a pro rata basis, based on the following percentages
of the average daily net assets of the Fund: $0 up to $500 million - .07%;
over $500 million to and including $1 billion - .06%; over $1 billion up to
$1.5 billion - .04%; over $1.5 billion - .03%; (ii) less an amount equal to
the sum of certain distribution-related expenses incurred by the Investment
Company's Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds. For the period March 7, 1995 (commencement of
operations) to August 31, 1995, the Administrator voluntarily waived a
portion of its administrative fee to the Fund which amounted to $502.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of $308
to SSBSI for the fiscal period ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of the
board meetings attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. Effective
July 17, 1995, the annual retainer was increased to $44,000.
5. COMMITMENTS
As of August 31, 1995, the Fund has entered into various forward foreign
currency exchange contracts which contractually obligate the Fund to deliver
or receive currencies at specified future dates. Open contracts were as
follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE (DEPRECIATION)
-------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
CHF 386,000 USD 339,639 11/06/95 $ 17,522
DEM 1,732,000 USD 1,258,538 11/06/95 74,839
JPY 625,000,000 USD 7,271,622 09/08/95 871,850
------------
$ 964,211
------------
------------
</TABLE>
The related net unrealized appreciation (depreciation) is reflected in the
Active International Fund financial statements.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
TAX INFORMATION
August 31, 1995
The Fund paid foreign taxes of $20,686 and recognized $155,736 of foreign source
income during the taxable year ended August 31, 1995. Pursuant to Section 853 of
the Internal Revenue Code, the Fund designates $.0089 per share of foreign taxes
paid and $.0673 of gross income earned from foreign sources in the taxable year
ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
23 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND -Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Yield Plus Fund Financial Statements . . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 18
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 26
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund" -Registered Trademark- is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Yield Plus Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. David Hertan, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Yield Plus Fund since April
1994. Mr. Hertan has been with State Street since 1991 as a director of
investments--Sallie Mae. Prior to that he was a manager of foreign exchange at
Ford Europe. There are eight other portfolio managers who work with Mr. Hertan
in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[Chart]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT*
Yearly Periods Donoghue's Money
Ended Fund Average -Trademark- Saloman Brothers 6-Month Saloman Brothers 1-Year
August 31 Yield Plus Fund All Taxable** Treasury Bills Index++ Treasury Bills Index++++
- ----------- ---------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1993 $10,285 $10,224 $10,273 $10,339
1994 $10,660 $10,537 $10,650 $10,630
1995 $11,301 $11,076 $11,251 $11,340
</TABLE>
SEVEN SEAS SERIES
YIELD PLUS FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,601 6.01%
Inception $ 11,301 4.45%+
</TABLE>
SALOMON BROTHERS 1-YEAR
TREASURY BILLS INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,668 6.68%
Inception $ 11,340 4.54%+
</TABLE>
NARROWLY BASED INDEX:
SALOMON BROTHERS 6-MONTH
TREASURY BILLS INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,564 5.64%
Inception $ 11,251 4.25%+
</TABLE>
NARROWLY BASED AVERAGE:
DONOGHUE'S MONEY FUND
AVERAGE -TRADEMARK- -ALL TAXABLE
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,512 5.12%
Inception $ 11,076 3.68%+
</TABLE>
The Seven Seas Series Yield Plus Fund generated an annual total return of 6.01%
for the fiscal year ended August 31, 1995. The Fund experienced modest growth
during the fiscal year as net assets increased from $1.36 billion on August 31,
1994, to $1.45 billion on August 31, 1995.
Although the Fund is not a money market fund, it is managed in a manner to
provide higher returns than that typically available from a money market fund.
For the year, the Fund returned 0.89% more than the average money market fund as
represented by the Donoghue's Money Fund Average--a universe of taxable money
market funds. The table also shows the Fund's performance compared to the
Salomon Brothers 6-Month and 1-Year Treasury Bill Indexes, which would represent
alternative short-term investment targets with longer durations. The Fund's
return and Donoghue's Average
*The Fund commenced operations on November 9, 1992.
Index comparisons began November 1, 1992.
**IBC/Donoghue's Money Fund Averages--a
universe of taxable funds.
++The total return calculated for the Salomon Brothers 6-Month Treasury Bills
Index includes principal gain or loss, income and reinvestment of proceeds. The
Index is based on a rolling maturity concept and holding the bond to maturity.
For example, the Index will continue, at any point, issues with 1-6 months of
remaining maturity.
++++The Salomon Brothers 1-Year Treasury Bill Index return is the return of the
newly issued (on-the-run) 1-year treasuries each month (auctioned monthly). It
is determined by taking the 1-year Treasury Bill at the beginning of each month
and calculating its return. This process is repeated each month with the new
1-Year Treasury Bill.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
both reflect fees and expenses which are not included in the Salomon Index
returns.
Last year was a tumultuous one in the fixed income markets, as the Federal
Reserve tightened monetary policy twice by a total of 125 basis points in
November and February and then turned around and eased policy by 25 basis points
in July. Yields on 3-Month Treasury Bills had a range of 145 basis points while
yields on 2-Year Treasury notes had a 220 basis point range. During this period
of volatility, the Fund was rewarded for maintaining a consistent strategy.
As a short-term investment fund, the Fund maintains a portfolio duration
approximating the 90-day maximum maturity permitted for SEC-registered money
market funds. The securities held in the Fund are typically securities which
would not be eligible money market investments primarily because they have
longer maturities than those permitted in money market funds. Duration is
controlled through interest rate reset features on certain investments and
hedging in the futures market. By pursuing this strategy, the Fund is able to
capitalize on the greater credit and maturity risk premiums available in
longer-term securities while limiting duration risk. It is also able to avoid
the overwhelming demand for short-term securities from money market type funds.
The Fund continues to focus its investments on high quality fixed and floating
rate corporate bonds and fixed and floating rate AAA asset-backed securities.
Specific securities are selected based on relative value analysis. The Fund is
actively traded to reposition itself and take advantage of market
inefficiencies.
-------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Yield Plus Fund (the "Fund"),
as of August 31, 1995, and the related statement of operations for the fiscal
year then ended, the statements of changes in net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the two fiscal years in the period then ended and for the period November 9,
1992 (commencement of operations) to August 31, 1993. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period November 9, 1992 (commencement
of operations) to August 31, 1993 in conformity with generally accepted
accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
<S> <C> <C>
LONG-TERM INVESTMENTS - 94.6%
ASSET-BACKED SECURITIES - 48.9%
Advanta Credit Card Master Trust II
Series 1994-D Class A
6.035% due 09/01/00 (b) $ 30,000 $ 30,019
Series 1994-B Class A
6.155% due 10/15/01 (b) 33,375 33,427
Carco Auto Loan Master Trust
Series 1992-2 Class A
6.288% due 09/15/99 (b) 12,150 12,203
Series 1993-1 Class A
6.218% due 01/18/00 (b) 10,000 10,031
Series 1995-1 Class A
6.051% due 06/15/00 (b) 35,000 35,000
Case Equipment Loan Trust
Series 1993-B Class A
4.300% due 05/15/99 3,248 3,189
Series 1994-A Class A2
4.650% due 08/15/99 11,177 11,026
Chase Manhattan
Credit Card Master Trust
Series 1995-2 Class A
6.005% due 08/15/01 (b) 55,800 55,765
Deere, (John) Owner Trust
Series 1993-A Class A2
6.187% due 04/29/00 (b) 15,748 15,764
First Chicago Master Trust II
Series 1993-G Class A
6.055% due 02/15/98 (b) 24,600 24,608
Series 1993-F Class A
6.175% due 02/15/00 (b) 10,000 10,028
First USA Credit Card Master Trust
Series 1994-3 Class A
6.095% due 08/15/97 (b) 56,790 56,861
Ford Credit Auto Loan Master Trust
Series 1992-1 Class A
6.875% due 01/15/99 48,695 49,182
Series 1992-2 Class A
7.375% due 04/15/99 13,300 13,533
Household Affinity Credit Card
Master Trust I
Series 1994-1 Class A
6.025% due 05/15/01(b) 42,400 42,307
Main Place Funding Corp.
Series 1995-1
6.147% due 07/17/98 (b) 25,000 25,016
MBNA Master Credit Card Trust
Series 1993-1 Class A
6.175% due 03/15/00 (b) 10,500 10,530
Series 1994-2 Class A
6.085% due 06/15/01 (b) 40,000 39,987
MBNA Master Credit Card Trust II
Series 1994-D Class A
6.230% due 03/15/00 (b) 12,000 12,015
Premier Auto Trust
Series 1993-6 Class A2
4.650% due 11/02/99 10,582 10,394
Series 1993-6 Class A3
6.075% due 11/02/99 (b) 25,286 25,320
Series 1994-3 Class A-3
6.000% due 04/02/97 (b) 23,500 23,503
Series 1994-4 Class A-3
6.200% due 10/02/97 12,500 12,527
Series 1995-1 Class A3
7.700% due 01/04/98 23,000 23,345
Series 1995-3 Class A2
5.955% due 12/31/99 (b) 33,000 32,989
Standard Credit Card Master Trust I
Series 1995-5 Class A
6.190% due 05/07/00 (b) 21,000 21,019
Superior Wholesale Inventory
Financing Trust
Series 1995-A Class A
6.012% due 08/15/00 (b) 67,400 67,399
---------
706,987
---------
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
<S> <C> <C>
CORPORATE BONDS AND
NOTES - 40.9%
Associates Corp.
of North America
4.625% due 11/30/96 $ 8,000 $ 7,849
8.700% due 01/01/97 8,420 8,683
7.750% due 11/01/97 5,020 5,155
8.125% due 01/15/98 20,000 20,816
Associates Corp.
of North America (MTN)
6.800% due 06/02/97 20,000 20,227
AVCO Financial Services, Inc.
7.500% due 11/15/96 21,010 21,355
BankAmerica Corp. (MTN)
6.162% due 05/12/97 (b) 25,000 24,983
Barnett Banks, Inc. (MTN)
6.292% due 06/01/96 (b) 6,000 6,002
Beneficial Corp. (MTN)
6.900% due 10/28/96 5,000 5,046
6.030% due 06/17/97 17,000 16,956
CIT Group Holdings, Inc. (MTN)
5.750% due 05/19/97 (b) 5,650 5,633
Comerica Bank (MTN)
5.730% due 12/31/96 (b) 27,000 26,919
6.875% due 04/18/97 14,600 14,746
CoreStates Capital Corp. (MTN)
5.855% due 09/17/97 (b) 15,000 14,923
Dean Witter Discover
& Co. (MTN)
6.113% due 02/03/97 (b) 18,000 18,039
6.055% due 03/03/97 (b) 10,000 9,993
6.075% due 09/29/97 (b) 20,000 19,964
First Bank Systems, Inc. (MTN)
5.925% due 03/19/97 (b) 6,000 5,994
First Chicago Corp. (MTN)
6.172% due 03/31/97 (b) 30,000 29,997
First Union Corp.
6.125% due 02/24/98 (b) 25,000 25,020
Ford Motor Credit Co. (MTN)
6.055% due 10/21/97 (b) 10,000 9,980
6.055% due 11/01/97 (b) 40,000 39,986
6.300% due 02/03/98 (b) 5,000 5,000
6.420% due 02/04/98 10,000 10,011
General Electric Capital Corp. (MTN)
6.070% due 05/02/97 (b) 10,000 9,987
6.080% due 07/07/97 (b) 15,000 14,993
General Motors Acceptance
Corp. (MTN)
7.375% due 01/15/97 5,000 5,074
7.875% due 02/28/97 5,400 5,522
7.125% due 03/27/97 20,000 20,251
Household Finance Corp. (MTN)
5.800% due 08/04/97 (b) 5,000 4,971
6.045% due 08/11/97 (b) 30,000 29,997
7.910% due 02/06/98 10,000 10,329
6.025% due 07/06/98 (b) 10,000 9,995
Household International, Inc.
6.125% due 05/27/97 (b) 6,000 5,997
Morgan (J. P.) & Co., Inc. (MTN)
5.630% due 03/21/97 (b) 10,000 9,993
Nationsbank Corp. (MTN)
6.125% due 11/18/96 (b) 26,750 26,760
6.037% due 08/25/98 (b) 37,500 37,453
Norwest Corp. (MTN)
7.875% due 01/30/97 18,500 18,975
Society National Bank
6.875% due 10/15/96 8,070 8,136
---------
591,710
---------
EURODOLLAR BONDS - 2.2%
Alberta, Province of
8.625% due 11/27/96 13,000 13,374
Associates Corp.
of North America
10.500% due 03/12/96 3,000 3,062
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
<S> <C> <C>
BankAmerica Corp.
6.312% due 02/28/97 (b) $ 5,000 $ 5,019
PepsiCo, Inc. (MTN)
7.750% due 02/28/97 5,000 5,106
8.000% due 12/28/97 5,000 5,178
---------
31,739
---------
UNITED STATES GOVERNMENT
AGENCIES - 1.9%
Federal Farm Credit Bank (MTN)
5.830% due 12/21/95 9,200 9,215
5.720% due 11/06/95 1,500 1,498
5.910% due 06/24/96 5,000 4,988
Federal Home Loan Mortgage Corp.
8.373% due 01/20/98 (b) 11,675 11,793
---------
27,494
---------
UNITED STATES GOVERNMENT
TREASURIES - 0.7%
United States Treasury Notes
5.625% due 06/30/97 500 498
6.000% due 08/31/97 10,000 10,023
---------
10,521
---------
TOTAL LONG-TERM INVESTMENTS
(cost $1,366,057) 1,368,451
---------
OPTIONS - 0.0%
Eurodollar Futures Dec 94.5 Call 200* 60
---------
TOTAL OPTIONS
(cost $89) 60
---------
SHORT-TERM INVESTMENTS - 0.1%
United States Treasury Bills
5.535% due 07/25/96 (a)(c) 1,000 952
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $950) 952
---------
REPURCHASE AGREEMENTS - 5.0%
Agreement with HSBC of $50,000
acquired 08/31/95 at 5.850%
to be repurchased at $50,008
on 09/01/95, collateralized by:
$43,725 Federal National
Mortgage Association
Discount Note, 5.560% due
12/08/95, valued at $43,056,
and by $7,960 Federal National
Mortgage Association
Discount Note, 5.620% due
10/06/95, valued at $7,915 50,000
Agreement with HSBC of $23,473
acquired 08/31/95 at 5.870%
to be repurchased at $23,477
on 09/01/95, collateralized by:
$24,290 Federal National
Mortgage Association
Discount Note, 5.530% due
11/29/95 valued at $23,956 23,473
---------
TOTAL REPURCHASE AGREEMENTS
(cost $73,473) 73,473
---------
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
-----------
<S> <C>
TOTAL INVESTMENTS AND
REPURCHASE AGREEMENTS
(identified cost $1,440,569)(d) - 99.7% $ 1,442,936
OTHER ASSETS AND LIABILITIES,
NET, INCLUDING WRITTEN
OPTIONS - 0.3% 4,161
-----------
NET ASSETS - 100.0% $ 1,447,097
-----------
-----------
</TABLE>
(a) Rate noted is yield-to-maturity.
(b) Adjustable or floating-rate securities.
(c) Collateral for open futures contracts sold short and call
options written.
(d) At August 31, 1995, the cost for federal income tax purposes was $1,440,540
and net unrealized appreciation for all securities was $2,396. This
consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess of market value over tax cost of $3,023 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $627.
(MTN) represents Medium Term Note.
* Number of contracts.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
FUTURES CONTRACTS AND OPTIONS WRITTEN
August 31, 1995
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
<S> <C> <C>
FUTURES CONTRACTS
SOLD SHORT (NOTES 2 AND 3)
Eurodollar Financial Futures Contract
Expiration date 09/95 132 $ (92)
Eurodollar Financial Futures Contract
Expiration date 12/95 236 (25)
Eurodollar Financial Futures Contract
Expiration date 03/96 215 (52)
Eurodollar Financial Futures Contract
Expiration date 06/96 156 (200)
Eurodollar Financial Futures Contract
Expiration date 09/96 143 (263)
Eurodollar Financial Futures Contract
Expiration date 12/96 75 (178)
Eurodollar Financial Futures Contract
Expiration date 03/97 50 (138)
Eurodollar Financial Futures Contract
Expiration date 06/97 20 (36)
--------
Total Unrealized Appreciation (Depreciation)
on Open Futures Contracts Sold Short (*) $ (984)
--------
--------
CALL OPTIONS WRITTEN (NOTES 2 AND 3)
Eurodollar Futures Contract
Strike Price 94.75
Expiration date 12/95 100 $ (15)
--------
Total Call Options Written (*)
(premiums received $39) $ (15)
--------
--------
</TABLE>
(*) At August 31, 1995, United States Treasury Bills valued at $952 with a par
of $1,000 were held as collateral by the custodian in connection with open
futures contracts sold short and call options written by the Fund.
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,367,095,861)(Note 2) . . . . . . $ 1,369,462,778
Repurchase agreements (cost $73,473,000)(Note 2) . . . . . . . . . . . . . 73,473,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Receivables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,157,275
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,572,694
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,012
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,465
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . 18,724
-----------------
1,618,736,417
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . $ 87,761
Fund shares redeemed . . . . . . . . . . . . . . . . . . 580
Investments purchased. . . . . . . . . . . . . . . . . . 170,165,751
Accrued administrative fees. . . . . . . . . . . . . . . 30,394
Accrued advisory fees. . . . . . . . . . . . . . . . . . 1,149,003
Accrued custodian fees . . . . . . . . . . . . . . . . . 68,289
Accrued distribution fees. . . . . . . . . . . . . . . . 33,828
Accrued shareholder servicing fees . . . . . . . . . . . 37,321
Accrued transfer agent fees. . . . . . . . . . . . . . . 1,601
Other accrued expenses . . . . . . . . . . . . . . . . . 28,200
Daily variation margin on
futures contracts sold short (Notes 2 and 3) . . . . . 21,400
Options written, at market value
(premiums received $39,400)(Notes 2 and 3) . . . . . . . 15,000 171,639,128
-------------- -----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,447,097,289
-----------------
-----------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income . . . . . . . $ (46,394)
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . (3,397,278)
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,366,917
Futures contracts sold short . . . . . . . . . . . . . . . . . . . . . . (983,775)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,400
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . 144,729
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 1,448,988,690
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,447,097,289
-----------------
-----------------
Net asset value, offering and redemption price per share
($1,447,097,289 divided by 144,728,939 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . $10.00
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,444,968
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . $ 3,256,063
Administrative fees. . . . . . . . . . . . . . . . . . . . 384,923
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 255,552
Distribution fees. . . . . . . . . . . . . . . . . . . . . 261,109
Professional fees. . . . . . . . . . . . . . . . . . . . . 24,374
Registration fees. . . . . . . . . . . . . . . . . . . . . 120,012
Shareholder servicing fees . . . . . . . . . . . . . . . . 506,798
Transfer agent fees. . . . . . . . . . . . . . . . . . . . 58,471
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . 69,018
Amortization of deferred organization expenses . . . . . . 8,005
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 64,190 5,008,515
-------------- -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,436,453
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . (1,862,940)
Futures contracts (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . (451,766)
Options written (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . (49,325)
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,828,065
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,937,250)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,400
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . 1,551,184
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . $ 74,987,637
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . $ 73,436,453 $ 47,559,818
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,862,940) (2,699,627)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . (451,766) 2,620,065
Options written. . . . . . . . . . . . . . . . . . . . . . . . . (49,325) --
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,828,065 (4,520,434)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . (1,937,250) 2,333,900
Options written. . . . . . . . . . . . . . . . . . . . . . . . . 24,400 --
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . 74,987,637 45,293,722
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . (73,436,453) (47,559,818)
In excess of net investment income . . . . . . . . . . . . . . . . (46,394) --
In excess of net realized gain on investments. . . . . . . . . . . (1,122,354) --
Increase (decrease) in net assets from Fund share transactions . . . 88,251,273 771,135,321
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 88,633,709 768,869,225
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . 1,358,463,580 589,594,355
-------------- --------------
NET ASSETS AT END OF YEAR
(including accumulated distributions in excess
of net investment income of $46,394 for fiscal 1995) . . . . . . . $1,447,097,289 $1,358,463,580
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
FUND SHARE TRANSACTIONS 1995 1994
------------------------------- --------------------------------
Shares Amount Shares Amount
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . 144,902,377 $1,447,298,600 204,280,102 $2,042,636,504
Fund shares issued to shareholders
in reinvestments of distributions . . . 7,206,031 71,958,014 4,669,149 46,668,225
Fund shares redeemed . . . . . . . . . . (143,360,605) (1,431,005,341) (131,878,729) (1,318,169,408)
------------- -------------- ------------- --------------
Net increase (decrease). . . . . . . . . 8,747,803 $ 88,251,273 77,070,522 $ 771,135,321
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31 and other performance information
derived from the financial statements.
<TABLE>
<CAPTION>
1995 1994 1993++
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . $ 9.99 $ 10.01 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . .56 .38 .27
Net realized and unrealized gain (loss) on investments .02 (.02) .01
---------- ---------- ----------
Total From Investment Operations . . . . . . . . . . . .58 .36 .28
---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . (.56) (.38) (.27)
In excess of net realized gain on investments. . . . . (.01) -- --
---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . (.57) (.38) (.27)
---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . $ 10.00 $ 9.99 $ 10.01
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . 6.01 3.65 2.85
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses gross, and net to
average daily net assets (b) . . . . . . . . . . . . .38 .35 .38
Net investment income to average daily net assets (b). 5.64 3.82 3.54
Portfolio turnover (b) . . . . . . . . . . . . . . . . 199.69 142.68 137.86
Net assets, end of year ($000 omitted) . . . . . . . . 1,447,097 1,358,464 589,594
Per share amount of fees waived ($ omitted). . . . . . -- -- .00042
</TABLE>
++ For the period November 9, 1992 (commencement of operations) to August 31,
1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1993 are annualized.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation as
of August 31, 1995. These financial statements report on one portfolio, The
Seven Seas Series Yield Plus Fund (the "Fund"). The Investment Company is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company which was organized as a
Massachusetts business trust on October 3, 1987 and now operates under a
First Amended and Restated Master Trust Agreement dated October 13, 1993. The
Investment Company's master trust agreement permits the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial
interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the basis
of the closing bid price. Futures contracts are valued on the basis of the
last sale price.
Many fixed-income securities do not trade each day, and thus last sale or bid
prices are frequently not available. Fixed-income securities may be valued
using prices provided by a pricing service when such prices are believed to
reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization to
maturity of any discount or premium is assumed, unless the Board of Trustees
determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to procedures
established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a
trade date basis. Realized gains and losses from securities transactions
are recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original issue
discounts are accreted for both tax and financial reporting purposes. All
short- and long-term market premiums/discounts are amortized/accreted for
both tax and financial reporting purposes.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its net
investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no federal
income taxes and no federal income tax provision was required. As permitted
by tax regulations, the Fund intends to defer a net realized capital loss of
$4,385,355 incurred from November 1, 1994 to August 31, 1995, and treat it as
arising in fiscal year 1996.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital gain
distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles ("GAAP"). As a
result, net investment income and net realized gain (or loss) from investment
transactions for a reporting period may differ significantly from
distributions during such period. The differences between tax regulations and
GAAP primarily relate to investments in options, futures, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED DISTRIBUTIONS ACCUMULATED ADDITIONAL
IN EXCESS OF NET NET REALIZED PAID-IN
INVESTMENT INCOME GAIN (LOSS) CAPITAL
------------------------- ----------------- ----------------
<S> <C> <C>
$ (46,394) $ 55,602 $ (9,208)
</TABLE>
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative, insurance,
and professional fees are generally allocated among all funds principally based
on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection with
its organization and initial registration. These costs have been deferred and
are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including accrued
interest) on
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
acquisition date is required to be an amount equal to at least 102% of the
repurchase price. The Fund's Adviser will monitor repurchase agreements daily
to determine that the market value (including accrued interest) at Fedwire
closing time of the underlying securities remains at least equal to 100% of
the repurchase price. The Adviser or third-party custodian will notify the
seller to immediately increase the collateral on the repurchase agreement to
102% of the repurchase price if collateral falls below 100%.
DERIVATIVES: Effective September 1, 1994, the Fund has adopted the provisions
of Statement of Financial Accounting Standards (SFAS) 119 "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments."
To the extent permitted by the investment objective, restrictions and
policies set forth in the Fund's Prospectus and Statement of Additional
Information, the Fund may participate in various derivative-based
transactions. Derivative securities are instruments or agreements whose value
is derived from an underlying security or index. The Fund's use of
derivatives includes exchange-traded futures and options on futures. These
instruments offer unique characteristics and risks that assist the Fund in
meeting its investment objective.
The Fund typically uses derivatives for hedging purposes. Hedging techniques
are utilized by the Fund to limit or control risks, such as adverse movements
in interest rates. The primary risk associated with options and futures is
generally categorized as market risk.
OPTIONS: The Fund is currently utilizing call options on futures. The Fund
may purchase and sell (write) call and put options on securities, securities
indexes, and futures, provided such options are traded on a national
securities exchange or in an over-the-counter market. The Fund may also
purchase and sell put and call options on foreign currencies.
When the Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The current market value of a written option is
the closing bid price on the principal exchange on which such option is
traded, or, in the absence of a sale, the last offering price. The Fund
receives a premium on the sale of an option but gives up the opportunity to
profit from any increase in stock value above the exercise price of the
option. If an option which the Fund has written either expires on its
stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which
the Fund has written is exercised, the Fund realizes a capital gain or loss
from the sale of the underlying security, and the proceeds from such sale are
increased by the premium originally received. When a put option which a Fund
has written is exercised, the amount of the premium originally received will
reduce the cost of the security which a Fund purchases upon exercise of the
option.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
The Fund's use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of those instruments reflect the
extent of the Fund exposure to off-balance-sheet risk. The risks may be
caused by an imperfect correlation between movements in the price of the
instrument and the price of the underlying securities and interest rates.
FUTURES: The Fund is currently utilizing exchange-traded futures contracts.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Funds and the prices of futures contracts and the possibility of
an illiquid market. Futures contracts are valued based upon their quoted
daily settlement prices; changes in initial settlement value are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1995, purchases, sales
and maturities of investment securities, excluding US Government and Agency
obligations, short-term investments, futures contracts, options and
repurchase agreements aggregated to $1,455,845,639, $1,339,127,445, and
$15,150,000 respectively.
For the fiscal year ended August 31, 1995, purchases and sales of US
Government and Agency obligations, excluding short-term investments, futures
and option contracts, and repurchase agreements aggregated to $1,102,202,672
and $1,151,660,099, respectively.
OPTIONS: Fund transactions in written options for the year ended August 31,
1995 were as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
-------------------------- ---------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1994 -- $ -- -- $ --
Written 640 219,575 140 9,875
Terminated (540) (180,175) (140) (9,875)
----------- ------------ ----------- ------------
Outstanding at August 31, 1995 100 $ 39,400 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
FUTURES TRANSACTIONS: Fund transactions in futures contracts during the
fiscal year ended August 31, 1995 were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS FUTURES CONTRACTS
SOLD SHORT PURCHASED
-------------------------------- --------------------------------
AGGREGATE AGGREGATE
NUMBER OF FACE VALUE OF NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1) CONTRACTS CONTRACTS (1)
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1994 1,137 $1,069,128,100 -- $ --
Contracts opened 7,403 6,917,353,200 839 785,430,800
Contracts closed (7,096) (6,631,549,700) (739) (691,330,800)
Contracts exercised (417) (391,506,000) (100) (94,100,000)
------------- -------------- ------------- -------------
Outstanding at August 31, 1995 1,027 $ 963,425,600 -- $ --
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened. Three month Eurodollar financial futures contracts have
a notional face amount of $1,000,000 and an equivalent duration of 13 weeks
or .25 years.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US currency)
and securities issued or guaranteed by the US Government or its agencies as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested in short-term
debt securities. To the extent that a loan is secured by non-cash collateral,
brokers pay the Fund negotiated lenders' fees, which are divided between the
Fund and its lending agent and are included as interest income to the Fund.
Income generated from the investment of cash collateral is also divided
between the Fund and its lending agent and is included as interest income to
the Fund. All collateral received will equal at least 100% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Consequently, loans are made
only to borrowers which are deemed to be of good financial standing. As of
the fiscal year ended August 31, 1995, there were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State Street
Bank and Trust Company (the "Adviser") under which the Adviser directs the
investment of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .25% of its
average daily net assets. The Investment Company has contracts with the
Adviser to provide custody, shareholder servicing, and transfer agent
services to the Fund.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"), a
wholly-owned subsidiary of the Adviser (collectively "the Agents"). The SSBSI
service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for Investment
Company shareholders, including services related to the purchase and
redemption of Investment Company shares. For these services, the Fund pays
fees to the Agents in an amount that per annum is equal to .025% and .175% of
the average daily value of all Fund shares held by or for customers of the
Adviser and SSBSI, respectively. These fees, in conjunction with other
distribution-related expenses, may not exceed .25% of the average daily value
of net assets on an annual basis, which includes a limit of .20% in
shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also required,
pursuant to the Administration Agreement, to arrange and pay certain
promotional and sales costs of Investment Company shares. Russell Fund
Distributors, Inc. (the "Distributor"), a subsidiary of the Administrator, is
the distributor of the Investment Company shares. Under the Distribution
Plan, each fund may spend, and the Distributor may be reimbursed, up to .25%
of the average daily value of the net assets on an annual basis for
distribution-related and shareholder servicing expenses. If, in any calendar
month, the distribution expenses incurred by the Distributor exceed the
maximum amount of allowable reimbursement, the excess amounts may be carried
forward for subsequent reimbursement from the Investment Company. In no event
may excess amounts be carried forward more than two fiscal years from the
year when such expenses were incurred. The amounts related to distribution
and shareholder servicing fees are included in the accompanying Statement of
Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion -
.03%; (ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Fund (up to a maximum of 15% of the asset-based fee determined in (i)); (iii)
out-of-pocket expenses; and (iv) start-up costs for new funds.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of the
board meetings attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. Effective
July 17, 1995, the annual retainer was increased to $44,000.
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
ADDITIONAL INFORMATION
August 31, 1995
On August 25, 1995, a special meeting of the shareholders of the Fund was held
for the purpose of voting on the following matter:
To approve or disapprove a proposal to amend the fundamental investment
objective and to make the objective nonfundamental.
The proposal was approved and the details of the vote are as follows:
Number of % of Outstanding % of Shares
Vote Shares Shares (Quorum) Voted
- -------------- -------------- ------------------- ------------------
Affirmative 108,629,174 76% 100%
Against -- -- --
Abstain 33,799,464 -- --
-------------- ------------------- ------------------
Total 142,428,638 76% 100%
-------------- ------------------- ------------------
-------------- ------------------- ------------------
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
TAX INFORMATION
August 31, 1995
The Fund paid distributions of $.0083 per share from net long-term capital gains
during its taxable year ended August 31, 1995. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $1,113,147 as capital gain dividends
for its taxable year ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 10
US Treasury Money Market Fund Financial Statements . . . . . 11
Prime Money Market Fund Financial Statements . . . . . . . . 17
Notes to Financial Statements. . . . . . . . . . . . . . . . 25
Fund Management and Service Providers. . . . . . . . . . . . 29
This report is prepared from the books and records of the Funds and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objectives and operations of the Funds, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark" is a registered trademark and
service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the U.S. Treasury Money Market and
Prime Money Market Funds. I hope you find this information to be a useful tool
as you review your overall investment strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the U.S. Treasury and Prime Money
Market Funds since her arrival at State Street in February 1994. Ms. Williams is
the Mutual Funds Unit Head responsible for oversight of money market and other
short-term funds. Prior to joining State Street, she was a portfolio manager
with PNC Bank and the Calvert Group. There are eight other portfolio managers
who work with Ms. Williams in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
Yearly Periods US Treasury
Ended Money Market Salomon Brothers
August 31 Fund 3-Month T-Bill Index**
- ------------- -------------- ----------------------
<S> <C> <C>
Inception* $10,000 $10,000
1994 $10,251 $10,277
1995 $10,812 $10,851
</TABLE>
In the last year, the interest rate environment has been very volatile, with
rapid rate increases by the Federal Reserve through February 1995. Over the last
fiscal year, two interest rate moves increased the Fed Funds' target rate from
4.75% to 6.00%. Continued rate increases were assumed which generated a very
steep yield curve throughout the first several months of the year. However, in
July 1995, the Federal Reserve reversed its tightening policy by lowering the
Fed Funds' target by 25 basis points to 5.75%. As the economy slowed from the
first quarter and the possibility of rate cuts increased, the yield curve
flattened, even inverting out to five years for a short time.
With the shifting outlook for growth and Fed policy in the last year, the short
end of the yield curve experienced wide swings in rates. The range on the
3-month Treasury bill was 4.62% to 6.06%, while 3-month LIBOR (London Interbank
Offering Rates) ranged from 5.0% to 6.5% and 1-year LIBOR ranged from 5.8125% to
7.8125%.
The Seven Seas Series US Treasury Money Market Fund held assets relatively
steady throughout the last year. Performance of the Fund was excellent despite
the wide spread between Treasury instruments and other money market instruments.
The average spread between the 3-month Treasury bill and 3-month LIBOR during
the last year has been .42%, with the widest being .90% due
SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------------ ---------- -----------
<S> <C> <C>
1 Year $10,548 5.48%
Inception $10,812 4.57%+
</TABLE>
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- -------
<S> <C> <C>
1 Year $10,558 5.58%
Inception $10,851 4.78%+
</TABLE>
*The Fund commenced operations on December 1, 1993. Index comparison began
December 1, 1993.
**Equal dollar amounts of 3-month Treasury bills are purchased at the beginning
of each of three consecutive months. As each bill matures, all proceeds are
rolled over or reinvested in a new 3-month bill. The income used to calculate
the monthly return is derived by subtracting the original amount invested from
the maturity value. The yield curve average is the basis for calculating the
return on the Index. The Index is rebalanced monthly by market capitalization.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
to year-end asset allocations. Despite such a wide spread, the Fund has
maintained a competitive yield performance. After the easing move by the Fed,
the yield curve for Treasury bills and notes less than one year has traded
relativity flat to inverted to the target Fed Funds rate of 5.75%. As a
consequence, a larger percentage of the Fund was held in the overnight market.
When the market provides opportunities, the Fund will extend maturity to enhance
yield.
The Fund returned 5.48% for the fiscal year ended August 31, 1995 as compared to
the Salomon Brothers 3-Month Treasury Index return of 5.58%. Fund performance is
net of actual expenses, whereas Index results do not include expenses of any
kind.
-----------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the
US Government. There can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
Yearly Periods
Ended Prime Money Salomon Brothers
August 31 Market Fund 3-Month T-Bill Index**
- ------------- -------------- ----------------------
<S> <C> <C>
Inception* $10,000 $10,000
1994 $10,209 $10,200
1995 $10,803 $10,769
</TABLE>
In the last year, the interest rate environment has been very volatile, with
rapid rate increases by the Federal Reserve through February 1995. Over the last
fiscal year, two interest rate moves increased the Fed Funds' target rate from
4.75% to 6.00%. Continued rate increases were assumed which generated a very
steep yield curve throughout the first several months of the year. However, in
July 1995, the Federal Reserve reversed its tightening policy by lowering the
Fed Funds' target by 25 basis points to 5.75%. As the economy slowed from the
first quarter and the possibility of rate cuts increased, the yield curve
flattened, even inverting out to five years for a short time.
With the shifting outlook for growth and Fed policy in the last year, the short
end of the yield curve experienced wide swings in rates. The range on the
3-month Treasury bill was 4.62% to 6.06%, while 3-month LIBOR (London Interbank
Offering Rates) ranged from 5.0% to 6.5% and 1-year LIBOR ranged from 5.8125% to
7.8125%.
The Seven Seas Series Prime Money Market Fund experienced tremendous growth in
assets during 1995 from around $400 million at August 31, 1994 to over $1
billion at fiscal year end 1995. During this time, the Fund invested in both
floating rate and fixed rate notes when attractive based on relative value in
the marketplace.
SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ----------- --------- -------
<S> <C> <C>
1 Year $10,582 5.82%
Inception $10,803 5.21%+
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ ---------- -------
<S> <C> <C>
1 Year $10,558 5.58%
Inception $10,769 5.06%+
</TABLE>
*The Fund commenced operations on February 22, 1994. Index comparison began
March 1, 1994.
**Equal dollar amounts of 3-month Treasury bills are purchased at the beginning
of each of three consecutive months. As each bill matures, all proceeds are
rolled over or reinvested in a new 3-month bill. The income used to calculate
the monthly return is derived by subtracting the original amount invested from
the maturity value. The yield curve average is the basis for calculating the
return on the Index. The Index is rebalanced monthly by market capitalization.
+Annualized.
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
Typical indexes were LIBOR, Fed Funds and Treasury bills. The Fund also
lengthened its portfolio maturity in the spring of this year to prepare for a
period of falling interest rates.
The Fund returned 5.82% for the fiscal year August 31, 1995 as compared to the
Salomon Brothers 3-Month Treasury Bill Index of 5.58%. Fund performance is net
of expenses whereas the Index represents absolute return.
------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statements of assets and liabilities and
statements of net assets of each of the Funds of The Seven Seas Series Fund (in
this report comprised of US Treasury Money Market and Prime Money Market Funds
(the "Funds")), as of August 31, 1995, and the related statements of operations,
the statements of changes in net assets and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds enumerated above as of August 31, 1995, the results of their operations,
the changes in their net assets and the financial highlights for each of the
periods indicated therein in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 13, 1995
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
---------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT TREASURIES - 24.8%
United States Treasury Bills . . . . . . . . . . . . . . . . $40,000 5.380% 09/21/95 $39,880
-------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $39,880) . . 39,880
-------
TOTAL INVESTMENTS (amortized cost $39,880) - 24.8% . . . . . 39,880
-------
REPURCHASE AGREEMENTS - 69.6%
Agreement with Aubrey Lanston of $40,000
acquired August 31, 1995 at 5.830% to be repurchased at $40,006
on September 1, 1995, collateralized by:
$39,565 United States Treasury Note,
6.500% due 04/30/97 valued at $40,801 . . . . . . . . . . 40,000
Agreement with Donaldson, Lufkin & Jenrette Securities Corp. of $8,000
acquired August 31, 1995 at 5.830% to be repurchased
at $8,001 on September 1, 1995, collateralized by:
$8,020 United States Treasury Note,
5.875% due 03/31/99 valued at $8,184 . . . . . . . . . . 8,000
Agreement with First Boston of $8,000
acquired August 31, 1995 at 5.730% to be repurchased at $8,001
on September 1, 1995, collateralized by:
$8,015 United States Treasury Note,
6.125% due 05/31/97 valued at $8,171 . . . . . . . . . . 8,000
Agreement with First Chicago National Bank of $8,000
acquired August 31, 1995 at 5.800% to be repurchased
at $8,001 on September 1, 1995, collateralized by:
$7,860 United States Treasury Note,
6.750% due 05/31/99 valued at $8,173 . . . . . . . . . . 8,000
Agreement with HSBC Securities, Inc. of $8,000
acquired August 31, 1995 at 5.850% to be repurchased at $8,001
on September 1, 1995, collateralized by:
$7,355 United States Treasury Note,
8.750% due 08/15/00 valued at $8,199 . . . . . . . . . . 8,000
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)
---------
<S> <C>
Agreement with UBS Securities, Inc. of $40,000
acquired August 31, 1995 at 5.830% to be repurchased at $40,006
on September 1, 1995, collateralized by:
$27,475 United States Treasury Bond,
11.250% due 02/15/15 valued at $40,800 . . . . . . . . . . . $ 40,000
---------
TOTAL REPURCHASE AGREEMENTS (cost $112,000). . . . . . . . . . . 112,000
---------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $151,880)(a) - 94.4% . . . . . . . . . . . . . . . . . . . 151,880
OTHER ASSETS AND LIABILITIES, NET - 5.6% . . . . . . . . . . . . 9,013
---------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . $ 160,893
---------
---------
</TABLE>
(a) The identified cost for federal income tax purposes is the same
as shown above.
The accompanying notes are an integral part of the financial
statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . $ 39,880,444
Repurchase agreements (cost $112,000,000)(Note 2). . . . . . . . . . . . . . . . . . . . 112,000,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,353
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,114
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,953,950
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 34,881
-------------
161,891,809
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 786,696
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . 4,913
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . 122,170
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . 18,509
Accrued distribution fees. . . . . . . . . . . . . . . . . . . . . 19,038
Accrued shareholder servicing fees . . . . . . . . . . . . . . . . 3,114
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 44,691 999,131
----------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,892,678
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ (185,479)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,078
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,917,079
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,892,678
-------------
-------------
Net asset value, offering and redemption price per share
($160,892,678 divided by 161,078,157 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . $1.00
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,187,974
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $462,645
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . 54,150
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,894
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . 31,785
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . 2,561
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . 110,284
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,781
Amortization of deferred organization expenses . . . . . . . . . . . 10,040
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,659
-----------
Expenses before expense reductions . . . . . . . . . . . . . . . . . 730,799
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . (497,132) 233,667
------------ ------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,954,307
------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . 89,724
------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . $ 10,044,031
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FISCAL YEAR DECEMBER 1,1993++
ENDED TO
AUGUST 31, 1995 AUGUST 31, 1994
--------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,954,307 $ 20,812,491
Net realized gain (loss) from investments . . . . . . . . . . . . . . . . 89,724 (275,203)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations . . . . . . 10,044,031 20,537,288
Distributions to shareholders from net investment income . . . . . . . . . (9,954,307) (20,812,491)
Increase (decrease) in net assets from Fund share transactions. . . . . . . 5,945,016 155,133,141
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . 6,034,740 154,857,938
Net assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . 154,857,938 --
--------------- ---------------
NET ASSETS AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,892,678 $ 154,857,938
--------------- ---------------
--------------- ---------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775,196,955 5,161,978,057
Fund shares issued to shareholders in reinvestments of distributions. . . . 2,433,268 18,375,229
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . (771,685,207) (5,025,220,145)
--------------- ---------------
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,945,016 155,133,141
--------------- ---------------
--------------- ---------------
</TABLE>
++ Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the fiscal year or period ended August 31 and other
performance information derived from the financial statements.
<TABLE>
<CAPTION>
1995 1994++
------------ -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . .0536 .0249
------------ -----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (.0536) (.0249)
------------ -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
------------ -----------
------------ -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . 5.48 2.51
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets (b) . . . . . . .13(c) .13
Operating expenses, gross, to average daily net assets (b) . . . . . .39(c) .38
Net investment income to average daily net assets (b). . . . . . . . 5.38 3.28
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . 160,893 154,858
Per share amount of fees waived ($ omitted). . . . . . . . . . . . . . .0018(c) .0019
</TABLE>
++ For the period December 1, 1993 (commencement of operations) to August 31,
1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-----------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 4.7%
First National Bank of Boston (a). . . . . . . . . . . . $ 11,000 5.812% 10/17/95 $ 11,000
First National Bank of Boston (a). . . . . . . . . . . . 15,000 5.967 02/28/96 15,000
Fleet Bank of New York (a) . . . . . . . . . . . . . . . 25,000 6.050 10/12/95 24,999
--------
TOTAL CERTIFICATES OF DEPOSIT (cost $50,999) . . . . . . 50,999
--------
EURODOLLAR CERTIFICATES OF DEPOSIT - 0.9%
Citibank . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6.820 03/07/96 10,000
--------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $10,000). 10,000
--------
CORPORATE NOTES - 14.9%
Bank of New York . . . . . . . . . . . . . . . . . . . . 20,000 6.850 03/11/96 19,997
Barnett Banks, Inc.. . . . . . . . . . . . . . . . . . . 10,000 5.790 07/22/96 9,998
Beneficial Corp. (MTN) . . . . . . . . . . . . . . . . . 20,000 7.450 01/19/96 20,101
CIT Group Holdings, Inc. . . . . . . . . . . . . . . . . 5,000 7.050 03/04/96 5,000
Ford Motor Credit Co.. . . . . . . . . . . . . . . . . . 1,000 8.875 03/15/96 1,015
General Motors Acceptance Corp. (MTN). . . . . . . . . . 11,000 5.500 04/22/96 10,903
General Motors Acceptance Corp. (MTN). . . . . . . . . . 7,650 5.650 06/18/96 7,627
Household Finance Corp.. . . . . . . . . . . . . . . . . 9,465 10.125 06/15/96 9,760
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . 15,000 6.150 05/31/96 15,033
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . 5,000 4.860 08/30/96 4,949
Morgan (J.P.) & Co., Inc.. . . . . . . . . . . . . . . . 10,000 6.200 05/13/96 10,000
National City Corp.. . . . . . . . . . . . . . . . . . . 5,000 8.375 03/15/96 5,062
PNC Bank . . . . . . . . . . . . . . . . . . . . . . . . 15,000 6.625 03/29/96 14,991
Sears Roebuck & Co.. . . . . . . . . . . . . . . . . . . 10,000 8.550 08/01/96 10,223
Society Corp. (MTN). . . . . . . . . . . . . . . . . . . 5,000 5.340 12/04/95 4,992
United States Leasing International, Inc.. . . . . . . . 10,000 8.750 05/01/96 10,136
--------
TOTAL CORPORATE NOTES (cost $159,787). . . . . . . . . . 159,787
--------
</TABLE>
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-----------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC COMMERCIAL PAPER - 7.1%
Barnett Banks, Inc.. . . . . . . . . . . . . . . . . . . $ 7,000 5.850% 09/14/95 $ 6,985
Ford Motor Credit Co.. . . . . . . . . . . . . . . . . . 40,000 5.875 09/01/95 40,000
GTE Corp.. . . . . . . . . . . . . . . . . . . . . . . . 5,000 5.830 09/12/95 4,991
Sherwood Medical Co. . . . . . . . . . . . . . . . . . . 25,000 5.790 09/25/95 24,904
---------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $76,880) . . . . . 76,880
---------
DOMESTIC SHORT-TERM ADJUSTABLE RATE NOTES - 28.9%
BankAmerica Corp. (MTN). . . . . . . . . . . . . . . . . 6,230 6.312 09/11/95 6,230
Bank of Boston Corp. (MTN) . . . . . . . . . . . . . . . 5,000 6.332 06/20/96 5,009
Barnett Banks, Inc. (MTN). . . . . . . . . . . . . . . . 15,000 5.917 02/22/96 14,999
Caterpillar Financial Services (MTN) . . . . . . . . . . 20,000 6.037 06/28/96 20,015
Citicorp (MTN) . . . . . . . . . . . . . . . . . . . . . 10,000 6.045 12/07/95 10,004
Comerica Bank. . . . . . . . . . . . . . . . . . . . . . 20,000 5.610 11/15/95 19,991
First American Bank of Indianapolis. . . . . . . . . . . 20,000 5.882 09/18/95 20,000
First Bank Systems, Inc. (MTN) . . . . . . . . . . . . . 8,500 5.925 06/19/96 8,503
First National Bank of Chicago . . . . . . . . . . . . . 6,200 5.700 05/10/96 6,197
First Union National Bank. . . . . . . . . . . . . . . . 10,000 5.960 05/15/96 9,997
Ford Motor Credit Co. (MTN). . . . . . . . . . . . . . . 6,000 6.175 05/10/96 6,013
General Electric Capital Corp. (MTN) . . . . . . . . . . 20,000 5.812 01/12/96 20,000
General Motors Acceptance Corp. (MTN). . . . . . . . . . 5,000 6.125 01/12/96 5,003
General Motors Acceptance Corp. (MTN). . . . . . . . . . 4,000 6.212 03/01/96 4,002
General Motors Acceptance Corp. (MTN). . . . . . . . . . 5,000 6.125 05/06/96 5,005
General Motors Acceptance Corp. (MTN). . . . . . . . . . 10,000 5.950 06/07/96 10,006
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . 25,000 5.799 09/29/95 24,999
NationsBank Corp.. . . . . . . . . . . . . . . . . . . . 5,000 6.125 09/20/95 5,000
PNC Bank . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.815 08/12/96 24,986
Sears Roebuck & Co. (MTN). . . . . . . . . . . . . . . . 20,000 5.875 11/07/95 19,998
Society National Bank of Cleveland (MTN). . . . . . . . 20,000 5.650 04/24/96 19,988
US West Financial Services (MTN) . . . . . . . . . . . . 10,000 6.262 09/05/95 10,000
Wachovia Bank (MTN). . . . . . . . . . . . . . . . . . . 25,000 5.812 05/31/96 24,998
Wells Fargo & Co. (MTN). . . . . . . . . . . . . . . . . 10,000 6.042 01/25/96 9,999
---------
TOTAL DOMESTIC SHORT-TERM ADJUSTABLE RATE NOTES
(cost $310,942). . . . . . . . . . . . . . . . . . . . . 310,942
---------
</TABLE>
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-----------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN COMMERCIAL PAPER - 10.2%
Glaxo Wellcome . . . . . . . . . . . . . . . . . . . . . $30,000 5.710% 11/28/95 $ 29,581
Kredietbank North America. . . . . . . . . . . . . . . . 20,000 5.730 09/06/95 19,984
UBS Finance (Delaware), Inc. . . . . . . . . . . . . . . 50,000 5.850 09/01/95 50,000
Westpac Capital Corp.. . . . . . . . . . . . . . . . . . 10,000 5.630 02/02/96 9,759
----------
TOTAL FOREIGN COMMERCIAL PAPER
(cost $109,324). . . . . . . . . . . . . . . . . . . . . 109,324
----------
TIME DEPOSITS - 15.5%
Abbey National, N.A. . . . . . . . . . . . . . . . . . . 25,000 5.812 11/15/95 25,000
Bank of Scotland . . . . . . . . . . . . . . . . . . . . 25,000 5.906 09/01/95 25,000
First Union National Bank. . . . . . . . . . . . . . . . 40,000 5.812 09/07/95 40,000
NationsBank. . . . . . . . . . . . . . . . . . . . . . . 20,000 5.750 09/12/95 20,000
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . 25,000 5.843 09/18/95 25,000
Swiss Bank Corp. . . . . . . . . . . . . . . . . . . . . 32,298 5.937 09/01/95 32,299
----------
TOTAL TIME DEPOSITS (cost $167,299). . . . . . . . . . . 167,299
----------
UNITED STATES GOVERNMENT AGENCIES - 8.4%
Federal Farm Credit Bank (a) . . . . . . . . . . . . . . 20,000 5.950 09/16/96 19,997
Federal National Mortgage Association (MTN)(a) . . . . . 28,000 6.080 08/13/96 28,033
Student Loan Marketing Association (a) . . . . . . . . . 5,000 5.850 03/20/96 5,004
Student Loan Marketing Association (a) . . . . . . . . . 19,980 5.650 07/19/96 19,981
Student Loan Marketing Association (a) . . . . . . . . . 17,190 5.875 11/27/96 17,242
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $90,257). 90,257
----------
TOTAL INVESTMENTS (amortized cost $975,488) - 90.6%. . . 975,488
----------
</TABLE>
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)
------------
<S> <C>
REPURCHASE AGREEMENTS - 9.3%
Agreement with HSBC Securities, Inc. of $100,000
acquired August 31, 1995 at 5.850% to be repurchased at $100,016
on September 1, 1995, collateralized by:
$103,545 Federal National Mortgage Association Discount Note,
5.560% due 12/08/95 valued at $101,959. . . . . . . . . . . . . . . . . . $ 100,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $100,000) . . . . . . . . . . . . . . . . . 100,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $1,075,488)(b) - 99.9% . . . . . . . . . . . . . . . . . . . . . . . . . 1,075,488
OTHER ASSETS AND LIABILITIES, Net - 0.1% . . . . . . . . . . . . . . . . . . . 1,142
------------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,630
------------
------------
</TABLE>
* The interest rate for all securities with a maturity greater than 13
months has an automatic reset feature resulting in an effective maturity
of 13 months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
(MTN) represents Medium Term Note.
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . $ 975,488,326
Repurchase agreements (cost $100,000,000)(Note 2). . . . . . . . . . . . . . . . . . . . 100,000,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,750,431
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,763
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 22,403
---------------
1,082,269,728
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,159,771
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . 23,708
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . 159,474
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . 56,719
Accrued distribution fees. . . . . . . . . . . . . . . . . . . . . 39,205
Accrued shareholder servicing fees . . . . . . . . . . . . . . . . 22,746
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . 423
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 177,584 5,639,630
------------- ---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,630,098
---------------
---------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 41,374
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076,589
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,075,512,135
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,630,098
---------------
---------------
Net asset value, offering and redemption price per share
($1,076,630,098 divided by 1,076,588,724 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . $1.00
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,898,182
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,319,424
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . 261,274
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,180
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . 184,201
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . 27,168
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . 34,523
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . 1,422
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . 262,458
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,747
Amortization of deferred organization expenses . . . . . . . . . . . 8,528
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,169
------------
Expenses before waivers . . . . . . . . . . . . . . . . . . . . . . 2,379,094
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . . . . (1,159,949) 1,219,145
------------ -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,679,037
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . 57,767
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . $ 50,736,804
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FISCAL YEAR FEBRUARY 22, 1994++
ENDED TO
AUGUST 31, 1995 AUGUST 31, 1994
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . $ 50,679,037 12,330,052
Net realized gain (loss) from investments. . . . . . . . . . . . . . 57,767 (16,393)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations. . . . 50,736,804 12,313,659
Distributions to shareholders from net investment income . . . . . . . (50,679,037) (12,330,052)
Increase (decrease) in net assets from Fund share transactions . . . . 644,348,603 432,240,121
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 644,406,370 432,223,728
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 432,223,728 --
---------------- ----------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . $ 1,076,630,098 $ 432,223,728
---------------- ----------------
---------------- ----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,335,495,297 1,843,505,831
Fund shares issued to shareholders in reinvestments of distributions . 2,419,607 9,675,260
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (3,693,566,301) (1,420,940,970)
---------------- ----------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . 644,348,603 432,240,121
---------------- ----------------
---------------- ----------------
</TABLE>
++ Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the fiscal year orperiod ended August 31 and other
performance information derived from the financial statements.
<TABLE>
<CAPTION>
1995 1994++
----------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
----------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . .0567 .0207
----------- ------------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . (.0567) (.0207)
----------- ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
----------- ------------
----------- ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . 5.82 2.09
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets (b). . . . . . . .14(c) .16
Operating expenses, gross, to average daily net assets (b). . . . . . .27(c) .32
Net investment income to average daily net assets (b) . . . . . . . . 5.76 4.00
Net assets, end of year ($000 omitted). . . . . . . . . . . . . . . . 1,076,630 432,224
Per share amount of fees waived ($ omitted) . . . . . . . . . . . . . .0013(c) .0007
Per share amount of fees reimbursed ($ omitted) . . . . . . . . . . . -- .0001
</TABLE>
++ For the period February 22, 1994 (commencement of operations) to August
31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4.
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation as
of August 31, 1995. These financial statements report on two portfolios
(collectively, the "Funds") The Seven Seas Series US Treasury Money Market
Fund (the "Treasury Money Market Fund") and The Seven Seas Series Prime Money
Market Fund (the "Prime Money Market Fund"). The Investment Company is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company which was organized as a
Massachusetts business trust on October 3, 1987 and now operates under a
First Amended and Restated Master Trust Agreement dated October 13, 1993. The
Investment Company's master trust agreement permits the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial
interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Funds in the preparation of these
financial statements.
SECURITY VALUATION: The Funds' portfolio investments are valued on the basis
of amortized cost, a method by which each portfolio instrument is initially
valued at cost, and thereafter a constant accretion/amortization to maturity
of any discount or premium is assumed. The Funds utilize the amortized cost
valuation method in accordance with Rule 2a-7 of the Investment Company Act
of 1940, as amended.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its net
investment income and capital gains (or losses) and the amounts to be
distributed to each funds' shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Funds, accordingly, paid no federal
income taxes and no federal income tax provision was required. At August 31,
1995, the Treasury Money Market Fund had a net tax basis capital loss
carryover of $173,944, which may be applied against any realized net taxable
gains in each succeeding year or until its expiration date of August 31,
2003.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Funds declare and record
dividends on net investment income daily and pay them monthly. Capital gain
distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Funds to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative, insurance,
and professional fees are generally allocated among all funds principally
based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: Each Fund has incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Funds,
through their custodian or third-party custodian, receive delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to at
least 102% of the repurchase price. The Funds' Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases, sales, and maturities of investment securities, excluding US
Government and Agency obligations and repurchase agreements, for the Prime
Money Market Fund aggregated to $20,943,897,207, $279,297,670, and
$20,038,883,895, respectively.
For the fiscal year ended August 31, 1995, purchases, sales, and maturities
of US Government and Agency obligations, excluding repurchase agreements, for
the Funds aggregated to the following:
<TABLE>
<CAPTION>
Purchases Sales Maturities
-------------- --------------- ---------------
<S> <C> <C> <C>
Treasury Money Market Fund $ 1,140,356,988 $ 686,030,343 $ 561,343,488
Prime Money Market Fund 653,739,904 244,024,490 436,459,882
</TABLE>
SECURITIES LENDING: Each Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Funds receive cash (US currency)
and securities issued or guaranteed by the US Government or its agencies as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested in short-term
debt securities. To the extent that a loan is secured by non-cash collateral,
brokers pay the Funds negotiated lenders' fees, which are divided between
each Fund and its lending agent, and are included as interest income to the
Funds. Income generated from the investment of cash collateral is also
divided between each Fund and its lending agent, and is included as interest
income to the Funds. All collateral received will equal at least 100% of the
market value of the loaned securities at the inception of each loan. This
collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Consequently, loans are made
only
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
to borrowers which are deemed to be of good financial standing. As of the
fiscal year ended August 31, 1995, there were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State Street
Bank and Trust Company (the "Adviser") under which the Adviser directs the
investments of the Funds in accordance with their investment objectives,
policies, and limitations. For these services, the Treasury Money Market and
Prime Money Market Funds pay a fee to the Adviser, calculated daily and paid
monthly, at the annual rate of .25% and .15%, of their average daily net
assets, respectively.
For the fiscal year ended August 31, 1995, the Adviser voluntarily agreed to
waive all of its advisory fees through April 30, 1995, and varying portions
of such fees thereafter to the Treasury Money Market and Prime Money Market
Funds. Additionally, effective May 1, 1995, the Adviser voluntarily agreed to
reimburse the Treasury Money Market and Prime Money Market Funds for all
expenses in excess of .20% of their average daily net assets on an annual
basis, respectively. For this period no reimbursement was required for the
Funds; however, expense reductions for the Treasury Money Market Fund include
$340,475 of advisory fees voluntarily waived and other miscellaneous expense
revisions. Advisory fee waivers for the Prime Money Market Fund amounted to
$1,159,849. The Investment Company has contracts with the Adviser to provide
custody, shareholder servicing and transfer agent services to the Funds.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"), a
wholly-owned subsidiary of the Adviser (collectively "the Agents"). The SSBSI
service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for Investment
Company shareholders, including services related to the purchase and
redemption of Investment Company shares. For these services, the Funds pay
fees to the Agents in an amount that per annum is equal to .025% and .175% of
the average daily value of all Fund shares held by or for customers of the
Adviser and SSBSI, respectively. These fees, in conjunction with other
distribution-related expenses, may not exceed .25% of the average daily value
of net assets on an annual basis, which includes a limit of .20% in
shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also required,
pursuant to the Administration Agreement, to arrange and pay certain
promotional and sales costs of Investment Company shares. Russell Fund
Distributors, Inc. (the "Distributor"), a subsidiary of the Administrator, is
the distributor of the Investment Company shares. Under the Distribution
Plan, each fund may spend, and the Distributor may be reimbursed, up to .25%
of the average daily value of the net assets on an annual basis for
distribution-related and shareholder servicing expenses. If, in any calendar
month, the distribution expenses incurred by the Distributor exceed the
maximum amount of allowable reimbursement, the excess amounts may be carried
forward for subsequent reimbursement from the Investment Company. In no event
may excess amounts be carried forward more than two fiscal years from the
year when such expenses were incurred. The amounts
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
related to distribution and shareholder servicing fees are included in the
accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion -
.03%; (ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
funds (up to a maximum of 15% of the asset-based fee determined in (i));
(iii) out-of-pocket expenses; and (iv) start-up costs for new funds.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of the
board meetings attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. Effective
July 17, 1995, the annual retainer was increased to $44,000.
28 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- -------------------------------------------------------------------------------
<TABLE>
<S>
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
<C>
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
</TABLE>
Annual Report 29
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 8
Growth and Income Fund Financial Statements. . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . 19
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark and
service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Growth and Income Fund. I hope you
find this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Brenton H. Dickson, Senior Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Growth and Income
Fund since its inception in September 1993. Mr. Dickson has been a manager in
State Street's Investment Research Division since 1981. He is a member of the
Board of Directors of the Boston Security Analyst Society and a portfolio
manager of the Personal Trust Stock Common Trust Funds. There are five other
portfolio managers who work with Mr. Dickson in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[Chart]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
Yearly Periods S&P-Registered
Ended Growth and Trademark-
August 31 Income Fund 500 Index**
- --------------- ----------- ---------------
<S> <C> <C>
Inception* $10,000 $10,000
1994 $10,623 $10,545
1995 $12,287 $12,818
</TABLE>
SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 11,566 15.66%
Inception $ 12,287 10.84%
</TABLE>
STANDARD & POOR'S-Registered Trademark- 500 COMPOSITE
STOCK PRICE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 12,156 21.56%
Inception $ 12,818 13.22%
</TABLE>
In the fiscal year which ended August 31, 1995, the Seven Seas Series Growth and
Income Fund's total investment return was 15.66% including all expenses,
compared with 21.56% for the Standard & Poor's-Registered Trademark- 500
Composite Stock Price Index. Investment results were hurt by the Fund's
holdings of Telefonos de Mexico and Panamerican Beverages, which declined
sharply as a result of the devaluation of the Mexican peso last December.
More recently, the Fund has benefited from its exposure to capital goods
and technology companies. These firms are experiencing strong demand for their
products and services which reduce costs and improve productivity. Over the
last six months, the Fund's total investment return was 17.3% versus 16.9% for
the benchmark.
During the past 12 months, stock prices rose sharply in response to record
corporate earnings and improving profitability. As a result of restructuring and
the employment of new technologies, productivity in the United States has
improved noticeably. Unit labor costs were unchanged during the 12 months ending
in June. The last time there was no increase in this series was in 1956.
Meanwhile, after 20 years of decline, the returns earned on capital for American
companies, after adjusting for inflation, have recovered to where they were in
the early 1960s. As a result, many American firms have become the world's
low-cost producers, and the US is again regaining its international business
leadership role. On the other hand, because of the near-term slowdown in the
economy, domestic growth of both sales and profits may be more modest over the
next few quarters.
*The Growth and Income Fund commenced operations on September 1, 1993. Index
comparison began September 1, 1993.
**The Standard & Poor's-Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's Corporation
to best capture the price performance of a large cross-section of the US
publicity traded stock market. The Index is structured to approximate the
general distribution of industries in the US economy.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
Consequently, while the Fund remains overweighted relative to the S&P 500 in the
technology sector (the benchmark's best performing sector), holdings of
companies with significant exposure to changing economic conditions have been
reduced. These have been replaced with shares of more defensive businesses with
less exposure to changing economic conditions, and thus are likely to exhibit
favorable relative earnings progress in 1996.
The Fund is well diversified, with at least some exposure to the major sectors
of the US economy. The individual holdings are believed to have favorable
long-term growth prospects as well as being attractively valued at the current
time.
-------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Growth and Income Fund (the
"Fund"), as of August 31, 1995, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets and the
financial highlights for the fiscal year then ended, and for the period
September 1, 1993 (commencement of operations) to August 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets and the financial highlights for the
the fiscal year then ended and for the period September 1, 1993 (commencement of
operations) to August 31, 1994 in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1995
NUMBER MARKET
OF VALUE
SHARES (000)
-------- --------
<S> <C> <C>
COMMON STOCKS - 96.6%
BASIC INDUSTRIES - 9.8%
Brush Wellman, Inc. 54,000 $ 1,107
Ethyl Corp. 100,000 1,087
Mallinckrodt Group, Inc. 29,000 1,091
Union Camp Corp. 18,000 1,024
--------
4,309
--------
CAPITAL GOODS - 2.7%
WMX Technologies, Inc. 40,000 1,175
--------
CONSUMER BASICS - 16.2%
Bristol-Myers Squibb Co. 16,000 1,098
CPC International, Inc. 20,000 1,257
Merck & Co., Inc. 25,000 1,247
Pan American Beverage Class A 41,000 1,220
Procter & Gamble Co. 19,000 1,318
Warner-Lambert Co. 10,500 949
--------
7,089
--------
CONSUMER DURABLES - 2.3%
General Motors Corp. 21,000 987
--------
CONSUMER NON-DURABLES - 7.5%
Dayton Hudson Corp. 15,000 1,097
Eastman Kodak Co. 19,000 1,095
V.F. Corp. 20,000 1,095
--------
3,287
--------
CONSUMER SERVICES - 2.3%
Disney (Walt) Co. 18,000 1,010
--------
ENERGY - 8.2%
Exxon Corp. 16,000 1,100
Halliburton Co. 31,000 1,314
Unocal Corp. 41,000 1,194
--------
3,608
--------
FINANCE - 11.7%
American General Corp. 37,000 1,304
American International Group, Inc. 16,500 1,330
Fleet Financial Group, Inc. 33,000 1,221
United Asset Management Corp. 33,000 1,287
--------
5,142
--------
GENERAL BUSINESS - 8.1%
General Motors Corp. Class E 25,000 1,166
Reuters Holdings PLC
Class B - ADR 23,000 1,199
Tele Danmark Class B - ADR 45,000 1,198
--------
3,563
--------
TECHNOLOGY - 16.2%
Allied Signal, Inc. 25,000 1,109
Boeing Co. 17,000 1,084
Intel Corp. 21,000 1,289
International Business
Machines Corp. 12,000 1,240
Microsoft Corp. (a) 13,000 1,201
Motorola, Inc. 16,000 1,196
--------
7,119
--------
TRANSPORTATION - 2.5%
Ryder System, Inc. 46,000 1,116
--------
UTILITIES - 9.1%
AT&T Corp. 22,000 1,243
GTE Corp. 40,000 1,465
Vodafone Group PLC - ADR 31,000 1,298
--------
4,006
TOTAL COMMON STOCKS
(cost $36,181) 42,411
--------
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- --------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.2%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 968 $ 968
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $968) 968
--------
TOTAL INVESTMENTS
(identified cost $37,149)(c) - 98.8% 43,379
OTHER ASSETS AND LIABILITIES,
NET - 1.2% 505
--------
NET ASSETS - 100.0% $ 43,884
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) At August 31, 1995, the cost for federal income tax
purposes was $37,162 and net unrealized appreciation
for all securities was $6,217. This consisted of aggregate
gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of
$6,405 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax
cost over market value of $188.
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
ASSETS
<S> <C> <C>
Investments at market (identified cost $37,148,963)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,379,058
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,104
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,343
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,553
From Adviser (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,165
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,922
-------------
44,049,644
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,128
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,960
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,229
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,250
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,886 165,492
------------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,884,152
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 181,126
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,816
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,230,095
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,671
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,319,444
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,884,152
-------------
-------------
Net asset value, offering and redemption price per share
($43,884,152 divided by 3,671,130 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.95
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
INVESTMENT INCOME
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $11,551) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 864,984
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,648
-------------
880,632
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280,417
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,796
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,102
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,428
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,226
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,799
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,370
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,937
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,547
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . . . . . . 8,690
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,260
-------------
Expenses before reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529,572
Expense reimbursement from Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (216,126) 313,446
------------- -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,186
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,901
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . 4,623,985
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,068,886
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,636,072
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE PERIOD
YEAR FISCAL SEPTEMBER 1, 1993++
ENDED TO
AUGUST 31, 1995 AUGUST 31, 1994
----------------- ------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 567,186 $ 315,388
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . 444,901 (295,085)
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,623,985 1,606,110
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . 5,636,072 1,626,413
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . . . (509,390) (206,037)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . 12,010,923 25,326,171
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,137,605 26,746,547
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,746,547 --
------------- -------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$181,126 and $109,351, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,884,152 $ 26,746,547
------------- -------------
------------- -------------
FUND SHARE TRANSACTIONS FOR THE FISCAL YEAR FOR THE PERIOD SEPTEMBER 1,
ENDED AUGUST 31, 1995 1993++ TO AUGUST 31, 1994
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
Fund shares sold . . . . . . . . . . . . . . . . . 2,456,856 $ 26,579,867 2,802,979 $ 27,914,765
Fund shares issued to shareholders
in reinvestments of distributions. . . . . . . . 48,392 505,648 20,572 205,771
Fund shares redeemed . . . . . . . . . . . . . . . (1,379,737) (15,074,592) (277,932) (2,794,365)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . . . . . . . 1,125,511 $ 12,010,923 2,545,619 $ 25,326,171
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
++ Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1995 1994++
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.51 $ 10.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 .15
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . 1.44 .47
------------- -------------
Total From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.62 .62
------------- -------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.18) (.11)
------------- -------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 10.51
------------- -------------
------------- -------------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.66 6.23
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets . . . . . . . . . . . . . . . . . . . . .95(a) .95
Operating expenses, gross, to average daily net assets . . . . . . . . . . . . . . . . . . 1.61(a) 1.44
Net investment income to average daily net assets. . . . . . . . . . . . . . . . . . . . . 1.72 1.75
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.32 36.48
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . 43,884 26,747
Per share amount of fees waived ($ omitted). . . . . . . . . . . . . . . . . . . . . . . . -- .0002
Per share amount of fees reimbursed ($ omitted). . . . . . . . . . . . . . . . . . . . . . .0685(a) .0418
</TABLE>
++ For the period September 1, 1993 (commencement of operations) to August 31,
1994.
(a) See Note 4.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios, which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Growth and Income Fund (the "Fund"). The Investment
Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company which was organized
as a Massachusetts business trust on October 3, 1987 and now operates under
a First Amended and Restated Master Trust Agreement dated October 13, 1993.
The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, the sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1995, the Fund has a net tax basis capital loss carryover of
$63,505, which may be applied against any realized net taxable gains on
each succeeding year until its expiration date of August 31, 2002.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in foreign-denominated
investments and certain securities sold at a loss. Accordingly, the Fund
may periodically make reclassifications among certain of its capital
accounts without impacting its net asset value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
Adviser will monitor repurchase agreements daily to determine that the
market value (including accrued interest) at Fedwire closing time of the
underlying securities remains at least equal to 100% of the repurchase
price. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding short-term
investments aggregated to $24,333,680 and $12,572,189, respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which
are divided between the Fund and its lending agent and are included as
interest income to the Fund. Income generated from the investment of cash
collateral is also divided between the Fund and its lending agent and is
included as interest income to the Fund. All collateral received will equal
at least 100% of the market value of the loaned securities at the inception
of each loan. This collateral must be maintained at not less than 100% of
the market value of the loaned securities during the period of the loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .85% of its average daily net assets.
For the fiscal year ended August 31, 1995, the Adviser voluntarily agreed
to reimburse the Fund for all expenses in excess of .95% of average daily
net assets on an annual basis. The Investment Company has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees to the Agents in an amount that per annum is equal to .025% and
.175% of the average daily value of all
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
AUGUST 31, 1995
Fund shares held by or for customers of the Adviser and SSBSI,
respectively. These fees, in conjunction with other distribution-related
expenses, may not exceed .25% of the average daily value of net assets on
an annual basis, which includes a limit of .20% in shareholder servicing
fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts related to distribution and shareholder servicing fees are included
in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-backed fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of
$3,803 to SSBSI for the fiscal year ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
5. DIVIDENDS
On September 1, 1995 the Board of Trustees declared a dividend of $.0444
from net investment income, payable on September 12, 1995 to shareholders
of record September 5, 1995.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- -------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Intermediate Fund Financial Statements . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 19
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the Intermediate Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, additional funds were opened or made available for
operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund was opened: a
money market investment to provide maximum current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Paul Mattocks, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Intermediate Fund since
December 1994. For the past five years, Mr. Mattocks has been portfolio manager
for several pooled funds and has worked with State Street's Trust Division in
the management of fixed-income assets. There are two other portfolio managers
who work with Mr. Mattocks in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[Chart]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
LEHMAN BROTHERS
YEARLY PERIODS INTERMEDIATE LEHMAN BROTHERS
ENDED INTERMEDIATE GOV./CORP. GOV./CORP.
AUGUST 31 FUND BOND INDEX** BOND INDEX+
- -------------- ------------ --------------- ---------------
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1994 $ 9,658 $ 9,967 $ 9,767
1995 $10,629 $10,911 $10,889
</TABLE>
SEVEN SEAS SERIES
INTERMEDIATE FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 11,005 10.05%
Inception 10,629 3.09%
</TABLE>
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 11,149 11.49%
Inception 10,889 4.35%
</TABLE>
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year 10,947 9.47%
Inception 10,911 4.46%
</TABLE>
For the fiscal year ended August 31, 1995, the Seven Seas Series Intermediate
Fund produced a total return of 10.05% while its benchmark, the Lehman Brothers
Government/Corporate Bond Index (LGC), and the Lehman Brothers Intermediate
Government/Corporate Bond Index (LIGC), returned 11.49% and 9.47%, respectively.
The Fund's performance is reported net of fees while the LGC and LIGC are quoted
on a gross basis. The varying results of the Fund, LGC and LIGC are primarily
attributed to differences in modified adjusted duration. The performance of the
Fund--with a period-end modified adjusted duration of 4.04 versus 5.08 for the
LGC and 3.27 for the LIGC--reflected its relative sensitivity to interest rate
movement as compared to the LGC and LIGC.
The Seven Seas Series Intermediate Fund seeks to provide current income
consistent with the preservation of principal by investing primarily in a
diversified portfolio of investment grade debt securities. The dollar-weighted
average maturity of the Fund may range between three and ten years.
The Fund has been well positioned against the indexes, given the recent period
of interest rate fluctuation. The Fund maintained a risk/reward profile which
resulted in both price appreciation and very reasonable income flows. Despite
the dramatic decline in bond yields, the Fund was able to increase coupon,
maintain current yield, and shorten duration over the year.
The bond market quickly turned around the previous year's dismal performance,
producing the strong total returns witnessed for the 12 months ended August 31,
1995. Despite excessively high levels of volatility, rates fell for all
maturities greater than one year.
* The Intermediate Fund commenced operations on September 1, 1993. Index
comparisons began September 1, 1993.
** The Lehman Brothers Intermediate Government/Corporate Bond Index is composed
of all bonds covered by the Lehman Brothers Government/Corporate Bond Index
with maturities between one and 9.99 years.
+ The Lehman Brothers Government/Corporate Bond Index is composed of all bonds
that are investment grade (rated Baa or higher by Moody's or BBB or higher by
S&P, if unrated by Moody's). Issues must have at least one year to maturity.
Total return comprises price appreciation/deprecation and income as a
percentage of the original investment. Indexes are rebalanced monthly by
market capitalization.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
For perspective, the ten-year Treasury note fell 89 basis points in yield which
resulted in principal price appreciation of more than 5%.
A slow down in the pace of economic expansion, combined with abating concerns
regarding inflation expectations, sparked the last year's bond market rally. The
Federal Reserve, given these observations, finally eased monetary policy for the
first time in almost three years by dropping the Discount Rate 25 basis points
in July.
Going forward, the Seven Seas Series Intermediate Fund will continue to invest
in high quality, full coupon bonds which will also offer opportunity for
outperformance. Bond swaps will be executed in order to capture anomalies and
add incremental value. The rigorous application of qualitative and quantitative
research will continue to characterize the framework within which the Fund is
managed.
------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Intermediate Fund (the "Fund"),
as of August 31, 1995, and the related statement of operations for the fiscal
year then ended, the statements of changes in net assets and the financial
highlights for the fiscal year then ended and for the period September 1, 1993
(commencement of operations) to August 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations for the fiscal year
then ended, the changes in its net assets and the financial highlights for the
fiscal year then ended and for the period September 1, 1993 (commencement of
operations) to August 31, 1994, in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ---------
<S> <C> <C>
LONG-TERM INVESTMENTS - 97.2%
CORPORATE BONDS AND NOTES - 37.0%
Associates Corp. of North America
7.500% due 05/15/99 $ 500 $ 516
Banc One, Milwaukee, N.A.
6.625% due 04/15/03 500 489
BankAmerica Corp.
8.125% due 08/15/04 500 514
Bankers Trust New York Corp.
7.500% due 01/15/02 750 768
du Pont (E.I.) de Nemours & Co.
6.000% due 12/01/01 750 726
Florida Power & Light Co.
6.625% due 02/01/03 500 493
Ford Motor Company
7.500% due 11/15/99 555 573
General Electric Capital Corp.
5.500% due 11/01/01 450 423
General Motors Acceptance Corp.
5.500% due 12/15/01 450 417
Georgia Power Co.
6.875% due 09/01/02 500 499
International Business Machines Corp.
6.375% due 06/15/00 750 748
International Lease Finance Corp.
7.000% due 06/01/98 500 506
Minnesota Mining
& Manufacturing Co. (MTN)
6.250% due 03/29/99 500 498
Morgan (J. P.) & Co., Inc.
7.625% due 09/15/04 750 788
NationsBank Corp.
6.500% due 08/15/03 500 483
Norwest Financial, Inc.
6.750% due 06/01/05 750 744
Ohio Edison Co.
7.500% due 08/01/02 350 354
Philip Morris Cos., Inc.
6.000% due 11/15/99 600 580
Sears Roebuck & Co.
6.000% due 05/01/00 500 487
Southwestern Bell Telephone Co.
5.875% due 06/01/03 450 423
Toronto Dominion Bank
6.125% due 11/01/08 500 457
Wal-Mart Stores, Inc.
7.500% due 05/15/04 500 524
WMX Technologies, Inc.
8.250% due 11/15/99 500 531
----------
12,541
----------
MORTGAGE-BACKED SECURITIES - 7.5%
Federal Home Loan Mortgage Corp.
Participation Certificate
Series 1292 Class 1292F
7.750% due 07/15/05 1,000 1,024
Participation Certificate REMIC
Series 1014 Class D
7.950% due 08/15/17 645 646
Federal National Mortgage Association
REMIC Trust 1992-46 Class E
6.750% due 12/25/03 870 869
----------
2,539
----------
UNITED STATES GOVERNMENT
AGENCIES - 26.1%
Federal Home Loan Bank
7.130% due 02/09/96 1,000 1,006
8.250% due 02/23/00 1,000 1,012
7.360% due 05/04/01 500 511
8.650% due 12/28/01 500 505
6.410% due 12/29/03 500 485
Federal Home Loan Mortgage Corp.
5.900% due 04/21/00 500 489
5.780% due 10/22/03 500 471
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF NET ASSETS
August 31, 1995
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
Federal National Mortgage
Association
6.200% due 07/10/03 $ 500 $ 484
6.250% due 08/12/03 500 484
5.450% due 10/10/03 500 466
Federal National Mortgage
Association (MTN)
5.200% due 04/30/98 600 582
5.930% due 09/26/03 500 483
Tennessee Valley Authority
7.875% due 09/15/01 500 514
6.125% due 07/15/03 400 386
6.375% due 06/15/05 1,000 985
----------
8,863
----------
UNITED STATES GOVERNMENT
TREASURIES - 20.0%
United States Treasury Notes
6.875% due 10/31/96 150 152
6.125% due 05/15/98 1,000 1,005
6.375% due 01/15/99 1,000 1,010
8.000% due 08/15/99 100 107
6.000% due 10/15/99 1,000 999
6.750% due 04/30/00 1,000 1,026
5.875% due 06/30/00 1,000 992
6.250% due 02/15/03 1,000 999
5.750% due 08/15/03 500 482
----------
6,772
----------
YANKEE BONDS - 6.6%
Household International
Netherlands B.V.
6.000% due 03/15/99 500 491
Shell Canada, Ltd.
7.375% due 06/01/99 550 568
Victorian Public Authority
Financial Agency
8.450% due 10/01/01 500 542
Westpac Banking, Ltd.
7.875% due 10/15/02 600 633
----------
2,234
----------
TOTAL LONG-TERM INVESTMENTS
(cost $32,739) 32,949
----------
SHORT-TERM INVESTMENTS - 0.6%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (a) 214 214
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $214) 214
----------
TOTAL INVESTMENTS
(identified cost $32,953)(b) - 97.8% 33,163
OTHER ASSETS AND LIABILITIES,
NET - 2.2% 730
----------
NET ASSETS - 100.0% $ 33,893
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) At August 31, 1995, the cost for federal income tax
purposes was the same as shown above and net
unrealized appreciation for all securities was $211.
This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of
market value over tax cost of $525 and aggregate gross
unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $314.
(MTN) represents Medium Term Note.
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $32,952,625)(Note 2). . $33,163,350
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,639
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . 521,504
Investments sold . . . . . . . . . . . . . . . . . . . . . . 445,802
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . 76,565
From Adviser (Note 4). . . . . . . . . . . . . . . . . . . . 263,602
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 389
Deferred organizational expenses (Note 2). . . . . . . . . . . 27,905
-----------
34,503,756
LIABILITIES
Payables (Note 4):
Investments purchased. . . . . . . . . . . . . $ 485,555
Fund shares redeemed . . . . . . . . . . . . . 1,623
Accrued administrative fees. . . . . . . . . . 754
Accrued advisory fees. . . . . . . . . . . . . 84,686
Accrued custodian fees . . . . . . . . . . . . 6,345
Accrued transfer agent fees. . . . . . . . . . 26,005
Other accrued expenses . . . . . . . . . . . . 5,790 610,758
---------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,892,998
-----------
-----------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . $ 512,121
Accumulated net realized gain (loss) . . . . . . . . . . . . . (422,397)
Unrealized appreciation (depreciation) on investments. . . . . 210,725
Shares of beneficial interest. . . . . . . . . . . . . . . . . 3,487
Additional paid-in capital . . . . . . . . . . . . . . . . . . 33,589,062
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,892,998
-----------
-----------
Net asset value, offering and redemption price per share
($33,892,998 divided by 3,486,536 shares of $.001
par value shares of beneficial interest outstanding) . . . . . $9.72
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,664,542
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 41,562
----------
1,706,104
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . $ 198,032
Administrative fees. . . . . . . . . . . . . . . 7,344
Custodian fees . . . . . . . . . . . . . . . . . 24,270
Distribution fees. . . . . . . . . . . . . . . . 27,531
Professional fees. . . . . . . . . . . . . . . . 12,646
Registration fees. . . . . . . . . . . . . . . . 14,635
Shareholder servicing fees . . . . . . . . . . . 7,921
Transfer agent fees. . . . . . . . . . . . . . . 105,926
Trustees' fees . . . . . . . . . . . . . . . . . 1,430
Amortization of deferred organization expenses . 8,684
Miscellaneous. . . . . . . . . . . . . . . . . . 3,759
---------
Expenses before reimbursement. . . . . . . . . . 412,178
Expense reimbursement from Adviser . . . . . . . (263,571) 148,607
--------- ----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . 1,557,497
----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . (358,690)
Net change in unrealized appreciation or depreciation
of investments . . . . . . . . . . . . . . . . . . . . . . . . 1,406,588
----------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . 1,047,898
----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . . . . . . . . . $2,605,395
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FISCAL YEAR SEPTEMBER 1, 1993++
ENDED TO
AUGUST 31, 1995 AUGUST 31, 1994
--------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,557,497 $ 746,538
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . (358,690) (63,707)
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . . 1,406,588 (1,195,863)
----------- -----------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . 2,605,395 (513,032)
Distributions to shareholders from net investment income . . . . . . . . . . . . . . (1,340,239) (465,579)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . 12,664,979 20,941,474
----------- -----------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 13,930,135 19,962,863
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,962,863 --
----------- -----------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$512,121 and $280,959, respectively) . . . . . . . . . . . . . . . . . . . . . . . $33,892,998 $19,962,863
----------- -----------
----------- -----------
</TABLE>
FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED FOR THE PERIOD SEPTEMBER 1, 1993++
AUGUST 31, 1995 TO AUGUST 31, 1994
-------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . 2,311,647 $ 21,578,927 2,465,136 $24,104,694
Fund shares issued to shareholders
in reinvestments of distributions. . . . . 135,007 1,248,108 45,103 428,053
Fund shares redeemed . . . . . . . . . . . . (1,090,932) (10,162,056) (379,425) (3,591,273)
---------- ------------ ---------- -----------
Net increase (decrease). . . . . . . . . . . 1,355,722 $12,664,979 2,130,814 $20,941,474
---------- ------------ ---------- -----------
---------- ------------ ---------- -----------
</TABLE>
++ Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each fiscal year or period ended August 31 and other
performance information derived from the financial statements.
<TABLE>
<CAPTION>
1995 1994++
--------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . $ 9.37 $ 10.00
--------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . .56 .42
Net realized and unrealized gain (loss) on investments . . . . .34 (.76)
--------- ----------
Total From Investment Operations . . . . . . . . . . . . . . . .90 (.34)
--------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . (.55) (.29)
--------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . $ 9.72 $ 9.37
--------- ----------
--------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . 10.05 (3.42)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets . . . . . .60(a) .60
Operating expenses, gross, to average daily net assets . . . . 1.67(a) 1.51
Net investment income to average daily net assets. . . . . . . 6.29 5.11
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . 26.31 15.70
Net assets, end of year ($000 omitted) . . . . . . . . . . . . 33,893 19,963
Per share amount of fees waived ($ omitted). . . . . . . . . . -- .0002
Per share amount of fees reimbursed ($ omitted). . . . . . . . .0946(a) .0753
</TABLE>
++ For the Period September 1, 1993 (Commencement of Operations) to
August 31, 1994.
(a) See Note 4.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios, which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Intermediate Fund (the "Fund"). The Investment
Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company which was organized
as a Massachusetts business trust on October 3, 1987 and now operates under
a First Amended and Restated Master Trust Agreement dated october 13, 1993.
The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 Par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short-and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
the amounts to be distributed to each fund's shareholders without regard to
the income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1995, the Fund had a net tax basis capital loss carryover of
$103,098, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2003. In
addition, as permitted by tax regulations, the Fund intends to defer a net
realized capital loss of $319,202 incurred from November 1, 1994 to
August 31, 1995 and treat it as arising in year 1996.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in mortgage-backed
securities and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal
to at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
interest) at Fedwire closing time of the underlying securities remains at
least equal to 100% of the repurchase price. The Adviser or third-party
custodian will notify the seller to immediately increase the collateral on
the repurchase agreement to 102% of the repurchase price if collateral
falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding US Government and
Agency obligations and short-term investments, aggregated to $4,541,433 and
$2,992,995, respectively.
For the fiscal year ended August 31, 1995, purchases and sales of US
Government and Agency obligations, excluding short-term investments,
aggregated to $15,140,024 and $3,289,908, respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which
are divided between the Fund and its lending agent and are included as
interest income to the Fund. Income generated from the investment of cash
collateral is also divided between the Fund and its lending agent and is
included as interest income to the Fund. All collateral received will equal
at least 100% of the market value of the loaned securities at the inception
of each loan. This collateral must be maintained at not less than 100% of
the market value of the loaned securities during the period of the loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .80% of its average daily net assets.
For the fiscal year ended August 31, 1995, the adviser voluntarily agreed
to reimburse the Fund for all expenses in excess of .60% of average daily
net assets on an annual basis. The Investment Company has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
Agents"). The SSBSI service agreement became effective July 17, 1995. Under
these service agreements, the Agents are to provide administrative
functions for Investment Company shareholders, including services related
to the purchase and redemption of Investment Company shares. For these
services, the Fund pays fees to the Agents in an amount that per annum is
equal to .025% And .175% Of the average daily value of all Fund shares held
by or for customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
Of the average daily value of net assets on an annual basis, which includes
a limit of .20% In shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (The "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% Of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts related to distribution and shareholder servicing fees are included
in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; Over $500 million to and including $1 billion - .05%; Over $1 billion
- .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
5. DIVIDENDS
On September 1, 1995, the Board of Trustees declared a dividend of $.1437
from net investment income, payable on September 12, 1995 to shareholders
of record September 5, 1995.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 754-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES FUND
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 8
Emerging Markets Fund Financial Statements . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . 21
Tax Information. . . . . . . . . . . . . . . . . . . . . . . 26
Fund Management and Service Providers. . . . . . . . . . . . 27
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund - Registered Trademark -" is a registered trademark
and service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual
report for the fiscal year ended August 31, 1995. Over the past
year, the Series has grown to include thirteen portfolios covering
a broad range of investment strategies from the far corners of the
emerging markets' countries to the domestic stock and bond markets.
This report contains summaries on the market environment, performance
and financial statements for the Emerging Markets Fund. I hope you
find this information to be a useful tool as you review your overall
investment strategy.
Over the past fiscal year, additional funds were opened or made available
for operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was
converted by a vote of that Fund's shareholders to the Small Cap Fund:
an equity investment in domestic smaller capitalized securities designed
to provide maximum total return, primarily through capital appreciation.
In December 1994, The Seven Seas Series Tax Free Money Market Fund
was opened: a money market investment to provide maximum current income,
exempt from federal income taxes, to the extent consistent with the
preservation of capital and liquidity.
In March 1995, The Seven Seas Series Active International Fund was
opened: an equity investment in the developed foreign countries designed
to provide maximum total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors,
which serves as the investment adviser to the Fund, I would like
to thank you for choosing The Seven Seas Series Fund and look
forward to continuing to serve your investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
[PHOTOGRAPH]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience
of our professional staff. Portfolio managers work together to develop
and enhance the techniques that drive our investment processes. The
result is that the portfolios we manage benefit from the knowledge
of the entire team.
Mr. Robert Furdak, CFA, Managing Director, has been the portfolio
manager primarily responsible for investment decisions regarding the
Emerging Markets Fund since its inception in March 1994. Mr. Furdak
has been with State Street since 1989, working on the non-US active
equity team. There are seven other portfolio managers who work with
Mr. Furdak in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[Chart]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
I F C
Yearly Periods Emerging Investable
Ended Markets Composite
August 31 Fund Index**
- --------------- --------- -----------
<S> <C> <C>
Inception* $10,000 $10,000
1994 $11,450 $10,531
1995 $10,387 $8,361
</TABLE>
The Seven Seas Series Emerging Markets Fund had a net asset value
of $10.30 per share for the fiscal year ended August 31, 1995.
The one year total return of the Fund was -9.28%. This compared very
favorably to the capitalization-weighted International Finance
Corporation Investable Composite Index, (an unmanaged index
of broadly diversified emerging market equities) which was down
20.61%.
The most recent fiscal year was a tumultuous one for the
emerging markets. December 20, 1994 was the watershed, when the
Mexican government decided to cease supporting the peso causing
the overvalued currency to devaluate significantly. This
action spelled disaster for the Mexican bolsa as the market plunged
over 45% (in US dollars) during the Fund's fiscal year. The Fund
was underweight to the Mexican market prior to the devaluation
and consequently, performance was not hurt significantly by
the Mexican market. Although the devaluation hurt other Latin
American countries, our exposure in Brazil and Argentina was not adversely
affected. The Fund was overweight to Brazil which reacted very
favorably to the success of a new economic plan which has
significantly reduced inflation and spurred a boom in consumerism
and economic growth. The Fund remains relatively overweighted in Brazil
and Argentina, compared to the Index, as both countries continue
reforms and build confidence in the wake of the peso crisis.
However, we feel that the Mexican peso devaluation has
yet to be fully reflected in Mexican stock prices and thus we
are maintaining our underweight position in Mexico.
Our position in southern Europe also benefited the Fund's
relative performance. The Fund's overweighted positions
in Greece (+25%)
SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 9,072 (9.28%)
Inception $10,387 2.57%+
</TABLE>
IFC INVESTABLE COMPOSITE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 7,939 (20.61%)
Inception $ 8,361 (11.25%)+
</TABLE>
*The Fund commenced operations on March 1, 1994.
Index comparison began March 1, 1994.
**The IFC Investable Composite Index is a market capitalization-weighted
index of the performance of securities listed on the stock exchanges
of emerging equity market countries.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
and Portugal (-6%) boosted overall returns as both markets beat the Fund's
benchmark. Our weight in Turkey (+21%) also helped returns, although we
liquidated our positions before the markets surged in mid 1995. We expect to
scale back these positions, especially Greece, and to continue to increase
exposure in eastern European countries such as Hungary and Poland, where we see
excellent opportunities.
Indonesia and South Korea were two of the far east region's top performers,
up 3% and 0%, respectively. Resource-rich Indonesia was helped by
stronger commodity prices. South Korea got a boost from more amicable
relations with the North, financial liberalization and the strength
of the yen which helped South Korean exports. The Fund intends to
remain overweighted in South Korea because of these positive changes.
The main themes for investing in the emerging markets remain
sound: growth potential, attractive valuation, diversification benefits,
large human and natural resources and an expanding middle class. The
uncertainty and negative returns caused by the Mexican peso devaluation
has made these investment opportunities in the emerging markets attainable
at much lower prices. We have already seen a rebound and stabilization
in prices, as evidenced by five straight months of positive performance
(March 95 through July 95) for the Fund's benchmark. (See quarterly
graphical presentation below.) We hope this sets the stage for a better
year in the emerging markets.
The Fund will reduce the cap on the annual expense ratio on November
1, 1995 to 1.25% of average daily net assets on an annual basis. This
new fee structure is more consistent with other emerging markets funds
offered in the institutional market place.
-------------------------------
Performance is historical and assumes reinvestment of all dividends
and capital gains. Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or
less than when purchased. Past performance is not indicative of future
results.
Investments in securities of non-US issuers and foreign currencies
involve investment risks different from those of US issuers, the Prospectus
contains further information and details regarding these risks.
[Chart]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
I F C
Quarterly Period Emerging Investable
Ended Markets Composite
August 31 Fund Index**
- ---------------- --------- ----------
<S> <C> <C>
Inception* $10,000 $10,000
05/94 $9,390 $9,027
08/94 $11,450 $10,531
11/94 $11,480 $10,035
02/95 $9,450 $7,674
05/95 $10,186 $8,277
08/95 $10,387 $8,361
</TABLE>
GROWTH OF A $10,000 INVESTMENT AS SHOWN ON THE YEARLY
GRAPH, PRESENTED ON A QUARTERLY BASIS.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities
and statement of net assets of The Seven Seas Series Emerging
Markets Fund (the "Fund"), as of August 31, 1995, and the
related statement of operations for the fiscal year then ended, the
statements of changes in net assets and the financial highlights for
the fiscal year then ended and for the period March 1, 1994 (commencement
of operations) to August 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 1995 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of August 31, 1995, the results of its operations
for the fiscal year then ended, the changes in its net assets and
the financial highlights for the fiscal year then ended and for the
period March 1, 1994 (commencement of operations) to August 31,
1994 in conformity with generally accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
October 13, 1995
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
COMMON STOCKS - 77.2%
ARGENTINA - 7.3%
Acindar Industria Argentina
de Aceros SA Class B (a) 533,798 $ 379
Alpargatas (a) 372,944 151
Astra cia Argentina de Petro 241,170 418
Banco de Galicia y Buenos Aires
Class B 64,050 295
Buenos Aires Embotelladora SA
Class B 92 110
Celulosa Argentina (a) 930,877 352
Dalmine Siderca SA 582,028 475
Garovaglio Zorraq (a) 11,548 38
Ledesma 189,700 214
Naviera Perez Companc
Class B (a) 193,612 907
Polledo SA Class A (a) 32,863 28
Telecom Argentina Class B 114,329 506
Telefonica de Argentina Class B 186,412 472
YPF SA Class D 35,988 641
-------
4,986
-------
AUSTRIA - 0.3%
Fotex (Regd)(a) 176,296 222
-------
BRAZIL - 8.9%
Eletrobras (centrais) NPV 5,368,000 1,486
Sider Nacional cia NPV 42,904,000 958
Telecomunicacoes Brasileiras
NPV 86,644,496 3,193
TELESP NPV 2,640,000 431
-------
6,068
-------
CHINA - 1.1%
Beiren Printing Class H 60,000 12
Dong Fang Electric
Machinery Co., Ltd. Class H (a) 64,000 18
Guangzhou Shipyard Class H 122,000 45
Luoyang Glasswork Class H 144,000 58
Harbin Power Equipment
Class H 158,000 38
Quingling Motors Class H 474,000 124
Maanshan Iron & Steel Class H 590,000 98
Shanghai Hai Xing Shipping Co.
Class H 730,000 80
Tsingtao Brewery Class H 84,000 27
Yizheng Chemical Fibre
Class H 946,000 281
-------
781
-------
GREECE - 2.3%
Alcatel Cables Hellenic 6,500 60
Alpha Leasing SA (Regd) 1,200 31
Aluminum Co. of Greece
Industrial & Commercial (Regd) 2,400 117
Commercial Bank of Greece (Regd) 13,640 505
Elais Oleaginous 1,800 58
ETBA Leasing SA (Regd) 3,360 60
Heracles General Cement Co. 17,700 164
Klonatex 1,800 37
National Bank of Greece (Regd) 6,150 340
National Mortgage Bank (a) 4,610 123
Petzetakis SA (a) 22,281 106
-------
1,601
-------
HONG KONG - 0.4%
Shanghai Petrochemical Corp. 7,500 240
-------
HUNGARY - 3.2%
Agrimpex Series A (a) 300 36
Danubius Hotel (Regd) 24,831 239
Domus Kereskedilmi (a) 6,294 27
Egis Gyogyszergyar 26,501 622
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
Fotex (Regd)(a) 207,812 $ 265
Martfu Brewery (Regd)(a) 387 7
Pick Szeged Rights (a) 8,387 429
Pick Szeged Rights - GDR (a) 7,086 362
Skala Coop (a) 9,554 165
-------
2,152
-------
INDIA - 1.8%
Morgan Stanley India
Investment Fund, Inc. (a) 60,900 632
The India Fund, Inc. 64,500 629
-------
1,261
-------
INDONESIA - 3.5%
Astra International (Alien Market) 56,000 111
Bank Dagang Nasional Indonesia
(Alien Market) 90,125 91
Bank International Indonesia
(Alien Market) 40,500 146
Barito Pacific Timber (Alien Market) 70,000 76
Dharmala Intiland (Alien Market) 143,500 89
Gadjah Tunggal (Alien Market) 65,000 47
Great River Industries (Alien Market) 64,000 40
Gudang Garam (Alien Market) 23,000 187
Hadtex Indosyntec (Alien Market) 125,500 66
HM Sampoerna (Alien Market) 77,500 735
Indah Kiat Pulp & Paper
(Alien Market) 174,300 240
Indosat (Alien Market) 32,000 113
Inti Indorayon Utama (Alien Market) 20,000 39
Jakarta International Hotel
& Development (Alien Market) 144,500 169
Japfa Comfeed Indonesia
(Alien Market) 82,500 50
Mayora Indah (Alien Market) 28,600 129
Semen Gresik (Alien Market) 9,500 29
Semen Gresik Rights (a) 28,500 42
-------
2,399
-------
MALAYSIA - 8.5%
Amalgamated Steel Mills (a) 138,000 121
Amsteel Corp. Berhad New (a) 110,400 96
Amsteel Corp. Berhad Rights (a) 27,600 6
Arab-Malaysian Development Berhad 333,000 219
Berjaya Leisure Berhad 182,000 157
Cement Industries 56,000 183
Cold Storage 24,000 35
DCB Holdings Berhad 61,000 181
Faber Group Berhad (a) 58,000 56
Federal Flour Mills Berhad 24,000 77
Golden Hope Plantation 150,000 251
Highlands & Lowlands 122,000 215
IGB Corp. Berhad 219,000 197
IND Oxygen, Inc. (a) 165,000 204
Jasa Megah Industries (a) 31,000 39
Kuala Lumpur Kepong (a) 144,000 430
Kumpulan Guthrie 192,000 300
Malayan Banking Berhad (a) 19,000 156
Malaysia Mining Corp. 58,000 94
Malaysian Airline System 77,000 231
Malaysian International
Shipping Corp. 50,000 134
Malaysian International
Shipping Corp. (Alien Market) 24,000 69
MBF Capital Berhad 184,000 214
Oriental Holdings Berhad 56,000 292
Pengkalen Holdings Berhad 60,000 68
Perlis Plantations (a) 65,000 214
Public Bank Berhad 88,000 134
Rashid Hussain Berhad 38,000 120
Renong Berhad 253,000 489
Sime Darby Berhad
(Resident Shares) 28,800 73
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
Tan Chong Motor Holdings 171,000 $ 201
Tenaga Nasional 83,000 308
Tractors Malaysia Holdings
Berhad 37,000 57
UMW Holdings Berhad 34,000 112
UMW Holdings Berhad 2000
Warrants (a) 4,000 5
Wembley Industries Holdings (a) 28,000 51
-------
5,789
-------
MEXICO - 4.9%
Alfa SA de CV Class A NPV 18,000 246
Cemex SA Series B NPV 36,737 169
Cifra SA de CV Class B NPV 97,000 124
Cydsa SA Series A NPV (a) 96,000 318
Desc Sociedad de Fomento Industrial
SA de CV Series B NPV (a) 30,000 122
Formento Economico Series B NPV 62,000 171
Grupo Carso Series A NPV (a) 20,000 128
Grupo Cementos Chihuahua
Series B NPV 200,000 177
Grupo Continental NPV 19,000 57
Grupo Finance Serfin Series B NPV 20,000 17
Grupo Financiero Bancomer
Series C NPV (a) 34,000 14
Grupo Gigante SA Series B NPV (a) 250,000 61
Grupo Mexico SA Series B NPV (a) 43,108 222
Grupo Posadas SA Series A NPV (a) 100,000 31
Grupo Synkro Series B NPV (a) 37,855 9
Grupo Tribasa NPV (a) 6,000 24
Industrias Penoles NPV 20,000 75
Sears Roebuck de Mexico
Series B NPV (a) 44,000 147
Telefonos de Mexico SA
Series L - ADR 15,600 511
Telefonos de Mexico SA
Series L NPV 192,900 315
Transportacion Maritima Mexica
SA de CV Series A - ADR (a) 8,000 60
Tubos de Acero de Mexico NPV (a) 47,000 322
Vitro SA NPV 12,000 36
-------
3,356
-------
PAKISTAN - 1.4%
Bank of Punjab (a) 52,400 60
Crescent Textile Mills (a) 41,000 31
Dandot Cement Co. (a) 35,000 39
Dewan Salmon Fibre (a) 7,200 24
Engro Chemical (a) 19,700 104
Fauji Fertilizer (a) 31,200 62
Hub Power Co., Ltd. - GDR (a) 257,000 182
Karachi Electric (a) 73,200 73
Muslim Commercial (a) 25,300 36
Pakistan International Air (a) 228,000 92
Pakistan State Oil (a) 12,400 153
Pioneer Cement (a) 61,300 43
Sui Northern Gas (a) 25,600 31
Sui Southern Gas Pipeline (a) 27,500 34
-------
964
-------
POLAND - 2.1%
Bank Inicjatyw Gospodarczych (a) 245,940 150
Bank Slaski SA 3,530 200
Bre Bank Rozwoju Eks (a) 15,835 244
Elektrim 55,995 177
Exbud SA (a) 6,080 55
Jelfa (a) 7,470 86
Mostostal Export SA (a) 9,430 25
Okocim SA (a) 5,740 167
Sokolowskie Zaklady Miesne SA (a) 84,840 76
Universal SA (a) 48,640 129
WBK (a) 21,500 44
Wolczanka SA 2,850 28
Zywiec 830 67
-------
1,448
-------
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
-------- -------
<S> <C> <C>
PORTUGAL - 7.2%
Banco Chemical SA 26,000 $ 259
Banco Comercial Portuguese (Regd) 42,700 528
Banco Portugues de
Investimento (Regd) 23,200 342
Banco Totta e Acores (Regd)(a) 7,000 135
Banif Banco International
do Funchal 30,500 272
Companhia de Celulose
do Caima SA (a) 7,100 224
Corticeira Amorim SGPS 15,500 194
Empresa Fabril de Maquinas
Electricas - Efacec (a) 19,400 178
Jeronimo Martins SGPS 3,800 178
Lusotur Societe Finance
de Turismo (a) 11,800 254
Mague-Gestao e Partipacoes 15,200 349
Modelo Continente SGPS SA 4,900 412
Modelo SGPS SA 7,700 264
Portucel Industrial SA (a) 16,900 123
Portugal Telecom SA (a) 13,800 250
Portugal Telecom SA - ADR (a) 7,200 131
Salvador Caetano Industrias
Metalurgicas e Veiculos
de Transporte SA 2,200 35
Salvador Caetano Industrias
Metalurgicas e Veiculos
de Transporte SA New 264 4
Soja de Portugal 14,400 170
Sonae Investimento 11,900 271
Soporcel SA (a) 15,600 353
-------
4,926
-------
SOUTH AFRICA - 7.3%
AECI, Ltd. 28,602 189
Amalgamated Banks
of South Africa 85,996 334
Anglo America Corp. SA 7,773 416
Barlow, Ltd. 27,839 303
De Beers Centenary AG 16,144 414
Del Monte Royal Food, Ltd. 85,739 101
Free State Consolidated
Gold Mines, Ltd. 21,668 254
Gencor, Ltd. 96,950 365
Iscor 241,794 278
LibLife Strategic 84,559 266
Malbak, Ltd. NPV 43,944 273
Polifin, Ltd. (a) 4,500 9
Rembrandt Group, Ltd. 43,894 351
Sappi, Ltd. 14,262 273
Sasol NPV 29,486 252
South African Breweries 4,200 128
Standard Bank Investment
Corp., Ltd. 1,850 61
Tongaat-Hulett Group, Ltd. 12,755 160
Vaal Reefs Exploration
& Mining, Ltd. 5,978 420
Western Deep Levels, Ltd. 4,191 144
-------
4,991
-------
SOUTH KOREA - 11.1%
Anam Electronics Co. (a) 5,170 81
Bank of Seoul (a) 32,080 315
Daewoo Corp. (a) 22,300 314
Daewoo Heavy Industries 11,496 139
Daewoo Telecom Co. (a) 24,620 375
Daewoo Telecom Co. New (a) 267 4
Dongkuk Steel Mill 3,738 89
Hana Bank (a) 8,300 171
Hanil Bank 21,680 271
Hanshin Construction Co. 8,500 81
Hanshin Securities 8,851 198
Hanwha Machinery (a) 13,230 217
Inkel Corp. (a) 6,600 95
Kia Steel Co., Ltd. (a) 7,446 65
Kia Steel Co., Ltd. New (a) 2,238 20
Korea Electric Power Corp. 23,000 809
</TABLE>
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
Korea Equity Trust (a) 15* $ 161
Korea Europe Fund (BR) - IDR 105** 407
Korea First Securities Co. 2,472 41
Korea Fund, Inc. 10,058 204
Korea International Trust - IDR (a) 2* 98
Kumho Construction
& Engineering Co. (a) 23,100 314
Kwang Ju Bank 6,900 80
Kwang Ju Bank New (a) 1,442 17
Kyong Nam Bank (a) 17,110 205
Kyong Nam Bank New (a) 3,810 46
Kyungki Bank 9,402 108
L.G. Information
& Communication (a) 400 24
L.G. Merchant Bank 4,220 180
Orion Electric Co. (a) 14,000 310
Pohang Iron & Steel 4,230 349
Samhee Investment & Finance 11,144 180
Samsung Electronics Co. New (a) 24 4
Samsung Electronics, Ltd. (a) 1,632 295
Samsung Electronics, Ltd. New (a) 322 57
Seoul Access Trust - IDR (a) 12* 174
Seoul Horizon Trust (a) 5,000 83
Seoul Securities 2,678 44
STC Corp. (a) 4,600 104
Sung Bo Chemical 2,700 81
Tongyang Cement (a) 6,000 194
Tongyang Nylon Co. (a) 6,170 226
Yukong, Ltd. 9,100 330
Yukong, Ltd. New (a) 527 19
--------
7,579
--------
SRI LANKA - 0.4%
Asian Hotel Corp. (a) 88,100 24
Blue Diamond Jewel NPV (a) 14,400 6
Central Finance Co. 3,300 17
Ceylon Grain Elevator 22,100 21
Commercial Bank of Ceylon 6,600 25
Hayleys 8,800 33
John Keells Holdings, Ltd. 18,800 71
Lanka Ceramic (a) 44,400 47
Lanka Milk Food (a) 21,600 8
Merchant Bank of Sri Lanka 3,800 3
National Development Bank 300 1
Richard Pieris & Co. 9,900 17
United Motor 26,800 14
--------
287
--------
TAIWAN - 2.0%
Acer, Inc. (a) 10,334 21
Ambassador Hotel 79,000 77
Cathay Life Insurance 36,400 158
Chang Hwa Bank 13,000 43
Cheng Loong (a) 13,080 11
Chia Hsin Flour (a) 18,400 10
China Development Corp. (a) 61,000 169
China Petrochemical
Development Corp. (a) 111,000 73
China Rebar (a) 22,425 10
China Steel Corp. 184,000 141
Ensure Co., Ltd. (a) 88,000 67
Far Eastern Textile 91,000 92
Hua Nan Bank (a) 18,900 63
Hualon Teijran (a) 23,266 16
Kao Hsing Chang Iron & Steel (a) 15,000 9
Kwong Fong Industries (a) 14,950 8
Lealea Enterprise (a) 14,981 12
Pacific Construction (a) 116,052 77
Prince Housing Development (a) 13,200 8
Taipei Business Bank (a) 50,000 136
Walsin Lihwa Wire 94,684 108
Wan Yu Paper (a) 20,160 10
Yieh Loong Co. 16,500 10
Yue Loong Motor (a) 19,000 12
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
Yuen Foong Yu Manufacturing 14,490 $ 12
--------
1,353
--------
THAILAND - 1.9%
Advanced Information Services
(Alien Market) 5,700 84
Bangkok Rubber PLC
(Alien Market) 24,400 17
Bank of Ayudhya Public Co., Ltd.
(Alien Market) 28,600 160
Industrial Finance Corp. of Thailand
(Alien Market) 42,400 115
International Cosmetics PLC
(Alien Market)(a) 4,900 65
Karat Sanitaryware PLC
(Alien Market) 26,100 110
NEP Realty & Industry Co. PLC
(Alien Market)(a) 14,700 7
Padaeng Industry Co., Ltd. PLC
(Alien Market)(a) 65,900 70
Saha Pathana Inter-Holding
Public Co., Ltd. (Alien Market)(a) 44,200 85
Saha Union Corp. PLC
(Alien Market) 52,500 69
Siam City Bank PLC
(Alien Market) 129,200 168
Siam Commercial Bank PLC
(Alien Market) 3,500 38
Tanayong (Alien Market) 9,800 17
TelecomAsia (Alien Market)(a) 71,500 230
Unicord Public Co., Ltd.
(Alien Market)(a) 348,600 51
--------
1,286
--------
UNITED KINGDOM - 0.1%
Barclays Bank PLC 88,605 74
--------
VENEZUELA - 0.3%
Ceramicas Carabobo CA
Class B - ADR 24,000 21
Corimon CA SA
Class B - ADR (a) 8,000 44
Mantex CA SA - ADR 5,934 29
Mavesa SA - ADR 11,788 43
Siderurgica Venezolana
Sivensa - ADR 40,300 61
--------
198
--------
ZIMBABWE - 1.2%
Art Corp. (a) 393,428 18
Delta Corp. 271,180 408
Financial Holdings (a) 85,044 90
Hunyani (a) 1,311,418 30
Kadoma 337,224 27
Mashoaland Holdings (a) 248,481 27
National Food Holdings (a) 33,965 30
TA Holdings 442,603 54
Tabex (a) 737,677 21
Wankie Colliery Co., Ltd. (a) 127,598 32
Whitehead (a) 754,815 44
Zimbabwe Spinners
& Weavers (a) 363,164 38
Zimbabwe Sun 99,824 24
--------
843
--------
TOTAL COMMON STOCKS
(cost $52,275) 52,804
--------
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
PREFERRED STOCKS - 15.8%
BRAZIL - 15.2%
Acos Villares SA NPV 1,100,000 $ 429
Banco Bradesco SA NPV (a) 91,828,832 885
Banco do Brasil SA NPV (a) 15,156,700 242
Banco do Estado de Sao Paulo
NPV (a) 32,236,600 241
Banco Nacional SA NPV 19,600,000 357
Caemi Mineracao e Metal (BR) 945,000 74
CEMIG SA 39,137,856 886
Ceval Alimentos SA NPV 61,288,800 890
Copene Petroquimica do Nordestse
Series A (Regd) 780,000 513
Electrobras Series B NPV 5,223,000 1,441
Hering SA (cia) NPV 30,450,000 335
Metal Barbara (cia) NPV (a) 37,000,000 26
Petrol Brasileiros SA NPV 4,770,000 460
Ripasa SA Celulose Papel NPV 236,000 51
Sider Riograndense NPV 18,040,580 403
Siderurgica Tubarao NPV 992,000 684
Telebras (a) 196,267 9
TELESP NPV 487,020 80
Telecomunicacoes Brasileras NPV 8,573,133 372
UNIPAR SA Class B 464,181 616
Usiminas Uni Sd Mg NPV 112,600,000 115
Vale do Rio Doce (cia) NPV 8,535,200 1,312
--------
10,421
--------
GREECE - 0.3%
Delta Dairy 11,924 195
--------
SOUTH KOREA - 0.3%
Tong Yang Securities Co. (a) 18,540 208
--------
TOTAL PREFERRED STOCKS
(cost $10,093) 10,824
--------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- --------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 5.2%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 2,025 $ 2,025
Federal Home Loan Bank
Discount Note (c)
5.700% due 09/01/95 1,505 1,505
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,530) 3,530
--------
TOTAL INVESTMENTS
(identified cost $65,898)(d) - 98.2% 67,158
OTHER ASSETS AND LIABILITIES
NET - 1.8% 1,227
--------
NET ASSETS - 100.0% $68,385
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity.
(d) At August 31, 1995, the cost for federal income tax
purposes was $66,124 and net unrealized appreciation for
all securities was $1,034. This consisted of aggregate
gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of
$6,183 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax
cost over market value of $5,149.
* Reflected in units. 1 IDR unit = 1,000 Shares.
** Reflected in units. 1 IDR unit = 500 Shares.
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ----------------------------- -------- --------
<S> <C> <C>
Basic Industries 16.5% $ 11,287
Capital Goods 6.0 4,139
Consumer Basics 9.7 6,652
Consumer Durable Goods 1.1 766
Consumer Non-Durables 4.9 3,359
Consumer Services 1.6 1,077
Energy 5.2 3,526
Finance 15.5 10,633
General Business 7.1 4,832
Miscellaneous 8.9 6,064
Shelter 2.0 1,360
Technology 2.3 1,554
Transportation 0.3 214
Utilities 11.9 8,165
Short-Term Investments 5.2 3,530
------ --------
Total Investments 98.2 67,158
Other Assets and Liabilities, Net 1.8 1,227
------ --------
NET ASSETS 100.0% $ 68,385
------ --------
------ --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $65,897,786)(Note 2). . . . . . . . . . . . . . . $ 67,158,194
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,752
Foreign currency holdings (identified cost $1,965,227) . . . . . . . . . . . . . . . . . 1,958,453
Receivables:,
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,903
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,612
From Adviser (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,265
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 24,464
-------------
70,146,533
LIABILITIES
Payables (Note 4):
Investments purchased . . . . . . . . . . . . . . . . . . . . . . $ 1,495,922
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . 13,567
Accrued administrative fees . . . . . . . . . . . . . . . . . . . 3,244
Accrued advisory fees . . . . . . . . . . . . . . . . . . . . . . 153,485
Accrued custodian fees. . . . . . . . . . . . . . . . . . . . . . 67,465
Accrued distribution fees . . . . . . . . . . . . . . . . . . . . 823
Accrued transfer agent fees . . . . . . . . . . . . . . . . . . . 5,023
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 21,900 1,761,429
------------ -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,385,104
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 522,449
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 686,043
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260,408
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . (10,154)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,637
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,919,721
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,385,104
-------------
-------------
Net asset value, offering and redemption price per share
($68,385,104 divided by 6,637,256 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . $10.30
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $148,940). . . . . . . . . . . . . . . . . . $ 831,928
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555,459
-------------
1,387,387
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 321,920
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . 25,877
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,255
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . 95,484
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . 23,437
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . 33,335
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . 11,820
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . 21,810
Trustee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,429
Amortization of deferred organization expenses . . . . . . . . . . . 9,384
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,641
------------
Expenses before reimbursement. . . . . . . . . . . . . . . . . . . . 813,392
Expense reimbursement from Adviser . . . . . . . . . . . . . . . . . (169,331) 644,061
------------ -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743,326
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,174
Foreign currency-related transactions (Notes 2 and 3). . . . . . . . . . . . . . . . . . (78,780)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,620,901)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . (9,528)
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,023,035)
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . $ (1,279,709)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FISCAL YEAR MARCH 1, 1994++
ENDED to
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . $ 743,326 $ 110,807
Net realized gain (loss) from: . . . . . . . . . . . . . . . . . .
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,174 290
Foreign currency-related transactions. . . . . . . . . . . . . . . (78,780) (6,591)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,620,901) 3,880,683
Foreign currency-related transactions. . . . . . . . . . . . . . . (9,528) --
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . . (1,279,709) 3,985,189
Distributions to shareholders of net investment income . . . . . . . . (258,975) --
Increase (decrease) in net assets from Fund share transactions . . . . 42,444,718 23,493,881
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 40,906,034 27,479,070
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 27,479,070 --
-------------- --------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income
of $522,449 and $110,807, respectively). . . . . . . . . . . . . . . $ 68,385,104 $ 27,479,070
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
FOR THE FISCAL YEAR FOR THE PERIOD MARCH 1, 1994++
ENDED AUGUST 31, 1995 TO AUGUST 31, 1994
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . 4,945,295 $ 49,529,291 2,436,871 $ 23,870,559
Fund shares issued to shareholders
in reinvestments of distributions. . . . . . . . 19,275 220,287 -- --
Fund shares redeemed . . . . . . . . . . . . . . . (726,403) (7,304,860) (37,781) (376,678)
------------ --------------- -------------- --------------
Net increase (decrease). . . . . . . . . . . . . . 4,238,167 $ 42,444,718 2,399,090 $ 23,493,881
------------ --------------- -------------- --------------
------------ --------------- -------------- --------------
</TABLE>
++ Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each fiscal year or period ended August 31 and other
performance information derived from the financial statements.
1995 1994++
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . $ 11.45 $ 10.00
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . .14 .05
Net realized and unrealized gain (loss) on investments . . . . . . . (1.19) 1.40
----------- -----------
Total From Investment Operations . . . . . . . . . . . . . . . . . . (1.05) 1.45
----------- -----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (.10) --
----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 10.30 $ 11.45
----------- -----------
----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . (9.28) 14.50
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets (b) . . . . . . 1.50(c) 1.50
Operating expenses, gross, to average daily net assets (b) . . . . . 1.90(c) 2.45
Net investment income to average daily net assets (b) . . . . . . . 1.74 1.31
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . . 19.77 --
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . 68,385 27,479
Per share amount of fees waived ($ omitted). . . . . . . . . . . . . -- .0130
Per share amount of fees reimbursed ($ omitted). . . . . . . . . . . .0320(c) .0204
</TABLE>
++ For the period March 1, 1994 (commencement of operations) to August 31,
1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Emerging Markets Fund (the "Fund"). The Investment
Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company which was organized
as a Massachusetts business trust on October 3, 1987 and now operates under
a First Amended and Restated Master Trust Agreement dated October 13, 1993.
The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of these
financial statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
fair market value of such securities.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. The Fund, accordingly, paid no
federal income taxes and no federal income tax provision was required. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $88,970 incurred from November 1, 1994 to August 31, 1995,
and treat it as arising in fiscal year 1996.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign denominated investments, and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1995:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
------------------ ------------------ ------------------
<S> <C> <C>
$ (72,709) $ 84,950 $ (12,241)
</TABLE>
EXPENSES: Expenses such as advisory, custodian, transfer agent,
shareholder servicing, printing, and registration fees are charged directly
to the individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the fund's books; and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations not typically associated with investing in
the United States. These risks include revaluation of currencies, future
adverse political and economic developments and liquidity concerns
resulting from thinner markets. Moreover, securities issued in these
markets may be less liquid and their prices more volatile than those of
comparable securities in the United States.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the fiscal year ended August 31, 1995,
purchases and sales of investment securities, excluding short-term
investments, aggregated to $49,117,106 and $7,541,016, respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
collateral, brokers pay the Fund negotiated lenders' fees, which are
divided between the Fund and its lending agent and are included as interest
income to the Fund. Income generated from the investment of cash collateral
is also divided between the Fund and its lending agent and is included as
interest income to the Fund. All collateral received will equal at least
100% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan. Should
the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets.
For the fiscal year ended August 31, 1995, the Adviser voluntarily agreed
to reimburse the Fund for all expenses in excess of 1.50% of average daily
net assets on an annual basis. The Investment Company has contracts with
the Adviser to provide custody, shareholder services and transfer agent
servicing to the Fund.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees to the Agents in an amount that per annum is equal to .025% and
.175% of the average daily value of all Fund shares held by or for
customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
of the average daily value of net assets on an annual basis, which includes
a limit of .20% in shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
forward for subsequent reimbursement from the Investment Company. In no
event may excess amounts be carried forward more than two fiscal years from
the year when such expenses were incurred. The Trustees or a majority of
the Fund's shareholders have the right, however, to terminate the
Distribution Plan and all payments thereunder at any time. The Fund will
not be obligated to reimburse the Distributor for carryover expenses
subsequent to the Distribution Plan's termination or noncontinuance. The
amount of carryover expenses outstanding for the Distribution Plan as of
August 31, 1995, for which the Distributor intends to seek repayment, is
approximately $380,000. The amounts related to distribution and shareholder
servicing fees are included in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of the Fund: $0 up to $500 million - .07%;
over $500 million to and including $1 billion - .06%; over $1 billion up to
$1.5 billion - .04%; over $1.5 billion - .03%; (ii) less an amount equal to
the sum of certain distribution-related expenses incurred by the Investment
Company's Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
The Adviser is authorized to effect brokerage transactions through its
affiliated broker dealer, SSBSI. The Fund paid brokerage commissions of
$3,786 to SSBSI for the fiscal year ended August 31, 1995.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
TAX INFORMATION
August 31, 1995
The Fund paid foreign taxes of $148,940 and recognized $980,868 of foreign
source income during the taxable year ended August 31, 1995. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0224 per share of
foreign taxes paid and $.1478 of gross income earned from foreign sources in the
taxable year ended August 31, 1995.
Please consult a tax advisor for questions about federal or state income tax
laws.
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . 8
Tax Free Money Market Fund Financial Statements. . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . .18
Tax Information. . . . . . . . . . . . . . . . . . . . . . .22
Fund Management and Service Providers. . . . . . . . . . . .23
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
Seven Seas Series Fund prospectus containing more complete information
concerning the investment objective and operations of the Fund, charges and
expenses. The prospectus should be read carefully before an investment is made.
"The Seven Seas Series Fund-Registered Trademark-" is a registered trademark and
service mark of The Seven Seas Series Fund.
<PAGE>
THE SEVEN SEAS SERIES
LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1995. Over the past year, the Series has grown
to include thirteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets' countries to the domestic stock
and bond markets. This report contains summaries on the market environment,
performance and financial statements for the recently opened Tax Free Money
Market Fund: a money market investment to provide maximum current income, exempt
from federal income taxes, to the extent consistent with the preservation of
capital and liquidity. I hope you find this information to be a useful tool as
you review your overall investment strategy.
Over the past fiscal year, additional funds including this Fund were opened or
made available for operation.
In November 1994, The Seven Seas Series S&P Midcap Index Fund was converted by a
vote of that Fund's shareholders to the Small Cap Fund: an equity investment in
domestic smaller capitalized securities designed to provide maximum total
return, primarily through capital appreciation.
In March 1995, The Seven Seas Series Active International Fund was opened: an
equity investment in the developed foreign countries designed to provide maximum
total return, primarily through capital appreciation.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs.
Sincerely,
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James Donahue, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Tax Free Money
Market Fund since its inception in December 1994. Mr. Donahue has been with
State Street's Capital Markets Division since 1991. Prior to that he was a
municipal bond trader with the investment firm of Jesup Josephthal. There are
two other portfolio managers who work with Mr. Donahue in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSSION
[CHART]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
Donoghue's
Yearly periods Money Fund
Ended Tax Free Average-TM-
August 31 Money Market Fund -Tax-Free+
- --------------- ----------------- -----------
<S> <C> <C>
Inception* $ 10,000 $ 10,000
1995 $ 10,254 $ 10,250
</TABLE>
The Seven Seas Series Tax Free Money Market Fund commenced operations on
December 1, 1994. The Fund seeks to maximize current income, exempt from federal
income taxes, to the extent consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value. The
Fund closed the fiscal year with a return of 2.54% since inception as compared
to a return of 2.50% for Donoghue's Tax-Free Money Fund Average for the same
period.
In early December, Orange County declared bankruptcy, causing a flight to the
perceived higher quality tax-exempt market. Investors avoided lower quality
securities in general, and California securities in particular, in search of
high quality issuers. The Fund responded by investing in securities with daily
and weekly resets that had a liquidity provision or a "put" feature from a
highly rated commercial bank. The Fund also purchased high coupon pre-refunded
bonds (refunded in US Treasuries) that provided a high level of net asset value
protection in a credit environment under stress from the Orange County fallout.
These strategies helped the Fund to maintain performance during a particularly
volatile period in the tax-exempt market. In July of 1995, the Federal Reserve
reversed its tightening policy by lowering the Fed Funds' target by 25 basis
points to 5.75%. As the economy slowed from the first quarter and the
possibility of rate cuts
SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- -------------------- --------------------- ------------------
<S> <C> <C>
Inception $ 10,254 2.54%++
</TABLE>
NARROWLY BASED AVERAGE:
DONOGHUE'S
MONEY FUND AVERAGE-TM--TAX-FREE
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/95 $10,000 Return
- ------------- -------------- -------------
<S> <C> <C>
Inception $ 10,250 2.50%++
</TABLE>
* The Fund commenced operations on December 1, 1994. Index comparison began
December 1, 1994.
+ IBC/Donoghue's Money Fund Averages-TM- -a universe of tax-free funds.
++ Total returns for periods less than one year are not annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PORTFOLIO MANAGEMENT DISCUSION
increased, the yield curve flattened, even inverting out to five years for a
short time.
During the year the Fund invested in both floating and fixed rate securities
when attractive, based on relative value in the market place. The portfolio had
a short average maturity of 52 days in January, and in the spring the maturity
was lengthened to an average of 64 days based on economic forecasts, market
outlook, and Federal Reserve policy.
We saw the spread between yields on municipal notes and Treasury securities
trade rich or narrow on an absolute basis because of the lack of an adequate
supply of high quality tax-exempt issues and strong investor demand. This trend
continued from December 1994 throughout 1995.
----------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Tax Free Money Market Fund (the
"Fund"), as of August 31, 1995, and the related statement of operations, the
statement of changes in net assets and the financial highlights for the period
December 1, 1994 (commencement of operations) to August 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31,1995 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1995, the results of its operations, the changes in its
net assets and the financial highlights for the period December 1, 1994
(commencement of operations) to August 31, 1995 in conformity with generally
accepted accounting principles.
Boston, Massachusetts
October 13, 1995 /s/ Coopers & Lybrand L.L.P.
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
----------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA - 1.2%
Bessemer, Alabama Medical Clinic Board Revenue
(pre-refunded 10/01/95)(a)(b). . . . . . . . . . . . . . . . . $ 500 9.500% 10/01/14 $ 512
--------
ARIZONA - 1.4%
Maricopa County, Arizona Hospital Facilities Revenue
Series B, daily demand (a) . . . . . . . . . . . . . . . . . . 400 3.450(1) 12/01/08 400
Maricopa County, Arizona Pollution Control Revenue
Series F, daily demand . . . . . . . . . . . . . . . . . . . . 200 3.400(1) 05/01/29 200
--------
600
--------
CALIFORNIA - 2.3%
California Pollution Control Financing Revenue Series A,
annual demand. . . . . . . . . . . . . . . . . . . . . . . . . 1,000 4.000(3) 05/01/08 1,000
--------
COLORADO - 2.4%
Fort Collins, Colorado General Obligation (pre-refunded
12/01/95)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 7.350 12/01/01 1,034
--------
CONNECTICUT - 8.9%
Connecticut, State of, General Obligation Series B, weekly demand 200 3.550(2) 06/01/96 200
Connecticut, State of, Special Assessment
(pre-refunded 10/15/95)(b) . . . . . . . . . . . . . . . . . 2,000 8.600 10/15/01 2,052
Connecticut, State of, Special Assessment (pre-refunded
10/15/95)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 8.700 10/15/05 1,539
--------
3,791
--------
FLORIDA - 11.3%
Dade County, Florida Aviation Revenue Series W (a) . . . . . . . 1,450 4.400 10/01/95 1,451
Dade County, Florida Industrial Development Revenue, weekly demand 1,300 3.700(2) 12/01/10 1,300
Hillsborough County, Florida Capital Improvement Revenue
(pre-refunded 02/01/96)(b) . . . . . . . . . . . . . . . . . . 1,000 8.200 08/01/07 1,038
Jacksonville, Florida Electric Authority Revenue (pre-refunded
10/01/95)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 9.500 10/01/95 1,025
--------
4,814
--------
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
----------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA - 4.7%
Burke County, Georgia Development Authority
Pollution Control Revenue, weekly demand (a) . . . . . . . . . $ 1,000 3.450(2)% 01/01/16 $ 1,000
Georgia, State of, General Obligation Series D . . . . . . . . . 1,000 7.000 11/01/95 1,005
--------
2,005
IDAHO - 2.8%
Idaho Health Facilities Hospital Authority Revenue, weekly
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 3.500(2) 12/01/23 1,200
--------
ILLINOIS - 1.2%
Chicago, Illinois O'Hare International Airport Revenue
Series A, daily demand . . . . . . . . . . . . . . . . . . . . 500 3.400(1) 12/01/17 500
--------
LOUISIANA - 4.0%
Ascension Parish, Louisiana Pollution Control Revenue, weekly
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 3.550(2) 12/01/09 700
New Orleans, Louisiana Aviation Board Revenue, weekly demand . . 1,000 3.900(2) 12/01/19 1,000
--------
1,700
--------
MARYLAND - 4.7%
Howard County, Maryland Multi-family Revenue, annual demand. . . 1,000 4.250(3) 06/01/08 1,000
Northeast Maryland Waste Disposal Authority
Resolution Revenue, weekly demand. . . . . . . . . . . . . . . 1,000 3.400(2) 01/01/08 1,000
--------
2,000
--------
MASSACHUSETTS - 6.2%
Massachusetts State Health & Education Facilities Revenue Series J
(pre-refunded 12/01/95)(b) . . . . . . . . . . . . . . . . . . 2,000 8.875 12/01/15 2,055
Massachusetts State Port Authority Revenue Series B, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 3.350(1) 07/01/18 600
--------
2,655
--------
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
----------------------------------------------
<S> <C> <C> <C> <C>
MINNESOTA - 7.2%
Rochester, Minnesota Health Care Facilities Revenue, weekly
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 4.200(2)% 11/15/16 $ 1,000
Southern Minnesota Municipal Power Agency
Supply System Revenue Series A (pre-refunded 01/01/96)(b). . . 2,000 6.750 01/01/13 2,058
--------
3,058
--------
MISSISSIPPI - 0.9%
Jackson County, Mississippi Pollution Control Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 3.350(1) 06/01/23 400
--------
MISSOURI - 0.9%
Missouri State Health & Education Facilities Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 3.400(1) 12/01/16 400
--------
NEW YORK - 6.0%
New York, New York Revenue Series A. . . . . . . . . . . . . . . 1,000 4.500 04/11/96 1,004
Triborough Bridge & Tunnel Authority Revenue Series H
(pre-refunded 01/01/96)(b) . . . . . . . . . . . . . . . . . . 1,500 8.375 01/01/16 1,553
--------
2,557
--------
NORTH CAROLINA - 4.3%
Charlotte, North Carolina Airport Revenue Series A, weekly demand
(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 3.450(2) 07/01/16 800
North Carolina Municipal Power Agency Revenue
Series B (pre-refunded 01/01/96)(b). . . . . . . . . . . . . . 1,000 8.500 01/01/17 1,035
--------
1,835
--------
OKLAHOMA - 2.4%
Oklahoma State Municipal Power Supply System Revenue Series
C (pre-refunded 01/01/96)(a)(b). . . . . . . . . . . . . . . . 1,000 7.125 01/01/05 1,031
--------
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
----------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA - 2.4%
Pennsylvania State Higher Educational Revenue Series L (a) . . . $ 1,000 7.000% 06/15/96 $ 1,025
--------
TEXAS - 17.5%
Dallas-Fort Worth, Texas Regional Airport Revenue (pre-refunded
11/01/95)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 9.125 11/01/15 2,067
Houston, Texas Airport General Obligation (pre-refunded
03/01/96)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 8.000 03/01/02 1,298
Houston, Texas Airport Revenue, weekly demand. . . . . . . . . . 1,000 4.200(2) 09/06/95 1,000
Lubbock, Texas Industrial Development Corp. Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . 200 3.650(1) 10/01/06 200
Panhandle Plains, Texas Higher Education Authority
Revenue, weekly demand . . . . . . . . . . . . . . . . . . . . 1,500 3.550(2) 06/01/21 1,500
Southwest Travis County, Texas Road District (pre-refunded
09/01/95)(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1,370 10.625 09/01/09 1,370
--------
7,435
--------
WASHINGTON - 3.6%
Tacoma, Washington Department of Public Utilities & Light Revenue
(pre-refunded 01/01/96)(b) . . . . . . . . . . . . . . . . . . 1,000 9.375 01/01/15 1,038
Washington, State of, General Obligation
(pre-refunded 04/01/96)(b) . . . . . . . . . . . . . . . . . . 500 6.150 04/01/98 507
--------
1,545
--------
WYOMING - 4.8%
Lincoln County, Wyoming Pollution Control Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 3.350(1) 11/01/14 400
Lincoln County, Wyoming Pollution Control Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 3.550(1) 07/01/17 1,000
Uinta County, Wyoming Pollution Control Revenue, daily demand. . 600 3.350(1) 08/15/20 600
--------
2,000
--------
TOTAL INVESTMENTS (amortized cost $43,097)(c) - 101.1% . . . . . 43,097
OTHER ASSETS AND LIABILITIES, NET - (1.1%) . . . . . . . . . . . (490)
--------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . $ 42,607
--------
--------
</TABLE>
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1995
* All securities with a maturity greater than 13 months have a demand
feature, or an optional or mandatory put, resulting in an effective
maturity of 13 months or less. Additionally, all daily and weekly demand
securities are backed by direct payment letters of credit.
Variable Rate:
(1) Daily
(2) Weekly
(3) Annually
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Prerefunded: These bonds are collateralized by U.S. Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date.
(c) The identified cost for federal income tax purposes is the same as shown
above.
QUALITY RATINGS AS A % OF MARKET VALUE (UNAUDITED)
<TABLE>
<S> <C>
AAA 91%
AA 2
A 7
</TABLE>
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE (UNAUDITED)
<TABLE>
<S> <C>
Refunded and Special Obligation Revenue 46%
Airport Revenue 11
Pollution Control Revenue 13
Education Revenue 11
Healthcare Revenue 8
General Obligation 3
Housing Revenue 5
Solid Waste Revenue 2
Port Authority Revenue 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . $ 43,096,832
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,788
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,695
Deferred organizational expenses (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . 1,728
-------------
43,830,078
LIABILITIES
Payables (Note 4):
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,915
Accrued administrative fees. . . . . . . . . . . . . . . . . . . . 1,040
Accrued advisory fees. . . . . . . . . . . . . . . . . . . . . . . 63,602
Accrued custodian fees . . . . . . . . . . . . . . . . . . . . . . 6,698
Accrued distribution fees. . . . . . . . . . . . . . . . . . . . . 124
Accrued shareholder servicing fees . . . . . . . . . . . . . . . . 910
Accrued transfer agent fees. . . . . . . . . . . . . . . . . . . . 298
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 33,272 1,222,859
------------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,607,219
-------------
-------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,523)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,611
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,568,131
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,607,219
-------------
-------------
Net asset value, offering and redemption price per share,
($42,607,219 divided by 42,610,742 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . $1.00
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Period December 1, 1994 (Commencement of Operations)
to August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,013,239
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,602
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . 7,564
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,823
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . 9,234
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . 11,831
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . 23,272
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . 6,360
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . 938
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361
Amortization of deferred organization expenses . . . . . . . . . . . 7,592
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,925
--------------
Expenses before waivers. . . . . . . . . . . . . . . . . . . . . . . 152,502
Expenses waived. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,813) 150,689
-------------- -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862,550
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investment transactions (Notes 2 and
3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,523)
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . $ 859,027
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period December 1, 1994 (Commencement of Operations)
to August 31, 1995
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,550
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,523)
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . 859,027
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . . . (862,550)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . 42,610,742
-------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,607,219
Net assets at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
-------------
NET ASSETS AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,607,219
-------------
-------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,000,157
Fund shares issued to shareholders in reinvestments of distributions . . . . . . . . . . . . . 608,107
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,997,522)
-------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,610,742
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the fiscal period ended August 31 and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
1995++
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.0000
-------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0251
-------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.0251)
-------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.0000
-------------
-------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.54
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net assets (b)(c). . . . . . . . . . . . . . . . . .59
Operating expenses, gross, to average daily net assets (b)(c). . . . . . . . . . . . . . . . .60
Net investment income to average daily net assets (b). . . . . . . . . . . . . . . . . . . . 3.40
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,607
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . .0001
</TABLE>
++ For the period December 1, 1994 (commencement of operations) to August 31,
1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1995 are
annualized.
(c) See Note 4.
Annaul Report 17
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 13 investment portfolios which are in operation
as of August 31, 1995. These financial statements report on one portfolio,
The Seven Seas Series Tax Free Money Market Fund (the "Fund"), which
commenced operations as of December 1, 1994. The Investment Company is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company which was organized as a
Massachusetts business trust on October 3, 1987 and now operates under a
First Amended and Restated Master Trust Agreement dated October 13, 1993,
as amended. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.001 par value. The Investment Company
has available Class B and Class C shares of the Fund as of September 22,
1994; however, shares have not been offered on these classes as of the date
of these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are followed by the Fund in the preparation of these financial
statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the
Investment Company Act of 1940, as amended.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. The Fund, accordingly, paid no
federal income tax and no federal income tax provision was required. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $3,523, incurred from December 1, 1994 to August 31, 1995
and treat it as arising in fiscal year 1996.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
annually. An additional distribution may be paid by the Fund to avoid
imposition of federal income tax on any remaining undistributed net
investment income and capital gains.
EXPENSES: Expenses such as advisory, custodian, transfer agent, shareholder
servicing, printing, and registration fees are charged directly to the
individual funds, while indirect expenses, such as administrative,
insurance, and professional fees are generally allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the period December 1, 1994 (commencement of
operations) to August 31, 1995, purchases, sales and maturities of
short-term tax exempt obligations (excluding repurchase agreements) were
$155,990,163, $73,232,077, and $39,450,000, respectively.
SECURITIES LENDING: The Fund may loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (US
currency) and securities issued or guaranteed by the US Government or its
agencies as collateral against the loaned securities. To the extent that a
loan is secured by cash collateral, such collateral shall be invested in
short-term debt securities. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which
are divided between the Fund and its lending agent and are included as
interest income to the Fund. Income generated from the investment of cash
collateral is also divided between the Fund and its lending agent and is
included as interest income to the Fund. All collateral received will equal
at least 100% of the market value of the loaned securities at the inception
of each loan. This collateral must be maintained at not less than 100% of
the market value of the loaned securities during the period of the loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of the fiscal year ended August 31, 1995, there
were no securities out on loan.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
4. RELATED PARTIES
The Investment Company has an investment advisory agreement with State
Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets.
The Investment Company has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. For the
period December 1, 1994 (commencement of operations) to August 31, 1995,
the Adviser voluntarily agreed to waive a portion of its custodial services
fee to the Fund which amounted to $958.
The Investment Company has service agreements with service providers,
including the Adviser and State Street Brokerage Services, Inc. ("SSBSI"),
a wholly-owned subsidiary of the Adviser (collectively "the Agents"). The
SSBSI service agreement became effective July 17, 1995. Under these service
agreements, the Agents are to provide administrative functions for
Investment Company shareholders, including services related to the purchase
and redemption of Investment Company shares. For these services, the Fund
pays fees to the Agents in an amount that per annum is equal to .025% and
.175% of the average daily value of all Fund shares held by or for
customers of the Adviser and SSBSI, respectively. These fees, in
conjunction with other distribution-related expenses, may not exceed .25%
of the average daily value of net assets on an annual basis, which includes
a limit of .20% in shareholder servicing fees for all providers.
Frank Russell Investment Management Company (the "Administrator") serves as
administrator of the Investment Company. The Administrator is also
required, pursuant to the Administration Agreement, to arrange and pay
certain promotional and sales costs of Investment Company shares. Russell
Fund Distributors, Inc. (the "Distributor"), a subsidiary of the
Administrator, is the distributor of the Investment Company shares. Under
the Distribution Plan, each fund may spend, and the Distributor may be
reimbursed, up to .25% of the average daily value of the net assets on an
annual basis for distribution-related and shareholder servicing expenses.
If, in any calendar month, the distribution expenses incurred by the
Distributor exceed the maximum amount of allowable reimbursement, the
excess amounts may be carried forward for subsequent reimbursement from the
Investment Company. In no event may excess amounts be carried forward more
than two fiscal years from the year when such expenses were incurred. The
amounts related to distribution and shareholder servicing fees are included
in the accompanying Statement of Operations.
Pursuant to the Administration Agreement with the Investment Company, the
Administrator supervises all non-portfolio investment aspects of the
Investment Company's operations and provides adequate office space and all
necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1995
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1 billion
- .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds. For the period December 1, 1994,
(commencement of operations) to August 31, 1995, the Administrator
voluntarily waived a portion of its administrative fee to the Fund, which
amounted to $855.
The Investment Company was paying each of its Trustees not affiliated with
the Investment Company a retainer of $38,000 annually, $1,000 for each of
the board meetings attended, an additional $1,000 for attending the annual
audit committee meeting, and reimbursement for out-of-pocket expenses.
Effective July 17, 1995, the annual retainer was increased to $44,000.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
TAX INFORMATION
August 31, 1995
Of the dividends paid by the Tax Free Money Market Fund from net investment
income for the taxable year ended August 31, 1995, 100% were exempt interest
dividends which are tax exempt for purposes of regular federal income tax, and
for purposes of the federal alternative minimum tax.
Please consult a tax advisor for any questions about federal or state income tax
laws.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- -------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
Margaret L. Barclay, Senior Vice President,
Treasurer and Director of Operations
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND
OFFICE OF SHAREHOLDERS INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
