<PAGE>
Filed pursuant to Rule 497(e)
File Nos. 33-19229; 811-5430
THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
YIELD PLUS FUND
The Seven Seas Series Fund is a series mutual fund. This Prospectus
describes and offers shares of beneficial interest in one portfolio, The Seven
Seas Series Yield Plus Fund, (referred to in this Prospectus as the "Yield Plus
Fund" or the "Fund". The Yield Plus Fund seeks high current income and
liquidity by investing primarily in a diversified portfolio of high-quality debt
securities and by maintaining a portfolio duration of one year or less. The
Fund's shares are offered without sales commissions. However, the Fund pays
certain distribution expenses under its Rule 12b-1 plan.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, STATE STREET BANK AND TRUST COMPANY, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Please read and retain
this document for future reference. Additional information about the Fund has
been filed with the Securities and Exchange Commission in a Statement of
Additional Information dated November 25, 1994. The Statement of Additional
Information is incorporated herein by reference and is available without charge
from Distributor at its address noted below or by calling (617) 654-6089.
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Adviser, Custodian
and Transfer Agent: Distributor: Administrator:
State Street Bank and Trust Russell Fund Distributors, Inc. Frank Russell Investment
Company Two International Place, 35th Fl. Management Company
225 Franklin Street Boston, Massachusetts 02110 909 A Street
Boston, Massachusetts 02110 (617) 654-6089 Tacoma, Washington 98402
(617) 654-4721 (206) 627-7001
</TABLE>
PROSPECTUS DATED NOVEMBER 25, 1994
(AS REVISED ON AUGUST 28, 1995)
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<PAGE>
TABLE OF CONTENTS
PAGE
----
Fund Operating Expenses. . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Seven Seas Series Fund . . . . . . . . . . . . . . . . . . . . . . 5
Manner of Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective, Policies and Restrictions. . . . . . . . . . . . 5
Certain Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . 12
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Valuation of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . 14
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . 14
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . 16
General Management . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 21
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . 22
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<PAGE>
FUND OPERATING EXPENSES
THE SEVEN SEAS YIELD PLUS FUND
The purpose of the following table is to assist the investor in understanding
the various costs and expenses that an investor in the Yield Plus Fund will
incur directly or indirectly. The examples provided in the table should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown. For additional information, see -- "General
Management."
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Advisory Fees .25%
12b-1 Fees(1) .04
Other Expenses:
Administrative Fees .03
Custodian Fees .02
Other Fees and Expenses .01
---
Total Other Expenses .06
---
Total Operating Expenses(2) .35%
---
---
EXAMPLES: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
assuming (i) 5.0% annual return
and (ii) redemption at the end of
each time period:
$4 $11 $50 $44
-- --- --- ---
----------------------------------------
<FN>
(1) Rule 12b-1 fees may include expenses paid for shareholder servicing
activities.
(2) The expense information in the table has been restated to reflect current
fees. Investors purchasing Fund shares through a financial intermediary,
such as a bank or an investment adviser, may also be required to pay
additional fees for services provided by the intermediary. Such investors
should contact the intermediary for information concerning what additional
fees, if any, will be charged.
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge applicable to mutual
fund securities sold by members of the National Association of Securities
Dealers, Inc.
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FINANCIAL HIGHLIGHTS
THE SEVEN SEAS SERIES YIELD PLUS FUND
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.
More detailed information concerning the Fund's performance, a complete
portfolio listing and audited financial statements are available in the Fund's
Annual Report dated August 31, 1994 which may be obtained without charge by
writing or calling the Distributor.
<TABLE>
<CAPTION>
1994 1993++
---- ----
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $ 10.01 $ 10.00
--------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .38 .27
Net realized and unrealized
gain (loss) on investments
(.02) .01
--------- ---------
Total From Investment Operations .36 .28
--------- ---------
LESS DISTRIBUTIONS:
Net investment income (.38) (.27)
--------- ---------
NET ASSET VALUE, END OF YEAR $ 9.99 $ 10.01
--------- ---------
--------- ---------
TOTAL RETURN (%)(a) 3.65 2.85
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses to average
daily net assets(b)(c) .35 .38
Net investment income to average
daily net assets(c) 3.82 3.54
Portfolio turnover(c) 142.68 137.86
Net assets, end of year ($000 omitted) 1,358,464 589,594
----------------------------------------
<FN>
++ For the period November 9, 1992 (commencement of operations) to August 31,
1993.
(a) Periods less than one year are not annualized.
(b) For the period November 9, 1992 (commencement of operations) to August 31,
1993, the Custodian and Administrator waived a portion of their fees
amounting to $.00013 and $.00029 per share, respectively.
(c) The ratios for the period ended August 31, 1993 are annualized.
</TABLE>
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<PAGE>
THE SEVEN SEAS SERIES FUND
The Seven Seas Series Fund ("Investment Company") is an open-end management
investment company that is organized and operates as a Massachusetts business
trust under a First Amended and Restated Master Trust Agreement dated October
13, 1993, as amended. In addition, each series of the Investment Company is
diversified as defined in the Investment Company Act of 1940, as amended ("1940
Act"). As a "series mutual fund," Investment Company is authorized to issue an
unlimited number of shares evidencing beneficial interest in different
investment portfolios. Through this Prospectus, Investment Company offers
shares in one such portfolio, The Seven Seas Series Yield Plus Fund.
MANNER OF OFFERING
DISTRIBUTION AND ELIGIBLE INVESTORS. Shares of the Fund are offered without
a sales commission by Russell Fund Distributors, Inc., Investment Company's
distributor, to US or foreign institutional and retail investors that invest for
their own account or in a fiduciary or agency capacity. The Fund will incur
distribution expenses under a 12b-1 plan. See "General Management --
Distribution Services."
MINIMUM AND SUBSEQUENT INVESTMENT. The Fund requires a minimum initial
investment of $1,000. A shareholder's investment in the Fund may be subject to
redemption at the Fund's discretion if the account balance is less than $500 as
a result of shareholder redemptions. The Fund reserves the right to reject any
purchase order.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The Fund's investment objective is to maximize current income consistent
with preserving liquidity by investing in a diversified portfolio of high-
quality debt securities and by maintaining a portfolio duration of one year or
less. This investment objective may be changed with the approval of a majority
of the Fund's Board of Trustees. Shareholders would, however, receive at least
60 days prior notice of any change to the Fund's investment objective. There
can be no assurance that the Fund will meet its investment objective.
The Fund attempts to meet its objective by investing primarily in: (1)
US Government securities (including repurchase agreements relating to such
securities); (2) instruments of US and foreign banks, including ETDs, ECDs,
YCDs, certificates of deposit, time deposits, letters of credit and banker's
acceptances; (3) commercial paper, notes and bonds issued by foreign and
domestic corporations; (4) securities of foreign governments, agencies and
subdivisions of foreign governments and supranational organizations (such as
the World Bank); (5) asset-backed securities; (6) mortgage-related
pass-through securities; and (7) interest rate swaps.
The Fund limits its portfolio investments to bank instruments, mortgage-
related pass-throughs, asset-backed securities, commercial paper, corporate
notes and bonds and obligations
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<PAGE>
of foreign governments and agencies and subdivisions of foreign governments and
supranational organizations that, at the time of acquisition: (1) are rated in
one of the four highest categories (or in the case of commercial paper, in the
two highest categories) by at least one nationally recognized statistical rating
organization; or (2) if not rated, are of comparable quality, as determined by
the Fund's adviser, State Street Bank and Trust Company, in accordance with
procedures established by the Board of Trustees. All securities may be either
fixed income, zero coupon or variable- or floating-rate securities and may be
denominated in US dollars or selected foreign currencies.
INVESTMENT POLICIES
The investment policies described below reflect the Fund's current
practices, are not fundamental and may be changed by the Board of Trustees of
Investment Company without shareholder approval. To the extent consistent with
the Fund's investment objective and restrictions, the Fund may invest in the
following instruments and may use the following investment techniques:
PORTFOLIO DURATION. The Fund will maintain a portfolio duration of one
year or less. Duration is a measure of the price sensitivity of a security to
changes in interest rates. Unlike maturity, which measures the period of time
until final payment is to be made on a security, duration measures the
dollar-weighted average maturity of a security's expected cash flows (i.e.,
interest and principal payments), discounted to their present values, after
giving effect to all maturity shortening features, such as call or redemption
rights. With respect to a variable or floating-rate instrument, duration is
adjusted to indicate the price sensitivity of the instrument to changes in
the interest rate in effect until the next reset date. For substantially all
securities, the duration of a security is equal to or less than its stated
maturity.
US GOVERNMENT SECURITIES. US Government securities include US Treasury
bills, notes, and bonds and other obligations issued or guaranteed as to
interest and principal by the US Government and its agencies and
instrumentalities. Obligations issued or guaranteed as to interest and
principal by the US Government, its agencies and instrumentalities include
securities that are supported by the full faith and credit of the United States
Treasury, securities that are supported by the right of the issuer to borrow
from the United States Treasury, discretionary authority of the US Government
agency or instrumentality, and securities supported solely by the
creditworthiness of the issuer.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks and other financial institutions, such as broker-dealers. Under these
agreements, the Fund purchases securities from financial institutions that agree
to repurchase the securities at the Fund's cost plus interest within a specified
time (normally one day). The Fund will not invest more than 10% of its net
assets (taken at current market value) in repurchase agreements maturing in more
than seven days. The Fund will enter into repurchase agreements only with
financial institutions that Adviser determines are creditworthy. Should the
parties to these transactions fail financially, the Fund may experience delays
in realizing on the collateral securing the borrowers' obligations
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<PAGE>
or loss of rights in such collateral. Further, any amounts realized upon the
sale of collateral may be less than that necessary to fully compensate the
Funds.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements under the circumstances described in "Investment Restrictions."
Under reverse repurchase agreements, the Fund transfers possession of portfolio
securities to banks in return for cash in an amount equal to a percentage of the
portfolio securities' market value and agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains the right to
receive interest and principal payments from the securities while they are in
the possession of the financial institutions. Cash or liquid high quality debt
obligations from a Fund's portfolio equal in value to the repurchase price
including any accrued interest will be segregated by Custodian on the Fund's
records while a reverse repurchase agreement is in effect. Reverse repurchase
agreements involve the risk of default by the counterparty, which may adversely
affect the Fund's ability to reacquire the underlying security.
FORWARD COMMITMENTS. The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time, provided that the
forward commitment is consistent with the Fund's ability to manage its
investment portfolio, maintain a stable net asset value and honor redemption
requests. When effecting such transactions, cash or liquid high quality debt
obligations held by the Fund of a dollar amount sufficient to make payment for
the portfolio securities to be purchased will be segregated on the Fund's
records at the trade date and maintained until the transaction is settled. The
failure of the other party to the transaction to complete the transaction may
cause the Fund to miss an advantageous price or yield. The Fund bears the risk
of price fluctuations during the period between the trade and settlement dates.
WHEN-ISSUED TRANSACTIONS. The Fund may purchase securities on a when-issued
basis. In these transactions, the Fund purchases securities with payment and
delivery scheduled for a future time. Until settlement, the Fund segregates
cash and marketable high quality debt securities equal in value to their when-
issued commitments. Between the trade and settlement dates, the Fund bears the
risk of any fluctuation in the value of the securities. These transactions
involve the additional risk that the other party may fail to complete the
transaction and cause the Fund to miss a price or yield considered advantageous.
The Fund will engage in when-issued transactions only for the purpose of
acquiring portfolio securities consistent with its investment objective and
policies and not for investment leverage. The Fund will not invest more than
25% of its net assets in when-issued securities.
ILLIQUID SECURITIES. The Fund will not invest more than 10% of its net
assets in illiquid securities or securities that are not readily marketable,
including repurchase agreements and time deposits of more than seven days'
duration. The absence of a regular trading market for illiquid securities
imposes additional risks on investments in these securities. Illiquid
securities may be difficult to value and may often be disposed of only after
considerable expense and delay. In addition, the Fund will not invest more than
10% in securities of issues which may not be sold to the public without
registration under the Securities Act of 1933.
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<PAGE>
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand notes
are unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements between
their issuers and holders. The agreements permit the holders to increase
(subject to an agreed maximum) and the holders and issuers to decrease the
principal amount of the notes, and specify that the rate of interest payable on
the principal fluctuates according to an agreed formula.
ASSET-BACKED SECURITIES. Asset-backed securities represent undivided
fractional interests in pools of instruments, such as consumer loans, and are
similar in structure to mortgage-related pass-through securities described
below. Payments of principal and interest are passed through to holders of the
securities and are typically supported by some form of credit enhancement, such
as a letter of credit, surety bond, limited guarantee by another entity or by
priority to certain of the borrower's other securities. The degree of credit
enhancement varies, generally applying only until exhausted and covering only a
fraction of the security's par value. If the credit enhancement of an asset-
backed security held by the Fund has been exhausted, and if any required
payments of principal and interest are not made with respect to the underlying
loans, the Fund may experience loss or delay in receiving payment and a decrease
in the value of the security. Further details are set forth in the Statement of
Additional Information under "Investment Restrictions and Policies -- Investment
Policies."
MORTGAGE-RELATED PASS-THROUGH SECURITIES. The Fund may invest in mortgage-
related securities, including Government National Mortgage Association ("GNMA")
Certificates ("Ginnie Maes"), Federal Home Loan Mortgage Corporation ("FHLMC")
Mortgage Participation Certificates ("Freddie Macs") and Federal National
Mortgage Association ("FNMA") Guaranteed Mortgage Pass-Through Certificates
("Fannie Maes"). Mortgage pass-through certificates are mortgage-backed
securities representing undivided fractional interests in pools of mortgage-
backed loans. These loans are made by mortgage bankers, commercial banks,
savings and loan associations and other lenders. Ginnie Maes are guaranteed by
the full faith and credit of the US Government, but Freddie Macs and Fannie Maes
are not.
ZERO COUPON SECURITIES. Zero coupon securities are notes, bonds and
debentures that: (1) do not pay current interest and are issued at a
substantial discount from par value; (2) have been stripped of their unmatured
interest coupons and receipts; or (3) pay no interest until a stated date one or
more years into the future. These securities also include certificates
representing interests in such stripped coupons and receipts.
VARIABLE AND FLOATING RATE SECURITIES. A floating rate security provides
for the automatic adjustment of its interest rate whenever a specified interest
rate changes. A variable rate security provides for the automatic establishment
of a new interest rate on set dates. Interest rates on these securities are
ordinarily tied to, and are a percentage of, a widely recognized interest rate,
such as the yield on 90-day US Treasury bills or the prime rate of a specified
bank. These rates may change as often as twice daily. Generally, changes in
interest rates will have a smaller effect on the market value of variable and
floating rate securities than on the market value of comparable fixed income
obligations. Thus, investing in variable and floating rate securities
<PAGE>
generally allows less opportunity for capital appreciation and depreciation than
investing in comparable fixed income securities.
EURODOLLAR CERTIFICATES OF DEPOSIT, EURODOLLAR TIME DEPOSITS AND YANKEE
CERTIFICATES OF DEPOSIT. ECDs are US dollar denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are US dollar denominated
deposits in foreign branches of US banks and foreign banks. YCDs are US dollar
denominated certificates of deposit issued by US branches of foreign banks.
Different risks than those associated with the obligations of domestic banks
may exist for ECDs, ETDs and YCDs because the banks issuing these instruments,
or their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as loan limitations,
examinations and reserve, accounting, auditing, recordkeeping and public
reporting requirements.
FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in foreign currency
transactions as described below. The US dollar value of assets held by the Fund
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. The Fund will engage in
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, through
forward and futures contracts to purchase or sell foreign currencies or by
purchasing and writing put and call options on foreign currencies. The Fund may
purchase and write these contracts for the purpose of protecting against
declines in the dollar value of foreign securities it holds and against
increases in the dollar cost of foreign securities it plans to acquire.
A forward foreign currency exchange contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date upon which the parties enter the contract, at a price set at the
time the contract is made. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. Foreign currency
futures contracts are traded on exchanges and are subject to procedures and
regulations applicable to other futures contracts. Forward foreign currency
exchange contracts and foreign currency futures contracts may protect the Fund
from uncertainty in foreign currency exchange rates, and may also limit
potential gains from favorable changes in such rates.
Put and call options on foreign currencies are traded on securities
exchanges, in the over-the-counter market, and privately among major recognized
dealers in such options. The Fund may purchase and write these options for the
purpose of protecting against declines in the dollar value of foreign securities
it holds and against increases in the dollar cost of foreign securities it plans
to acquire. If a rise is anticipated in the dollar value of a foreign currency
in which securities to be acquired are denominated, the increased cost of such
securities may be offset in whole or in part by purchasing calls or writing puts
on that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be offset in whole or in part by writing calls
or purchasing puts on that foreign
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<PAGE>
currency. However, certain currency rate fluctuations would cause the option to
expire unexercised, and thereby cause the Fund to lose the premium it paid and
its transaction costs.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. For hedging purposes, including
protecting the price or interest rate of a security that the Fund intends to
buy, the Fund may enter into futures contracts that relate to securities in
which it may directly invest and indices comprised of such securities and may
purchase and write call and put options on such contracts.
A financial futures contract is a contract to buy or sell a specified
quantity of financial instruments such as US Treasury bills, notes and bonds,
commercial paper and bank certificates of deposit or the cash value of a
financial instrument index at a specified future date at a price agreed upon
when the contract is made. Under such contracts no delivery of the actual
securities making up the index takes place. Rather, upon expiration of the
contract, settlement is made by exchanging cash in an amount equal to the
difference between the contract price and the closing price of the index at
expiration, net of variation margin previously paid.
Substantially all futures contracts are closed out before settlement date or
called for cash settlement. A futures contract is closed out by buying or
selling an identical offsetting futures contract. Upon entering into a futures
contract, the Fund is required to deposit an initial margin with Custodian for
the benefit of the futures broker. The initial margin serves as a "good faith"
deposit that the Fund will honor its futures commitments. Subsequent payments
(called "variation margin") to and from the broker are made on a daily basis as
the price of the underlying investment fluctuates.
Options on futures contracts give the purchaser the right to assume a
position at a specified price in a futures contract at any time before
expiration of the option contract.
When trading futures contracts, the Fund will not commit more than 5% of the
market value of its total assets to initial margin deposits on futures and
premiums paid for options on futures.
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may write and
purchase covered put and call options on securities in which it may directly
invest. Option transactions of the Fund will be conducted so that the total
amount paid on premiums for all put and call options outstanding will not exceed
5% of the value of the Fund's total assets. Further, the Fund will not write a
put or call option or combination thereof if, as a result, the aggregate value
of all securities or collateral used to cover its outstanding options would
exceed 25% of the value of the Fund's total assets.
The Fund may purchase or sell options on securities indices that are
comprised of securities in which the Fund may directly invest, subject to the
limitations set forth above and provided such options are traded on a national
securities exchange or in the over-the-counter market. Options on securities
indices are similar to options on securities except there is no transfer of a
security and settlement is in cash. A call option on a securities index grants
the purchaser of the call, for a premium paid to the seller, the right to
receive in cash an amount equal
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<PAGE>
to the difference between the closing value of the index and the exercise price
of the option times a multiplier established by the exchange upon which the
option is traded.
LENDING PORTFOLIO SECURITIES. The Fund may lend portfolio securities with a
value of up to 33-1/3% of its total assets. Such loans may be terminated at any
time. The Fund will continuously maintain as collateral cash or obligations
issued by the US Government, its agencies or instrumentalities in an amount
equal to not less than 100% of the current market value (on a daily marked-to-
market basis) of the loaned securities plus accrued interest.
The Fund will retain most rights of beneficial ownership, including the
right to receive dividends, interest and other distributions on the loaned
securities. However, the borrower has the right to vote the loaned securities.
The Fund will call loans to vote proxies if a material issue affecting the
investment is to be voted upon. Should the borrower of the securities fail
financially, the Fund may experience delay in recovering the securities or
exercising its rights in the collateral. Loans are made only to borrowers that
are deemed by Adviser to be of good financial standing.
CASH RESERVES. For defensive purposes, the Fund may temporarily invest,
without limitation, in certain high quality short-term fixed income securities.
These securities include obligations issued or guaranteed as to principal and
interest by the US Government, its agencies and instrumentalities and repurchase
agreements collateralized by these obligations, commercial paper, bank
certificates of deposit, bankers' acceptances and time deposits. When using
this strategy, the weighted average maturity of securities held by the Fund will
decline, and thereby possibly cause its yield to decline as well.
INTEREST RATE SWAPS. The Fund may enter into interest rate swap
transactions with respect to any security it is entitled to hold. Interest rate
swaps involve the exchange by the Fund with another party of their respective
rights to receive interest, e.g., an exchange of floating rate payments for
fixed rate payments. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities
it anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment.
INVESTMENT RESTRICTIONS
The Fund has fundamental investment restrictions, which may be changed only
with the approval of a majority of the Fund's shareholders as defined in the
1940 Act. A more detailed discussion of the Fund's investment restrictions and
policies appears in the Statement of Additional Information. Unless otherwise
noted, the fundamental restrictions apply at the time an investment is made.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US
Government, its agencies and instrumentalities). Concentration may
occur as a result of changes in the market value of portfolio
securities, but may not result from investment.
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<PAGE>
2. Borrow money (including reverse repurchase agreements), except as a
temporary measure for extraordinary or emergency purposes or to
facilitate redemptions (not for leveraging or investment), provided
that borrowings do not exceed an amount equal to 33-1/3% of the current
value of the Fund's assets taken at market value, less liabilities
other than borrowings. If at any time the Fund's borrowings exceed
this limitation due to a decline in net assets, such borrowings will
within three days be reduced to the extent necessary to comply with
this limitation. The Fund will not purchase additional investments if
borrowed funds (including reverse repurchase agreements) exceed 5% of
total assets.
3. Pledge, mortgage, or hypothecate its assets. However, the Fund may
pledge securities having a market value at the time of the pledge not
exceeding 33-1/3% of the value of the Fund's total assets to secure
borrowings permitted by paragraph (2) above.
CERTAIN RISK FACTORS
FUTURES AND OPTIONS CONTRACTS. There are certain investment risks in using
futures contracts and options as a hedging technique. Such risks may include:
(1) the inability to close out a futures contract or option caused by the
nonexistence of a liquid secondary market; and (2) an imperfect correlation
between price movements of the futures contracts or option with price movements
of the portfolio securities or securities index subject to the hedge.
FOREIGN INVESTMENTS. Investment in securities of non-US issuers and
securities denominated in foreign currencies involve investment risks that are
different from those of US issuers, including: changes in currency rates;
uncertain future political, diplomatic and economic developments; possible
imposition of exchange controls or other governmental restrictions; less
publicly available information; lack of uniform accounting, auditing and
financial reporting standards, practices and requirements; lower trading volume,
less liquidity and more volatility for securities; less government regulation of
securities exchanges, brokers and listed companies; political or social
instability; and the possibility of expropriation or confiscatory taxation, each
of which could adversely affect investments in such securities.
PORTFOLIO TURNOVER
Because the Fund will actively trade to benefit from short-term yield
disparities among different issues of fixed-income securities, or otherwise to
increase its income, the Fund may be subject to a greater degree of portfolio
turnover than might be expected from investment companies which invest
substantially all of their assets on a long-term basis. The portfolio turnover
rate cannot be predicted, but it is anticipated that the Fund's annual turnover
rate generally will not exceed 100% (excluding turnover of securities having a
maturity of one year or less).
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DIVIDENDS AND DISTRIBUTIONS
The Board of Trustees intends to declare dividends on shares of the Fund
from net investment income daily, and have them payable as of the last business
day of each month. Distributions will be made at least annually from net short
and long-term capital gains, if any. In most instances, distributions will be
declared and paid in mid-October with additional distributions declared and paid
in December, if required for the Fund to avoid imposition of a 4% federal excise
tax on undistributed capital gains.
Dividends declared in October, November or December and payable to
shareholders of record in such months will be deemed to have been paid by the
Fund and received by shareholders on December 31 of that year if the dividend is
paid prior to February 1 of the following year.
Income dividends and capital gains distributions will be paid in additional
shares at their net asset value on the record date unless the shareholder has
elected to receive them in cash. Such election may be made by giving 10 days'
written notice to Transfer Agent.
Any dividend or capital gain distribution paid by the Fund shortly after a
purchase of shares will reduce the per share net asset value of the Fund by the
amount of the dividend or distribution. In effect, the payment will represent a
return of capital to the shareholder. However, the shareholder will be subject
to taxes with respect to such dividend or distribution.
TAXES
The Fund intends to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code, as amended (the "Code") . As a RIC,
the Fund will not be subject to federal income taxes to the extent it
distributes its net investment income and capital gain net income (capital gains
in excess of capital losses) to its shareholders. The Board intends to
distribute each year substantially all of the Fund's net investment income and
capital gain net income.
Dividends from net investment income and distributions of net short-term
capital gains are taxable to shareholders as ordinary income under federal
income tax laws whether paid in cash or in additional shares. Distributions
from net long-term capital gains are taxable as long-term capital gains
regardless of the length of time a shareholder has held such shares.
The Fund may purchase bonds at market discount (i.e., bonds with a purchase
price less than original issue price or adjusted issue price). If such bonds
are subsequently sold at a gain then a portion of that gain equal to the amount
of market discount, which should have been accrued through the sale date, will
be taxable to shareholders as ordinary income.
Dividends and distributions may also be subject to state or local taxes.
Depending on the state tax rules pertaining to a shareholder, a portion of the
dividends paid by the Fund attributable to direct obligations of the US Treasury
and certain agencies may be exempt from state and local taxes.
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The sale of Fund shares by a shareholder is a taxable event and may result
in capital gain or loss. A capital gain or loss may be realized from an
ordinary redemption of shares or an exchange of shares between two mutual funds
(or two series of portfolios of a mutual fund). Any loss incurred on sale or
exchange of Fund shares held for one year or more will be treated as a long-term
capital loss to the extent of capital gain dividends received with respect to
such shares.
Shareholders will be notified after each calendar year of the amount of
income dividends and net capital gains distributed and the percentage of a
Fund's income attributable to US Treasury and agency obligations. The Fund is
required to withhold a portion of all taxable dividends, distributions and
redemption proceeds payable to any noncorporate shareholder that does not
provide the Fund with the shareholder's correct taxpayer identification number
or certification that the shareholder is not subject to backup withholding.
The forgoing discussion is only a summary of certain federal income tax
issues generally affecting the Fund and its shareholders. Circumstances among
investors may vary and each investor is encouraged to discuss investment in the
Fund with the investor's tax adviser.
VALUATION OF FUND SHARES
NET ASSET VALUE PER SHARE. The Fund determines net asset value once each
business day, as of the close of the regular trading session of the New York
Stock Exchange (currently 4 p.m. Eastern time). A business day is one on which
the New York Stock Exchange is open. Net asset value per share is computed by
dividing the current value of a Fund's assets, less its liabilities, by the
number of shares of the Fund outstanding and rounding to the nearest cent.
VALUATION OF FUND SECURITIES. The Fund values securities maturing within 60
days of the valuation date at amortized cost unless the Board determines that
amortized cost does not represent their fair value. The "amortized cost"
valuation procedure initially prices an instrument at its cost and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if it sold the instrument.
With the exceptions noted below, the Fund values portfolio securities with
remaining maturities in excess of 60 days at "market value." This generally
means that 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 sales, at the closing bid price, on the primary exchange on which the
security is traded. United States fixed income securities traded principally
over-the-counter and options are valued on the basis of the last reported bid
price. Futures contracts are valued on the basis of the last reported sale
price.
Because many fixed income securities do not trade each day, last sale or bid
prices are frequently not available. Fixed income securities therefore may be
valued using prices provided
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by a pricing service when such prices are determined by Custodian to reflect the
market value of such securities.
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 best bid or official bid, as determined by
the relevant securities exchange. In the absence of a last sale, best or
official bid price, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the market
value of such securities.
The Fund values 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.
PURCHASE OF FUND SHARES
MINIMUM INITIAL INVESTMENT AND ACCOUNT BALANCE. The Fund requires a minimum
initial investment of $1,000. The minimum account balance is $500. The Fund
reserves the right to reject any purchase order.
OFFERING DATES AND TIMES. Fund shares may be purchased on any business day
without a sales commission. All purchases must be made in US dollars. Purchase
orders in good form and payments for Fund shares must be received by Transfer
Agent prior to 4:00 p.m. Eastern time to be effective on the date received. The
accompanying payment must be in federal funds or converted into federal funds by
Transfer Agent before the purchase order can be accepted. Purchase orders in
good form are described below. Purchase orders which are accepted: (1) prior
to 12:00 noon Eastern time will earn the dividend declared on the date of
purchase; and (2) at or after 12:00 noon Eastern time will earn the dividend
determined on the next day.
ORDER AND PAYMENT PROCEDURES. There are several ways to invest in the Fund.
The Fund requires a purchase order in good form which consists of a completed
and signed Account Registration and Investment Instruction Form ("Application")
for each new account regardless of the investment method. For additional
information, copies of forms or questions, call Transfer Agent at (800) 647-
7327, or write to Transfer Agent at: State Street Bank and Trust Company, P.O.
Box 8317, Boston, MA 02107, Attention: The Seven Seas Series Yield Plus Fund.
FEDERAL FUNDS WIRE. An investor may purchase shares by wiring federal funds
to State Street Bank and Trust Company as Transfer Agent by:
1. Telephoning State Street Bank and Trust Company at (800) 647-7327 and
stating: (1) the investor's account registration, address and social
security or tax identification number; (2) the name of the investment
portfolio to be invested in; (3) the amount being wired; (4) the name
of the wiring bank; (5) the name and telephone number of the person at
the wiring bank to be contacted in connection with the order.
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2. Instructing the wiring bank to wire federal funds to: State Street
Bank and Trust Company, Boston, MA (ABA #0110-00028), Attention: The
Seven Seas Series Yield Plus Fund, Mutual Funds Service Division (DDA
#9904-631-0). The wire instructions should also include the name in
which the account is registered, the account number, and the name of
the Fund in which to be invested.
3. Completing the Application and forwarding it to Transfer Agent at the
above address.
MAIL. To purchase shares by mail, send a check or other negotiable bank
draft payable to: State Street Bank and Trust Company, P.O. Box 8317, Boston,
MA 02107, Attention: The Seven Seas Series Yield Plus Fund. Certified checks
are not necessary; however, all checks are accepted subject to collection at
full face value in United States funds and must be drawn in United States
dollars on a United States bank. Normally, checks and drafts are converted to
federal funds within two business days following receipt of the check or draft.
Initial investments should be accompanied by a completed Application, and
subsequent investments are to be accompanied by the investor's account number.
CASH SWEEP PROGRAM. Money managers of master trust clients may participate
in a cash sweep program to automatically invest excess cash in the Fund. A
money manager must select the Fund, give authorization to complete the Fund's
Application and authorize the investment of excess cash into or the withdrawal
of required cash from the Fund on a daily basis. Where Adviser acts as money
manager, Adviser will receive an advisory fee from the client.
THIRD PARTY TRANSACTIONS. Investors purchasing Fund shares through a
program of services offered by a financial intermediary, such as a bank, broker-
dealer, investment adviser or others, may be required by such intermediary to
pay additional fees. Investors should contact such intermediary for information
concerning what additional fees, if any, may be charged.
"IN-KIND" EXCHANGE OF SECURITIES. The Transfer Agent may, at its
discretion, permit investors to purchase shares through the exchange of
securities they hold. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least $1 million. Shares purchased in exchange for securities
generally may not be redeemed or exchanged until the transfer has settled --
usually within 15 days following the purchase by exchange.
The basis of the exchange will depend upon the relative net asset value of
the shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Transfer Agent and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities.
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EXCHANGE PRIVILEGE. Subject to the Fund's minimum investment requirement,
investors may exchange their Fund shares without charge for shares of any other
investment portfolio offered by Investment Company. Shares are exchanged on the
basis of relative net asset value per share. Exchanges may be made: (1) by
telephone if the registrations of the two accounts are identical; or (2) in
writing addressed to State Street Bank and Trust Company, P.O. Box 8317, Boston,
MA 02107, Attention: The Seven Seas Series Yield Plus Fund. If shares of the
Fund were purchased by check, the shares must have been present in an account
for 10 days before an exchange is made. The exchange privilege will only be
available in states where the exchange may legally be made, and may be modified
or terminated by the Fund upon 60 days' notice to shareholders.
REDEMPTION OF FUND SHARES
Fund shares may be redeemed on any business day at the net asset value next
determined after the receipt of a redemption request in proper form as described
below. Payment will ordinarily be made in seven days and will be mailed to the
shareholder's address of record. Upon request, redemption proceeds will be wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System. Although Investment Company does not
currently charge a fee for this service, Investment Company reserves the right
to charge a fee for the cost of wire-transferred redemptions of less than
$1,000. Payment for redemption of shares purchased by check may be withheld for
up to 10 days after the date of purchase to assure that such checks are honored.
A dividend will be paid on shares redeemed if the redemption request is received
by State Street Bank and Trust Company after 12:00 noon Eastern time.
Redemption requests received before 12:00 noon Eastern time will not be entitled
to that day's dividend.
EXPEDITED REDEMPTION. Shareholders may normally redeem Fund shares by
telephoning State Street Bank and Trust Company between 9:00 a.m. and 4:00 p.m.
Eastern time at (800) 647-7327, Attention: The Seven Seas Series Yield Plus
Fund. Shareholders using the expedited redemption method must complete the
appropriate section on the Application. The Fund and the Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are properly authorized. The Fund and the Transfer Agent will not be
liable for executing telephone instructions that are deemed to be authorized
after following reasonable procedures. These procedures include recording
telephonic instructions, mailing to the shareholder a written confirmation of
the transaction, performing a personal identity test with private information
not likely to be known by other individuals, and restricting mailing of
redemptions to the shareholder's address of record. During periods of drastic
economic or market changes, shareholders using this method may encounter delays.
In such event, shareholders should consider using the mail redemption procedure
described below.
MAIL. Redemption requests may be made in writing directly to State Street
Bank and Trust Company, P.O. Box 8317, Boston, MA 02107, Attention: The Seven
Seas Series Yield Plus Fund. The redemption price will be the net asset value
next determined after receipt by State
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Street of all required documents in good order. "Good order" means that the
request must include the following:
1. A letter of instruction or a stock assignment stating that the shares
are to be redeemed out of The Seven Seas Series Yield Plus Fund and
designating specifically the dollar amount to be redeemed signed by all
owners of the shares in the exact names in which they appear on the
account, together with a guarantee of the signature of each owner by a
bank, trust company or member of a recognized stock exchange; and
2. Such other supporting legal documents, if required by applicable law or
Transfer Agent, in the case of estates, trusts, guardianships,
custodianships, corporations and pension and profit-sharing plans.
The Fund reserves the right to redeem the shares in any account with a
balance of less than $500 as a result of shareholder redemptions. Before shares
are redeemed to close an account, the shareholder will be notified in writing
and allowed 60 days to purchase additional shares to meet the minimum account
balance.
The Fund may pay any portion of the redemption amount in excess of $250,000
by a distribution in kind of readily marketable securities from the portfolio of
the Fund in lieu of cash. Investors will incur brokerage charges on the sale of
these portfolio securities. The Fund reserves the right to suspend the right of
redemption or postpone the date of payment if emergency conditions, as specified
in the 1940 Act or determined by the Securities and Exchange Commission, should
exist.
GENERAL MANAGEMENT
The Board of Trustees supervises the management, activities and affairs of
the Fund and has approved contracts with various financial organizations to
provide, among other services, day-to-day management required by the Fund.
ADVISORY AGREEMENT. Investment Company employs State Street Bank and Trust
Company ("State Street" or "Adviser") to furnish investment services to the
Fund. State Street is one of the largest providers of securities processing and
recordkeeping services for US mutual funds and pension funds. State Street is a
wholly owned subsidiary of State Street Boston Corporation, a publicly held bank
holding company. State Street, with over $144 billion (US) under management as
of September 30, 1994, provides complete global investment management services
from offices in the United States, London, Sydney, Hong Kong, Tokyo, Toronto,
Luxembourg, Melbourne, Montreal and Paris.
Adviser, subject to Board supervision, directs the investments of the Fund
in accordance with the Fund's investment objective, policies and restrictions.
The Fund's investment decisions are made by committee and no person is primarily
responsible for making recommendations to
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that committee. For these services, the Fund pays Adviser a fee, calculated
daily and paid monthly, that on an annual basis is equal to .25% of the Fund's
average daily net assets.
The Glass-Steagall Act prohibits a depository state chartered bank such as
Adviser from engaging in the business of issuing, underwriting, selling or
distributing certain securities. The activities of Adviser in informing its
customers of the Fund, performing investment and redemption services and
providing custodian, transfer, shareholder servicing, dividend disbursing and
investment advisory services may raise issues under these provisions. Adviser
has been advised by its counsel that its activities in connection with the Fund
are consistent with its statutory and regulatory obligations. THE SHARES
OFFERED BY THIS PROSPECTUS ARE NOT ENDORSED OR GUARANTEED BY STATE STREET OR ITS
AFFILIATES, ARE NOT DEPOSITS OR OBLIGATIONS OF STATE STREET OR ITS AFFILIATES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
Changes in federal or state statutes and regulations relating to the
permissible activities of banks and their affiliates, as well as judicial or
administrative decisions or interpretations of such or future statutes and
regulations, could prevent Adviser from continuing to perform all or a part of
the above services for its customers and/or the Fund. If Adviser were
prohibited from serving the Fund in any of its present capacities, the Board of
Trustees would seek an alternative provider(s) of such services. In such event,
changes in the operation of the Fund may occur. It is not expected by Adviser
that existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities is found) as a result of any of these
occurrences.
State Street may from time to time have discretionary authority over
accounts which invest in Investment Company shares. These accounts include
accounts maintained for securities lending clients and accounts which permit the
use of Investment Company portfolios as short-term cash sweep investments.
Shares purchased for all discretionary accounts are held of record by State
Street, who retains voting control of them. As of November 9, 1994, State
Street held of record 38% of the issued and outstanding shares of Investment
Company in connection with its discretionary accounts. Consequently, State
Street may be deemed to be a controlling person of Investment Company for
purposes of the 1940 Act.
ADMINISTRATION AGREEMENT. Frank Russell Investment Management Company
("Administrator") serves as administrator of the Fund. Administrator currently
serves as investment manager and administrator to 22 mutual funds with assets of
$6.2 billion as of October 31, 1994, and acts as administrator to 17 mutual
funds, including the Fund presented in this Prospectus, with assets of
$6.1 billion as of October 31, 1994.
Pursuant to the Administration Agreement with Investment Company,
Administrator will: (1) supervise all aspects of the Fund's operations;
(2) provide the Fund with administrative and clerical services, including the
maintenance of certain of the Fund's books and records; (3) arrange the periodic
updating of the Fund's prospectuses and any supplements thereto; (4) provide
proxy materials and reports to Fund shareholders and the Securities and Exchange
Commission; and (5) provide the Fund with adequate office space and all
necessary office equipment and services,
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including telephone service, heat, utilities, stationery supplies and similar
items. For these services, the Yield Plus Fund and Investment Company's other
domestic investment portfolios pay Administrator a combined fee that on an
annual basis is equal to the following percentages of their average aggregate
daily net assets: (1) $0 up to $500 million -- .06%; (2) over $500 million to
$1 billion -- .05%; and (3) over $1 billion -- .03%. The percentage of the fee
paid by the Yield Plus Fund is equal to the percentage of average aggregate
daily net assets that are attributable to the Fund. Administrator will also
receive reimbursement of expenses it incurs in connection with establishing new
investment portfolios. Further, the administration fee paid by the Investment
Company will be reduced by the sum of certain distribution related expenses (up
to a maximum of 15% of the asset-based administration fee listed above).
Administrator also provides administrative services in connection with the
registration of shares of Investment Company with those states in which its
shares are offered or sold. Compensation for such services is on a "time spent"
basis. Investment Company will pay all registration, exemptive application,
renewal and related fees and reasonable out-of-pocket expenses.
DISTRIBUTION SERVICES AND SHAREHOLDER SERVICING ARRANGEMENTS. Pursuant to
the Distribution Agreement with Investment Company, Russell Fund Distributors,
Inc. ("Distributor"), a wholly owned subsidiary of Administrator, serves as
distributor for all Fund shares.
The Fund has adopted a distribution plan pursuant to Rule 12b-1 (the "Plan")
under the 1940 Act. The purpose of the Plan is to provide for the payment of
certain Investment Company distribution and shareholder servicing expenses.
Under the Plan, Distributor will be reimbursed in an amount up to .25% of the
Fund's average annual net assets for distribution-related and shareholder
servicing expenses. Payments under the Plan will be made to Distributor to
finance activity that is intended to result in the sale and retention of Fund
shares including: (1) the costs of prospectuses, reports to shareholders and
sales literature; (2) advertising; and (3) expenses incurred in connection with
the promotion and sale of Fund shares, including Distributor's overhead expenses
for rent, office supplies, equipment, travel, communication, compensation and
benefits of sales personnel.
Under the Plan, the Fund may also enter into agreements ("Service
Agreements") with financial institutions, which may include Adviser ("Service
Organizations"), to provide shareholder servicing with respect to Fund shares
held by or for the customers of the Service Organizations. Under the Service
Agreements, the Service Organizations may provide various services for such
customers including: answering inquiries regarding the Fund; assisting customers
in changing dividend options, account designations and addresses; performing
subaccounting for such customers; establishing and maintaining customer accounts
and records; processing purchase and redemption transactions; providing periodic
statements showing customers' account balances and integrating such statements
with those of other transactions and balances in the customers' other accounts
serviced by the Service Organizations; arranging for bank wires transferring
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customers' funds; and such other services as the customers may request in
connection with the Fund, to the extent permitted by applicable statute, rule or
regulation. Service Organizations may receive from the Fund, for shareholder
servicing, a monthly fee at a rate that shall not exceed .20% per annum of the
average daily net asset value of the Fund's shares owned by or for shareholders
with whom the Service Organization has a servicing relationship. Banks and
other financial service firms may be subject to various state laws, and may be
required to register as dealers pursuant to state law.
Investment Company has entered into Service Agreements with Adviser and with
State Street Brokerage Services, Inc. ("SSBSI") to obtain the services described
above with respect to Fund shares held by or for customers. In return for these
services, Investment Company pays Adviser a fee in an amount that per annum is
equal to .025% and .175 of 1% of the average daily value of all Fund shares held
by or for customers of Adviser and of SSBSI, respectively.
Payments to Distributor, as well as payments to Service Organizations from
the Fund, are not permitted by the Plan to exceed .25% of the Fund's average net
asset value per year. Any payments that are required to be made by the
Distribution Agreement and any Service Agreement but could not be made because
of the .25% limitation may be carried forward and paid in subsequent years so
long as the Plan is in effect. The Fund's liability for any such expenses
carried forward shall terminate at the end of two years following the year in
which the expenditure was incurred. Service Organizations will be responsible
for prompt transmission of purchase and redemption orders and may charge fees
for their services.
FUND EXPENSES
The Fund will pay all of its expenses other than those expressly assumed by
Adviser and Administrator. The principal expenses of the Fund are the annual
advisory fee payable to Adviser and distribution and shareholder servicing
expenses. Other expenses include: (1) amortization of deferred organizational
costs; (2) taxes, if any; (3) expenses for legal, auditing and financial
accounting services; (4) expense of preparing (including typesetting, printing
and mailing) reports, prospectuses and notices to existing shareholders;
(5) administrative fees; (6) expense of issuing and redeeming Fund shares;
(7) the cost of registering Fund shares under federal and state laws;
(8) shareholder meetings and related proxy solicitation expenses; (9) the fees,
travel expenses and other out-of-pocket expenses of Trustees who are not
affiliated with Adviser or any of its affiliates; (10) insurance, interest,
brokerage and litigation costs; (11) extraordinary expenses as may arise,
including expenses incurred in connection with litigation proceedings and claims
and the legal obligations of Investment Company to indemnify its Trustees,
officers, employees, shareholders, distributors and agents; and (12) other
expenses properly payable by the Fund.
PERFORMANCE CALCULATIONS
The Fund may from time to time advertise its yield. Yield is calculated by
dividing the net investment income per share earned during the most recent 30-
day (or one-month) period by the
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maximum offering price per share on the last day of the month. This income is
then annualized. That is, the amount of income generated by the investment
during that 30-day period is assumed to be generated each month over a 12-month
period and is shown as a percentage of the investment. For purposes of the
yield calculation, interest income is computed based on the yield to maturity of
each debt obligation. The calculation includes all recurring fees that are
charged to all shareholder accounts.
From time to time the Fund may advertise its total return. The total return
of the Fund is the average annual compounded rate of return from a hypothetical
investment in the Fund over one-year, five-year and ten-year periods or for the
life of the Fund (as stated in the advertisement), assuming the reinvestment of
all dividend and capital gains distributions.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Donoghue's Money Fund Report, the Bank Rate Monitor, Wall Street
Journal Score Card, Lehman Brothers Index or other industry publications,
business periodicals, rating services and market indices. The Fund may also
advertise nonstandardized performance information which is for periods in
addition to those required to be presented.
Quoted yields, returns and other performance figures are based on historical
earnings and are not indications of future performance.
ADDITIONAL INFORMATION
CUSTODIAN, ACCOUNTANTS AND REPORTS. State Street holds all portfolio
securities and cash assets of the Fund, provides portfolio recordkeeping
services and serves as the Fund's transfer agent ("Transfer Agent") and
custodian ("Custodian"). State Street is authorized to deposit securities in
securities depositories or to use the services of subcustodians. State Street
has no responsibility for the supervision and management of the Fund except as
investment adviser. Coopers & Lybrand L.L.P., Boston, Massachusetts, is
Investment Company's independent accountants.
REPORTS TO SHAREHOLDERS AND SHAREHOLDER INQUIRIES. Shareholders will
receive unaudited semiannual financial statements and annual financial
statements audited by Investment Company's independent accountants. Shareholder
inquiries regarding the Prospectus and financial statements may be made by
calling Distributor at (617) 654-6089. Inquiries regarding shareholder balances
may be made by calling Transfer Agent at (800) 647-7327.
ORGANIZATION, CAPITALIZATION AND VOTING. Investment Company was organized
as a Massachusetts business trust on October 3, 1987.
Investment Company issues shares divisible into an unlimited number of
series (or funds), each of which is a separate trust under Massachusetts law.
The Yield Plus Fund is one of such series.
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Each Fund share represents an equal proportionate interest in the Fund, has
a par value of $.001 per share and is entitled to such relative rights and
preferences and dividends and distributions earned on assets of the Fund as may
be declared by the Board of Trustees. Fund shares are fully paid and
nonassessable by Investment Company and have no preemptive rights.
Each Fund share has one vote. There are no cumulative voting rights. There
is no annual meeting of shareholders, but special meetings may be held. On any
matter that affects only a particular investment portfolio, only shareholders of
that fund may vote unless otherwise required by the 1940 Act or the Master Trust
Agreement. The Trustees hold office for the life of the Trust. A Trustee may
resign or retire, and may be removed at any time by a vote of two-thirds of
Investment Company shares. The Trustees shall promptly call and give notice of
a meeting of shareholders for the purpose of voting upon removal of any Trustee
when requested to do so in writing by holders of not less than 10% of the shares
then outstanding. A vacancy on the Board of Trustees may be filled by the vote
of a majority of the remaining Trustees, provided that immediately thereafter at
least two-thirds of the Trustees have been elected by shareholders.
Investment Company does not issue share certificates for the Fund. Transfer
Agent sends shareholders statements concurrent with any transaction activity,
confirming all investments in or redemptions from their accounts. Each
statement also sets forth the balance of shares held in the account.
As of November 10, 1994, CM18 Stock Performance Index Futures Fund and
International Clearing Stock Loan owned of record 42% and 30%, respectively, of
the issued and outstanding shares of the Fund. Each is therefore deemed to be a
controlling person of the Fund for purposes of the 1940 Act.
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THE SEVEN SEAS SERIES FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
INVESTMENT ADVISER, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
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
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THE SEVEN SEAS SERIES FUND
The Seven Seas Series Money Market Fund
The Seven Seas Series US Government Money Market Fund
The Seven Seas Series Tax Free Money Market Fund
The Seven Seas Series S&P 500 Index Fund
The Seven Seas Series Small Cap Fund
The Seven Seas Series Matrix Equity Fund
The Seven Seas Series Yield Plus Fund
The Seven Seas Series Growth and Income Fund
The Seven Seas Series Intermediate Fund
The Seven Seas Series Active International Fund
The Seven Seas Series Emerging Markets Fund
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