<PAGE>
THE SEVEN SEAS SERIES FUND
SUPPLEMENT DATED AUGUST 7, 1995
TO PROSPECTUS DATED NOVEMBER 25, 1994
THE SEVEN SEAS SERIES YIELD PLUS FUND
A Special Meeting of the Shareholders (the "Meeting") will be held on August
25, 1995 to consider a proposal to amend the investment objective of The
Seven Seas Series Yield Plus Fund (the "Fund"), to read as follows:
The Seven Seas Series 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 current investment objective has been interpreted to mean that not
more than 35% of the Fund's assets may be invested in securities with
remaining maturities in excess of three years, regardless of the Fund's
average weighted maturity or duration. The Trustees believe that this
restriction artificially limits the Fund's investment opportunities with
little or no benefit to shareholders and that it is advisable to amend the
Fund's investment objective by eliminating the restriction on maturity and
adding a requirement that the Fund maintain a duration of one year or less.
Although not required by the current investment objective or policies of the
Fund, the Adviser has maintained the Fund's duration at one year or less
since inception of the Fund. The proposed change of the Fund's investment
objective, therefore, will not result in a material change to the strategies
currently used in managing the Fund's portfolio. The proposed change,
however, will provide the Adviser with more flexibility to invest in
securities with stated maturities in excess of three years, provided that the
investments do not cause the Fund's duration to extend beyond a maximum of
one year.
<PAGE>
Filed pursuant to Rule 497(c)
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 with remaining maturities of three years 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>
Investment Adviser, Custodian
and Transfer Agent: Distributor: Administrator:
<S> <C> <C>
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
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
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
</TABLE>
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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>
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 $20 $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.
-3-
<PAGE>
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>
-4-
<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 fundamental investment objective is to maximize current
income consistent with preserving liquidity by investing in a diversified
portfolio of high-quality debt securities with a remaining maturity of three
years or less. This investment objective may be changed only with the
approval of a majority of the Fund's shareholders as defined by the 1940 Act.
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
bankers acceptances; (3) commercial paper, notes and bonds issued by foreign
and domestic corporations; (4) securities 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 in commercial paper,
corporate notes and bonds and obligations of foreign governments and
supranational organizations to those 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,
-5-
<PAGE>
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.
The Fund will not maintain a stable $1.00 net asset value. Total
return from the Fund is expected to exceed that of money market funds.
INVESTMENT POLICIES
The investment policies described below reflect the Fund's current
practices and are not fundamental. Investment policies may be changed by the
Board of Trustees of Investment Company without shareholder approval. To the
extent consistent with the Fund's fundamental investment objective and
restrictions the Fund may invest in the following instruments and may use the
following investment techniques:
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 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
-6-
<PAGE>
repurchase agreements involve the risk that the market value of securities
sold by the Fund may decline below the price at which it is obligated to
repurchase the securities.
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.
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 borrowers other securities.
The degree of credit enhancement varies, generally applying only
-7-
<PAGE>
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 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.
-8-
<PAGE>
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
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
-9-
<PAGE>
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 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,
-10-
<PAGE>
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.
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%
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<PAGE>
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).
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.
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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.
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 31% 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.
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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.
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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 "fair 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 by a pricing service when such
prices are determined by Custodian to reflect the fair 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 fair 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.
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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. The
Fund will not permit redemptions until a completed Application is on file.
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.
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.
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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.
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
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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. 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 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.
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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 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
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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, 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. The fee paid to the Administrator will be less than
an amount equal to the sum of certain distribution expenses incurred by the
Fund's distributor on behalf of the Fund, up to a maximum of 15% of the
amount as determined in the fee calculation 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
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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
Distributors 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 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 Adviser's State Street Solutions area 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% of the average daily value of all Fund
shares held by or for customers, and .175% of the average daily value of all
Fund shares held by or for customers of Adviser's State Street Solutions area.
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
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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 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., Donoghues 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.
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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 Companys independent accountants.
REPORTS TO SHAREHOLDERS AND SHAREHOLDER INQUIRIES. Shareholders will
receive unaudited semiannual financial statements and annual financial
statements audited by Investment Companys 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.
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.
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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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