<PAGE>
N-30D Table of Contents
Seven Seas Series Fund Name N-30D page
- --------------------------- ----------
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . 2
US Government Money Market Fund . . . . . . . . . . . . . . . . . 21
Matrix Equity Fund . . . . . . . . . . . . . . . . . . . . . . . 38
S&P 500 Index Fund . . . . . . . . . . . . . . . . . . . . . . . 59
Small Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . . 85
Active International Fund . . . . . . . . . . . . . . . . . . . . 105
Yield Plus Fund . . . . . . . . . . . . . . . . . . . . . . . . . 130
US Treasury Money Market and Prime Money Market Funds . . . . . . 150
Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . 175
Intermediate Fund . . . . . . . . . . . . . . . . . . . . . . . . 194
Emerging Markets Fund . . . . . . . . . . . . . . . . . . . . . . 213
Tax Free Money Market Fund . . . . . . . . . . . . . . . . . . . 240
Bond Market Fund . . . . . . . . . . . . . . . . . . . . . . . . 262
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
MONEY MARKET FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 21
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC. IS THE
DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Money Market Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA
Funds. In the coming year you will notice the new logo and name on all fund
materials. SSgA is the investment management business of State Street Bank and
Trust Company, a 200 year old pioneer and leader in the world of financial
services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Money Market Fund since her
arrival at State Street in February 1994. Ms. Williams is the Mutual Funds Unit
Head responsible for oversight of money market and other short-term funds. Prior
to joining State Street, she was a portfolio manager with PNC Bank and the
Calvert Group. There are seven other portfolio managers working with Ms.
Williams in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality money market instruments including certificates of
deposits, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[Graph]
DATES MONEY MARKET SALOMON BROTHERS 3-MONTH T-BILL INDEX**
Inception* $10,000 $10,000
1988 $10,241 $10,220
1989 $11,183 $11,087
1990 $12,132 $11,990
1991 $12,991 $12,775
1992 $13,599 $13,320
1993 $14,040 $13,729
1994 $14,510 $14,217
1995 $15,310 $15,010
1996 $16,132 $15,813
PERFORMANCE REVIEW
In the last year, fixed income yields held low through February 1996 by
recessionary fears, gave way to higher bond yields fueled by better than
expected economic growth in the second half of the year. Last December and
January, two interest rate moves of 25 basis points each brought the Fed Funds'
target rate down to 5.25%, where it remained for the rest of the year. Despite
this relatively quiet Fed activity, short-term interest rates traded in a wide
range. One- and three-month LIBOR (London Interbank Offering Rate) dropped close
to 70 basis points before rising in March. One year LIBOR fell 110 basis points
to 4.99% in February, but closed the year at 6.31%, 20 basis points higher than
it started. Similarly, one-year Treasuries traded from 5.97% down to 4.79% and
back up to 5.91% by the end of August. These dramatic shifts in short-term
interest rates reflected the market's anticipation of Federal Reserve moves,
which proved more volatile than the actual Fed activity.
SEVEN SEAS SERIES MONEY MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------------- ------------ ---------
1 Year $ 10,536 5.36%
5 Years $ 12,418 4.43%
Inception $ 16,132 5.91%+
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------------- ------------ ---------
1 Year $ 10,535 5.35%
5 Years $ 12,378 4.36%
Inception $ 15,813 5.65%+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The Fund had a one year return of 5.36% for the fiscal year ended August 31,
1996. This compares favorably to the return of 5.35% for the same period for the
benchmark of the Fund, the Salomon Brothers 3-Month Treasury Bill Index. This
return of one basis point ahead of the Index is net of fund operating expenses,
whereas Index results do not include fees or expenses of any kind. The Salomon
Brothers Treasury Bill Index was chosen as a standard, well-known representation
of money market rates.
PORTFOLIO HIGHLIGHTS
In fiscal 1996, the Fund sought and received an Am rating from Standard & Poor's
Corporation. This rating reflects the investment quality of shares of the mutual
fund which invest in short-term fixed income obligations. The Standard & Poor's
Corporation assigns ratings across a wide spectrum of comparable funds. In
awarding its ratings, Standard & Poor's often require investment guidelines that
may, in certain instances, be more conservative than otherwise allowed a fund
under applicable law. The Fund was managed consistently with its objective of
providing safety of principal and liquidity by investing in high quality
investments and providing competitive returns.
Fund investments included floating rate and fixed rate notes based on relative
value in the marketplace. Purchases of floating rate notes were largely
concentrated using one- and three-month LIBOR as reset indices. A small
percentage were reset based on Fed Funds and Prime rates. These securities
allowed for periodic resetting of rates at attractive levels relative to LIBOR
giving the Fund the ability to respond rapidly to changing interest rates. The
average maturity of the Fund was in the 56 to 69 day range, well below that of
90 days allowable by law and Standard & Poor's rating guidelines.
The Fund's five largest holdings by investment type represented 79.6% of the
portfolio with almost one-third of the Fund in shorter-term corporate bonds and
notes. A total of 20.8% of the Fund was held in US Government Treasury and
Agency instruments.
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Corporate Bonds and Notes 32.8%
Eurodollar Time Deposits 17.1
United States Government Agencies 15.1
Repurchase Agreements 7.8
Domestic Commercial Paper 6.8
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on May 2, 1988. Index comparison began
May 1, 1988.
**Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Money Market Fund (the "Fund"),
as of August 31, 1996, and the related statement of operations for the fiscal
year then ended, the statements of changes in net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the five fiscal years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC CERTIFICATES OF DEPOSIT - 1.5%
First Tennessee Bank . . . . . . . . . . . . . . . . . . . . . . $ 50,000 5.340% 09/05/96 $ 50,000
----------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (cost $50,000). . . . . . 50,000
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 2.6%
Abbey National PLC, London . . . . . . . . . . . . . . . . . . . 25,000 5.110 03/17/97 24,969
Bank of New York . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.500 03/12/97 25,000
Den Danske Bank. . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.500 09/26/96 25,000
Morgan Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.080 02/28/97 14,969
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $89,938). . . . . 89,938
----------
YANKEE CERTIFICATES OF DEPOSIT - 5.2%
Bayerische Hypotheken Bank . . . . . . . . . . . . . . . . . . . 30,000 5.480 10/02/96 30,000
Bayerische Landesbank (a). . . . . . . . . . . . . . . . . . . . 65,000 5.291 01/15/97 64,983
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.210 03/11/97 24,995
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . . . . 42,000 5.730 08/13/97 41,902
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.920 08/28/97 19,996
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $181,876) . . . . . . 181,876
----------
CORPORATE BONDS AND NOTES - 33.9%
AIG Matched Funding Corp. (MTN)(a) . . . . . . . . . . . . . . . 50,000 5.737 01/15/97 50,000
BankAmerica National Trust & Savings Association . . . . . . . . 25,000 5.070 01/29/97 24,994
Beneficial Corp. (a) . . . . . . . . . . . . . . . . . . . . . . 50,000 5.605 01/16/97 49,993
Beneficial Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . 45,000 5.490 11/22/96 45,009
Caterpillar Financial Services (MTN)(a). . . . . . . . . . . . . 10,000 5.715 05/09/97 10,015
CIT Group Holdings, Inc. (MTN)(a). . . . . . . . . . . . . . . . 45,000 5.300 10/30/96 44,992
Colorado National Bank, Denver (MTN)(a). . . . . . . . . . . . . 125,000 5.389 01/15/97 124,986
Comercia Bank, Detroit (MTN)(a). . . . . . . . . . . . . . . . . 25,000 5.394 02/14/97 25,000
Dean Witter Discover & Co. (a) . . . . . . . . . . . . . . . . . 30,000 5.632 05/23/97 30,016
Discover Credit Corp. (MTN). . . . . . . . . . . . . . . . . . . 8,500 7.970 05/07/97 8,617
FCC National Bank, Wilmington. . . . . . . . . . . . . . . . . . 15,000 4.940 02/26/97 14,981
First Chicago Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . 30,000 5.692 03/31/97 30,025
First National Bank of Boston (MTN)(a) . . . . . . . . . . . . . 20,000 5.645 01/29/97 20,000
Fleet National Bank, Providence (a). . . . . . . . . . . . . . . 25,000 5.750 10/30/96 24,999
Ford Motor Credit Co. (MTN)(a) . . . . . . . . . . . . . . . . . 24,625 5.650 02/18/97 24,647
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
General Motors Acceptance Corp. (a). . . . . . . . . . . . . . . $ 10,000 5.805% 12/06/96 $ 10,004
Household Finance Corp. (MTN)(a) . . . . . . . . . . . . . . . . 27,000 5.330 11/22/96 26,995
Household Finance Corp. (MTN)(a) . . . . . . . . . . . . . . . . 55,000 5.412 02/24/97 54,987
Household Finance Corp. (MTN)(a) . . . . . . . . . . . . . . . . 40,000 5.472 06/04/97 40,000
Mellon Bank, Pittsburgh. . . . . . . . . . . . . . . . . . . . . 10,000 5.800 09/25/96 10,001
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . 25,000 4.900 02/13/97 24,988
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . 15,000 5.850 05/09/97 15,000
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . 30,000 5.950 06/06/97 29,989
Norwest Corp. (MTN). . . . . . . . . . . . . . . . . . . . . . . 25,000 4.960 02/20/97 25,000
Old Kent Bank & Trust Co.. . . . . . . . . . . . . . . . . . . . 16,000 7.100 03/07/97 16,166
PNC Bank, Pittsburgh (MTN)(a). . . . . . . . . . . . . . . . . . 50,000 5.210 09/03/96 50,000
PNC Bank, Pittsburgh . . . . . . . . . . . . . . . . . . . . . . 15,000 5.650 09/18/96 15,002
PNC Bank, Pittsburgh (MTN)(a). . . . . . . . . . . . . . . . . . 15,000 5.387 12/20/96 14,998
PNC Bank, Pittsburgh (MTN)(a). . . . . . . . . . . . . . . . . . 25,000 5.325 05/13/97 24,983
Sears Roebuck & Co. (MTN). . . . . . . . . . . . . . . . . . . . 10,000 5.250 02/24/97 9,998
SMM Trust Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 75,000 5.421 12/16/96 74,998
Society Bank (MTN) . . . . . . . . . . . . . . . . . . . . . . . 22,750 6.500 04/25/97 22,857
Society National Bank. . . . . . . . . . . . . . . . . . . . . . 46,000 6.875 10/15/96 46,070
Transamerica Financial Corp. . . . . . . . . . . . . . . . . . . 25,000 6.750 08/15/97 25,182
Wachovia Bank (a). . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.304 01/17/97 49,982
Wachovia Bank (a). . . . . . . . . . . . . . . . . . . . . . . . 18,000 5.582 02/03/97 17,998
Wachovia Bank (a). . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.312 03/03/97 24,991
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . 20,000 5.582 01/28/97 20,000
----------
TOTAL CORPORATE BONDS AND NOTES (cost $1,178,463). . . . . . . . 1,178,463
----------
DOMESTIC COMMERCIAL PAPER - 7.0%
Colgate Palmolive Co.. . . . . . . . . . . . . . . . . . . . . . 20,000 5.340 09/13/96 19,964
Ford Motot Credit Corp.. . . . . . . . . . . . . . . . . . . . . 50,000 5.260 09/25/96 49,825
General Electric Capital Corp. . . . . . . . . . . . . . . . . . 35,000 5.280 09/12/96 34,944
General Electric Capital Corp. . . . . . . . . . . . . . . . . . 50,000 5.310 11/07/96 49,506
Transamerica Finance Group Inc.. . . . . . . . . . . . . . . . . 40,000 5.420 09/13/96 39,928
Transamerica Finance Group Inc.. . . . . . . . . . . . . . . . . 50,000 5.430 10/11/96 49,698
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $243,865). . . . . . . . . 243,865
----------
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN COMMERCIAL PAPER - 6.0%
Caisse d'Amortissement . . . . . . . . . . . . . . . . . . . . . $ 15,000 5.420% 09/24/96 $ 14,948
Caisse d'Amortissement . . . . . . . . . . . . . . . . . . . . . 30,000 5.290 11/21/96 29,643
Den Danske Corp. . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.420 10/02/96 49,767
KFW International Finance, Inc.. . . . . . . . . . . . . . . . . 14,000 5.420 10/17/96 13,903
Westpac Capital Corp.. . . . . . . . . . . . . . . . . . . . . . 25,000 5.330 11/08/96 24,748
Woolwich Building Society. . . . . . . . . . . . . . . . . . . . 75,000 5.430 10/29/96 74,344
----------
TOTAL FOREIGN COMMERCIAL PAPER (cost $207,353) . . . . . . . . . 207,353
----------
EURODOLLAR TIME DEPOSITS - 17.7%
ABN Amro Bank. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.468 09/05/96 50,000
BankAmerica, San Francisco . . . . . . . . . . . . . . . . . . . 50,000 5.330 10/01/96 50,000
Caisse des Depots. . . . . . . . . . . . . . . . . . . . . . . . 100,000 5.281 09/03/96 100,000
Key Bank National Association. . . . . . . . . . . . . . . . . . 90,000 5.312 09/03/96 90,000
Rabobank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 5.312 09/03/96 60,000
Republic National Bank . . . . . . . . . . . . . . . . . . . . . 100,000 5.312 09/03/96 100,000
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . . . . 115,825 5.312 09/03/96 115,825
Union Bank of Switzerland, Grand Cayman. . . . . . . . . . . . . 50,000 5.312 09/03/96 50,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (Cost $615,825) . . . . . . . . . 615,825
----------
UNITED STATES GOVERNMENT AGENCIES - 15.7%
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . 25,000 5.600 06/03/97 24,974
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . 25,000 5.218 09/26/96 24,998
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . 50,000 5.210 09/27/96 49,996
Federal National Mortgage Association (MTN). . . . . . . . . . . 56,950 4.780 02/14/97 56,929
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 62,000 5.240 09/03/96 62,000
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 75,000 5.240 02/21/97 74,976
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 50,000 5.347 03/06/97 49,962
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 70,000 5.251 04/15/97 69,956
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 30,000 5.277 04/17/97 29,986
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 100,000 6.687 09/12/97 99,917
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $543,694). . . . . 543,694
----------
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT TREASURIES - 5.8%
United States Treasury Bills . . . . . . . . . . . . . . . . . . $ 1,400 4.850% 11/14/96 $ 1,386
United States Treasury Notes . . . . . . . . . . . . . . . . . . 115,000 7.500 01/31/97 116,180
United States Treasury Notes . . . . . . . . . . . . . . . . . . 50,000 6.875 02/28/97 50,409
United States Treasury Notes . . . . . . . . . . . . . . . . . . 35,000 6.500 04/30/97 35,193
----------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $203,168). . . . 203,168
----------
TOTAL INVESTMENTS (Amortized Cost $3,314,182) - 95.4%. . . . . . 3,314,182
----------
REPURCHASE AGREEMENTS - 8.0%
Agreement with Union Bank of Switzerland of $281,000
acquired August 30, 1996 at 5.280% to be repurchased at
$281,082 on September 3, 1996, collateralized by:
$293,069 United States Treasury Notes,
5.240% due 01/30/97 valued at $286,542. . . . . . . . . . 281,000
----------
TOTAL REPURCHASE AGREEMENTS (cost $281,000). . . . . . . . . . . 281,000
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $3,595,182)(b) - 103.4%. . . . . . . . . . . . . . . . . . 3,595,182
OTHER ASSETS AND LIABILITIES, NET - (3.4%) . . . . . . . . . . . (119,773)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . $3,475,409
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
ABBREVIATIONS:
MTN - Medium Term Note.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . $3,314,182,220
Repurchase agreements (cost $281,000,000)(Note 2). . . . . . . . . . . . . . . . . . 281,000,000
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,476,362
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,793
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,617,691,375
LIABILITIES
Payables (Note 4):
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,676,439
Investments purchased . . . . . . . . . . . . . . . . . . . . . . 125,184,375
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 1,154,501
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 267,427
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,282,742
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,475,408,633
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (3,411,808)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,478,820
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,475,341,621
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,475,408,633
--------------
--------------
Net asset value, offering and redemption price per share,
($3,475,408,633 divided by 3,478,820,441 shares of $.001,
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191,463,828
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . $ 8,559,529
Administrative fees . . . . . . . . . . . . . . . . . . . . 996,454
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . 654,361
Distribution fees . . . . . . . . . . . . . . . . . . . . . 817,506
Professional fees . . . . . . . . . . . . . . . . . . . . . 44,252
Registration fees . . . . . . . . . . . . . . . . . . . . . 287,890
Shareholder servicing fees. . . . . . . . . . . . . . . . . 1,268,824
Transfer agent fees . . . . . . . . . . . . . . . . . . . . 311,187
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . 166,149
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 153,948
-----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,260,100
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,203,728
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . 753,358
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . $ 178,957,086
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 178,203,728 $ 149,922,892
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . 753,358 576,551
--------------- ---------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 178,957,086 150,499,443
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . (178,405,621) (149,922,892)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . 721,962,326 (268,477,535)
--------------- ---------------
Increase (Decrease) in Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 722,513,791 (267,900,984)
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,752,894,842 3,020,795,826
--------------- ---------------
Net Assets at End of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,475,408,633 $ 2,752,894,842
--------------- ---------------
--------------- ---------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,284,105,177 31,138,940,091
Fund shares issued to shareholders in reinvestments of distributions . . . . . . . . . 161,571,084 137,268,575
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,723,713,935) (31,544,686,201)
--------------- ---------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721,962,326 (268,477,535)
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year
ended August 31 and other performance information derived from the financial statements.
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .0524 .0538 .0330 .0320 .0458
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . (.0524) (.0538) (.0330) (.0320) (.0458)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . 5.36 5.52 3.35 3.24 4.68
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets . . . .39 .39 .36 .33 .35
Operating expenses, gross, to average net assets . . .39 .39 .36 .38 .35
Net investment income to average net assets . . . . 5.20 5.37 3.33 3.20 4.40
Net assets, end of year ($000 omitted) . . . . . . . 3,475,409 2,752,895 3,020,796 2,502,483 4,263,057
Per share amount of fees waived ($ omitted). . . . . -- -- -- .0005 --
</TABLE>
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Money Market Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value. The
Investment Company has available Class B and Class C shares of the Fund as
of August 15, 1994; however, shares have not been offered on these classes
as of the date of these financial statements.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
provision was required. At August 31, 1996, the Fund had a net tax basis
capital loss carryover of $3,411,808, which may be applied against any
realized net taxable gains in each succeeding year or until its expiration
date of August 31, 2003.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Fund aggregated to
$83,334,886,986, $338,329,487 and $82,765,923,000, respectively.
For the year ended August 31, 1996, purchases, sales, and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $1,533,604,573, $487,786,368 and $774,406,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $1,039,682, $113,571, and $115,571 from the
Adviser, SSBSI, and Commercial Banking, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
and all payments thereunder at any time. The Fund will not be obligated to
reimburse the Distributor for carryover expenses subsequent to the
Distribution Plan's termination or noncontinuance. There were no carryover
expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 770,271
Administration fees 92,841
Custodian fees 58,267
Distribution fees 66,853
Shareholder servicing fees 77,323
Transfer agent fees 44,371
Trustees' fees 44,575
-----------
$ 1,154,501
-----------
-----------
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
US GOVERNMENT MONEY MARKET FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . . . . . 19
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC., IS THE
DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual
report for the fiscal year ended August 31, 1996. Over the past
year, the Series has grown to include fourteen portfolios covering
a broad range of investment strategies from the far corners of the
emerging markets countries to the domestic stock and bond markets.
This report contains summaries on the market environment, performance
and financial statements for the US Government Money Market Fund.
I hope you find this information to be a useful tool as you review
your overall investment strategy.
Over the past fiscal year, the Board of Trustees of the Seven
Seas Series of Funds approved a name change from the Seven
Seas Series Funds to the SSgA Funds. In the coming year you
will notice the new logo and name on all fund materials. SSgA is the
investment management business of State Street Bank and Trust Company,
a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale.
Creative thinking combined with quantitative tools distinguishes SSgA's
investment management style. These vital strengths are brought to
life through our proprietary global information network-a system
of process, people and technology that led us to become one of the
most efficient, flexible and responsive firms in the field of investment
management.
The Seven Seas Series of Funds opened an additional fund in fiscal
1996. The Seven Seas Series Bond Market Fund was opened on February
7, 1996. It's investment objective seeks to maximize total return
by investing in fixed income securities, including, but not limited
to, those represented by the Lehman Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors,
which serves as the investment adviser to the Fund, I would like
to thank you for choosing The Seven Seas Series Fund and look
forward to continuing to serve your investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the US Government Money
Market Fund since June 1994. Ms. Hatfield has been with State Street since 1986
and has managed several money market funds since 1987. There are seven other
portfolio managers working with Ms. Hatfield in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: Obligations of the US Government, its Agencies or
Instrumentalities.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[Graph]
DATES US GOV'T MONEY MARKET SALOMON BROTHERS 3-MONTH T-BILL INDEX**
Inception* $10,000 $10,000
1991 $10,306 $10,293
1992 $10,769 $10,731
1993 $11,100 $11,061
1994 $11,466 $11,454
1995 $12,083 $12,093
1996 $12,720 $12,740
PERFORMANCE REVIEW
In the last year, fixed income yields held low through February 1996 by
recessionary fears, gave way to higher bond yields fueled by better than
expected economic growth in the second half of the year. Last December and
January, two interest rate moves of 25 basis points each brought the Fed
Funds' target rate down to 5.25%, where it remained for the rest of the year.
Despite this relatively quiet Fed activity, short-term interest rates traded
in a wide range. One- and three-month LIBOR (London Interbank Offering Rate)
dropped close to 70 basis points before rising in March. One year LIBOR fell
110 basis points to 4.99% in February, but closed the year at 6.31%, 20 basis
points higher than it started. Similarly, one-year Treasuries traded from
5.97% down to 4.79% and back up to 5.91% by the end of August. These dramatic
shifts in short-term interest rates reflected the market's anticipation of
Federal Reserve moves, which proved more volatile than the actual Fed
activity.
SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- ----------- ------------
1 Year $ 10,527 5.27%
5 Years $ 12,343 4.30%
Inception $ 12,720 4.47%+
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- ----------- ------------
1 Year $ 10,535 5.35%
5 Years $ 12,378 4.36%
Inception $ 12,740 4.50%+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The Fund had a one year return of 5.27% for the fiscal year ended August 31,
1996 as compared to the Salomon Brothers 3-Month Treasury Index of 5.35%.
This return, while slightly lagging the Index, is net of fund operating
expenses, whereas Index returns do not include fees or expenses of any kind.
The Salomon Brothers Treasury Bill Index was chosen as a standard, well-known
representation of money market returns.
PORTFOLIO HIGHLIGHTS
In fiscal 1996, the Fund sought and received an AAAm rating--the highest
available from Standard & Poor's Corporation. This rating reflects the
investment quality of shares of the mutual fund which invest in short-term
fixed income obligations. The Standard & Poor's Corporation assigns ratings
across a wide spectrum of comparable funds. In awarding its ratings, Standard
& Poor's often require investment guidelines that may, in certain instances,
be more conservative than otherwise allowed a fund under applicable law.
The Fund was managed consistently with its objective of providing safety of
principal and liquidity by investing in high quality investments and
providing competitive returns. Fund investments included US Government
Treasuries and Agencies, and floating rate notes, based on relative value in
the marketplace. A large percentage of the Fund continues to be invested in
floating rate notes using standard money market indices such as one-month
LIBOR, three-month LIBOR, three-month Treasury Bills and the Fed Funds rate.
These securities allow for periodic resetting of rates at attractive levels
relative to LIBOR, giving the Fund the ability to respond more rapidly to
changing interest rates. As market expectations shifted from expecting the
Fed to ease to expecting the Fed to tighten, the managers let the average
days to maturity of the portfolio to roll down from 57 days to 48 days over
the course of the year. The average maturity of the portfolio at year-end was
48 days.
Until such time that significant changes take place, management of the Fund
will continue to take advantage of the roll-down available in the curve,
while any extension will be made during sell-offs in the market.
-----------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on March 1, 1991. Index comparison also
began on March 1, 1988.
**Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures,
all proceeds are rolled over or reinvested in a new 3-month bill.
The income used to calculate the monthly return is derived by subtracting
the original amount invested from the maturity value. The yield curve
average is the basis for calculating the return on the Index. The Index
is rebalanced monthly by market capitalization.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and
capital gains. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than when
purchased. Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the
US Government. There can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series US Government Money Market
Fund (the "Fund"), as of August 31, 1996, and the related statement of
operations for the fiscal year then ended, the statements of changes in net
assets for each of the two fiscal years in the period then ended and the
financial highlights for each of the five fiscal years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five
fiscal years in the period then ended in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 59.3%
Federal Farm Credit Bank (a) . . . . . . . . . . . . . . . . . . $ 20,000 5.450% 09/16/96 $ 20,000
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . 30,000 5.400 11/08/96 29,991
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . 6,000 5.550 05/02/97 5,995
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . 10,000 5.600 06/03/97 9,989
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . 30,000 5.238 09/20/96 29,998
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . 20,000 5.211 09/27/96 19,999
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . 10,000 5.372 10/02/96 9,999
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . 5,000 5.610 06/05/97 4,992
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . 5,000 6.440 07/25/97 5,024
Federal Home Loan Bank Discount Notes. . . . . . . . . . . . . . 11,735 5.220 09/09/96 11,721
Federal Home Loan Mortgage Corp. . . . . . . . . . . . . . . . . 15,000 5.640 08/28/97 14,963
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . 20,000 5.220 09/11/96 19,971
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . 6,390 5.220 09/12/96 6,380
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . 5,815 5.220 09/30/96 5,791
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . 10,000 5.290 11/04/96 9,906
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . 15,000 5.180 11/22/96 14,823
Federal National Mortgage Association (a). . . . . . . . . . . . 10,000 5.470 06/20/97 9,998
Federal National Mortgage Association (a). . . . . . . . . . . . 20,000 5.371 08/07/97 19,985
Federal National Mortgage Association (a). . . . . . . . . . . . 30,000 6.688 09/12/97 29,975
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 15,000 5.180 10/15/96 14,999
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 20,000 5.240 11/20/96 19,997
Federal National Mortgage Association (MTN). . . . . . . . . . . 10,000 4.780 02/14/97 9,996
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 10,000 5.850 02/14/97 10,020
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 20,000 5.240 02/21/97 19,993
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 10,000 5.348 03/06/97 9,992
Federal National Mortgage Association (MTN)(a) . . . . . . . . . 15,000 5.370 03/28/97 14,991
Federal National Mortgage Association Discount Notes . . . . . . 15,000 5.220 09/20/96 14,959
Student Loan Marketing Association (a) . . . . . . . . . . . . . 11,000 5.585 11/27/96 11,007
---------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $405,454). . . . . 405,454
---------
UNITED STATES GOVERNMENT TREASURIES - 9.3% . . . . . . . . . . .
United States Treasury Bills . . . . . . . . . . . . . . . . . . 20,000 5.245 09/17/96 19,959
United States Treasury Notes . . . . . . . . . . . . . . . . . . 25,000 7.500 01/31/97 25,252
United States Treasury Notes . . . . . . . . . . . . . . . . . . 10,000 6.875 02/28/97 10,081
United States Treasury Notes . . . . . . . . . . . . . . . . . . 5,000 6.625 03/31/97 5,031
United States Treasury Notes . . . . . . . . . . . . . . . . . . 3,000 6.500 05/15/97 3,015
---------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $63,338) . . . . 63,338
---------
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINTUED
August 31, 1996
VALUE
(000)
---------
TOTAL INVESTMENTS (amortized cost $468,792) - 68.6%. . . . . $ 468,792
---------
REPURCHASE AGREEMENTS - 39.5%
Agreement with Bear Sterns of $95,125
acquired August 30, 1996 at 5.18% to be repurchased at
$95,180 on September 3, 1996, collateralized by:
$15,000 United States Treasury Bonds,
6.000% due 02/15/26 valued at $12,911, and by
$37,790 United States Treasury Notes,
5.875% due 03/31/99 valued at $38,204, and by
$46,660 United States Treasury Notes,
5.750% due 10/31/00 valued at $45,967. . . . . . . . . 95,125
Agreement with Union Bank of Switzerland of $175,000
acquired August 30, 1996 at 5.28% to be repurchased at
$175,103 on September 3, 1996, collateralized by:
$177,172 United States Treasury Notes,
5.625% due 06/30/97 valued at $178,464 . . . . . . . . 175,000
---------
TOTAL REPURCHASE AGREEMENTS (cost $270,125). . . . . . . . . 270,125
---------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $738,917)(b) - 108.1%. . . . . . . . . . . . . . . . . 738,917
OTHER ASSETS AND LIABILITIES, NET - (8.1)% . . . . . . . . . (55,707)
---------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . $ 683,210
---------
---------
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
ABBREVIATIONS:
MTN - Medium Term Note.
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . $ 468,791,703
Repurchase agreements (cost $270,125,000)(Note 2). . . . . . . . . . . . . . . . . . 270,125,000
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,712,910
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,075
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,635,688
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,101,154
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . 54,993,402
Accrued fees to affiliates and trustees. . . . . . . . . . . . . . 236,758
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 94,257
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,425,571
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 683,210,117
-------------
-------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (37,963)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 683,248
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682,564,832
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 683,210,117
-------------
-------------
Net asset value, offering and redemption price per share
($683,210,117 divided by 683,248,080 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . $1.00
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,166,934
------------
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,546,062
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . 179,304
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 156,230
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . 106,509
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 20,028
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . 128,278
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . 241,584
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . 46,305
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 31,219
Amortization of deferred organization expenses . . . . . . . . . . 1,472
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,808
------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,476,799
------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,690,135
------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . 119,491
------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . $ 31,809,626
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,690,135 $ 20,841,782
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . 119,491 101,628
-------------- --------------
Net increase in net assets resulting from operations . . . . . . . . . . . 31,809,626 20,943,410
Distributions to shareholders from net investment income . . . . . . . . . (31,688,771) (20,841,782)
Increase in net assets from Fund share transactions. . . . . . . . . . . . 192,951,714 238,870,688
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 193,072,569 238,972,316
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . 490,137,548 251,165,232
-------------- --------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . $ 683,210,117 $ 490,137,548
-------------- --------------
-------------- --------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,802,329,508 5,109,979,137
Fund shares issued to shareholders in reinvestments of distributions . . . 25,091,214 13,741,104
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,634,469,008) (4,884,849,553)
-------------- --------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . 192,951,714 238,870,688
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year
ended August 31 and other performance information derived from the financial statements.
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income. . . . . . . . . . . . . . . . . . . . .0515 .0528 .0324 .0304 .0441
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net Investment Income. . . . . . . . . . . . . . . . . . . . . (.0515) (.0528) (.0324) (.0304) (.0441)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . 5.27 5.38 3.30 3.08 4.49
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets . . . . . . . .40 .42 .38 .39 .41
Operating expenses, gross, to average net assets. . . . . . .40 .42 .39 .46 .42
Net investment income to average net assets . . . . . . . . 5.12 5.37 3.27 3.04 4.26
Net assets, end of year ($000 omitted) . . . . . . . . . . . 683,210 490,138 251,165 137,136 156,707
Per share amount of fees waived ($ omitted). . . . . . . . . -- -- -- -- .0001
Per share amount of fees
reimbursed ($ omitted) . . . . . . . . . . . . . . . . . . -- -- .0001 .0007 --
</TABLE>
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series US Government Money Market Fund (the "Fund"). The
Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value. The Investment Company has available Class B and Class C
shares of the Fund as of August 15, 1994; however, shares have not been
offered on these classes as of the date of these financial statements.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement, to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required. At August
31, 1996, the Fund had a net tax basis capital loss carryover of $37,963,
which may be
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
applied against any realized net taxable gains in each succeeding year or
until its expiration date of August 31, 2003.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and were being amortized over 60 months on a straight-line
basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases,
sales, and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $1,213,731,214, $69,622,504 and
$1,029,656,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
ADMINISTRATOR: The Investment Company has an administration agreement
with Frank Russell Investment Management Company (the "Administrator")
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items.
The Investment Company pays the Administrator the following fees for
the services supplied by the Administrator pursuant to the
Administration Agreement: (i) an annual fee, payable monthly on a pro
rata basis, based on the following percentages of the average daily net
assets of all domestic funds: $0 up to and including $500 million -
.06%; over $500 million to and including $1 billion - .05%; over $1
billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and
(iv) start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has
entered into a Distribution Agreement with Russell Fund Distributors
(the "Distributor") which is a wholly-owned subsidiary of the
Administrator to promote and offer shares of the Investment Company.
The Distributor may have entered into sub-distribution agreements with
other non-related parties. The amounts paid to the Distributor are
included in the accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the
Investment Company is authorized to make payments to the Distributor,
or any Shareholder Servicing Agent, as defined in the Plan, for
providing distribution and marketing services, for furnishing
assistance to investors on an ongoing basis, and for the reimbursement
of direct out-of-pocket expenses incurred by the Distributor in
connection with the distribution and marketing of shares of the
Investment Company and the servicing of investor accounts.
The Fund has entered into service agreements with the Adviser, State
Street Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of
the Adviser, and the Adviser's Metropolitan Division of Commercial
Banking ("Commercial Banking")(collectively the "Agents"), as well as
other non-related party service providers. For these services, the Fund
pays .025%, .175%, and .175% to the Adviser, SSBSI, and Commercial
Banking, respectively based upon the average daily value of all Fund
shares held by or for customers of these Agents. For the year ended
August 31, 1996, the Fund incurred expenses of $160,340 and $81,244
from the Adviser and Commercial Banking, respectively. The Fund did not
incur any expenses from SSBSI during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual
basis. The shareholder servicing payments shall not exceed .20% of the
average daily value of net assets on an annual basis. Any payments that
exceed the maximum amount of allowable reimbursement may be carried
forward for two years following the year in which the expenditure was
incurred so long as the plan is in effect. The Fund's responsibility
for any such expenses carried forward shall terminate at the end of two
years following the year in which the expenditure was incurred. The
Trustees or a majority of the Fund's shareholders have the right,
however, to terminate the Distribution Plan and all payments thereunder
at any time. The Fund will not be obligated to reimburse the
Distributor for
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
carryover expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000
for attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE AS
FOLLOWS:
Advisory fees $ 155,631
Administration fees 17,899
Custodian fees 14,631
Distribution fees 14,312
Shareholder servicing fees 16,753
Transfer agent fees 7,607
Trustees' fees 9,925
---------
$ 236,758
---------
---------
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US GOVERNMENT MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
MATRIX EQUITY FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 23
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES MATRIX EQUITY FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Matrix Equity Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA FUNDS.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MATRIX EQUITY FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Douglas Holmes, Managing Director, has been the portfolio manager primarily
responsible for investment decisions regarding the Matrix Equity Fund since its
inception in May 1992. Mr. Holmes has been with State Street since 1984 and has
managed State Street's matrix portfolios for the past six years. There are four
other portfolio managers working with Mr. Holmes in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES MATRIX EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide total returns that exceed over time the S&P 500 Composite
Index.
INVESTS IN: Equity securities.
STRATEGY: Fund Managers concentrate investments in what they view as the best
opportunities in our model's universe of approximately 1,000 companies. At the
end of the period, the Fund held 154 stocks with market capitalizations ranging
from $1.5 billion to $50 billion. The Fund's mean market capitalization was
$19.8 billion.
[Graph]
DATES MATRIX EQUITY FUND S&P 500-Registered Trademark- INDEX**
Inception* $10,000 $10,000
1992 $9,780 $10,093
1993 $12,152 $11,628
1994 $12,687 $12,264
1995 $15,074 $14,895
1996 $17,285 $17,671
SEVEN SEAS SERIES MATRIX EQUITY FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
------------- ------------- -------------
1 Year $ 11,467 14.67%
Inception $ 17,285 13.50%+
STANDARD & POOR'S-Registered Trademark- 500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
------------- ------------- -------------
1 Year $ 11,864 18.64%
Inception $ 17,671 14.04%+
SEE RELATED NOTES ON PAGE 7.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1996, the Seven Seas Series Matrix Equity
Fund had a total return of 14.67% as compared to the S&P 500 Index results of
18.64%. The S&P 500 Index outperformed the Fund primarily due to the large cap
bias in the benchmark not mirrored by the Fund in the fourth calendar quarter
ended December 31, 1995. However, the Fund's return remained strong because its
investment in technology stocks proved successful due to the continued strength
of that sector. Additionally, performance of the Fund can lag the Index due to
operating expenses that are not present in an Index.
PORTFOLIO HIGHLIGHTS
The market rally of 1995 continued through the calendar year end and into early
1996. Large capitalization stocks persisted to be the driving force in the
market over the last year followed closely by small capitalization issues. In
the S&P 500 Index, the healthcare sector was the best performing sector over the
past fiscal year. The US equity
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MATRIX EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
market pulled back slightly in the second quarter from its strong first quarter
performance. Inflationary concerns in the second quarter caused a slowdown in
the US equity markets as many investors feared a rate hike from the Fed to slow
the economy. Late in May, market volatility grew as evidenced by the triggering
of the up- and downside Dow Jones Industrial Average "collars" on an intraday
basis. This collar is designed to reduce volatility in the market by inhibiting
program trading when the Dow moves more than 50 points. Even with the sharp
market decline in the last few days of June, the S&P 500 managed to post a
return of +3.89% for the second quarter. As of August 31, 1996, the S&P 500
Index fell 2.8% as a result of market correction in July.
The matrix process ranks securities on both value and growth measures. The
combination of these rankings creates an expected return historically for each
stock. The Manager believes this expected return has been an accurate predictor
of returns which allowed the Fund to seek to outperform the S&P 500 Index after
all costs.
In summary, the past year has demonstrated the benefit of using both growth and
value measures to select securities as well as maintaining characteristics and
industry weights similar to those of the S&P 500 Index. The Fund has
participated in the continued favorable performance of the market as a whole and
it has been able to extract excess returns in areas, such as healthcare and
technology, where we exhibit the greatest stock selection ability.
The Fund's ten largest equity holdings comprised 21.5% of the portfolio. Four of
the top ten equity holdings were in the consumer basics sector, while the next
largest concentrations within the top ten equity holdings were represented by
energy and finance-related sectors, respectively.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Dayton Hudson Corp. 3.0%
Exxon Corp. 2.7
Bristol-Myers Squibb Co. 2.3
BankAmerica Corp. 2.1
PepsiCo, Inc. 2.0
Merck & Co., Inc. 1.9
Becton, Dickinson & Co. 1.9
Comerica, Inc. 1.9
Ameritech Corp. 1.9
Mobil Corp. 1.8
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on May 4, 1992. Index comparison
began May 1, 1992.
**The Standard & Poor's-Registered Trademark- 500 Composite Stock Index
is composed of 500 common stocks which are chosen by Standard and Poor's
Corporation to best capture the price performance of a large
cross-section of the US publicly traded stock market. The Index is
structured to approximate the general distribution of industries in the
US economy.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Matrix Equity Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the four fiscal years in the period then ended and for the period May 4, 1992
(commencement of operations) to August 31, 1992. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the four fiscal
years in the period then ended and for the period May 4, 1992 (commencement of
operations) to August 31, 1992 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 99.0%
BASIC INDUSTRIES - 4.5%
Caraustar Industries, Inc. 31,100 $ 925
Dow Chemical Co. 50,600 4,035
du Pont (E.I.) de Nemours & Co. 7,000 575
Fort Howard Corp. New (a) 25,100 593
International Specialty Products 400 4
Kimberly-Clark Corp. 8,200 643
Lubrizol Corp. 300 9
Mallinckrodt Group, Inc. 9,300 377
Mead Corp. 25,500 1,460
NL Industries, Inc. 700 8
P.H. Glatfelter Co. 26,400 482
PPG Industries, Inc. 41,800 2,063
Wellman, Inc. 25,700 530
---------
11,704
---------
CAPITAL GOODS - 4.3%
Atmel Corp. (a) 25,000 644
Case Corp. 72,600 3,303
Caterpillar, Inc. 25,100 1,729
General Electric Co. 33,500 2,785
Johnson Controls, Inc. 29,700 2,094
Parker-Hannifin Corp. 19,400 756
---------
11,311
---------
CONSUMER BASICS - 21.1%
American Home Products Corp. 48,400 2,868
Amgen, Inc. (a) 28,600 1,666
Becton, Dickinson & Co. 120,800 4,938
Bristol-Myers Squibb Co. 67,100 5,888
Clorox Co. 20,400 1,910
Coca-Cola Co. (The) 55,400 2,770
ConAgra, Inc. 49,000 2,064
Eckerd Corp. 55,600 1,362
General Nutrition Companies, Inc. 67,400 986
Genzyme Corp. 31,700 757
Great Atlantic & Pacific Tea Co., Inc. 40,700 1,089
Heinz (H.J.) Co. 53,900 1,698
Hershey Foods Corp. 30,900 2,692
Interstate Bakeries Corp. 3,100 94
Johnson & Johnson 6,200 305
Lincare Holdings, Inc. (a) 600 22
Merck & Co., Inc. 75,400 4,948
OrNda Healthcorp (a) 72,700 1,872
PepsiCo, Inc. 180,500 5,189
Philip Morris Cos., Inc. 37,800 3,393
Safeway, Inc. 1,900 69
Schering-Plough Corp. 56,200 3,140
Tupperware Corp. (a) 1,000 44
Vons Cos., Inc. (a) 48,400 2,142
Warner-Lambert Co. 31,500 1,874
Watson Pharmaceuticals, Inc. (a) 25,200 718
Wellpoint Health Networks, Inc.
Class A 27,613 855
---------
55,353
---------
CONSUMER DURABLES - 2.9%
Arvin Industries, Inc. 24,600 566
Callaway Golf Co. 15,800 521
Chrysler Corp. 78,000 2,272
Ford Motor Co. 97,700 3,273
Maytag Corp. 50,000 1,006
---------
7,638
---------
CONSUMER NON-DURABLES - 6.3%
Avon Products, Inc. 25,700 1,230
Consolidated Stores Corp. (a) 40,400 1,535
Dayton Hudson Corp. 228,000 7,866
Fruit of the Loom, Inc. Class A (a) 82,600 2,292
Ross Stores, Inc. 1,800 69
Russell Corp. 37,300 1,194
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
TJX Cos., Inc. 68,100 $ 2,179
V.F. Corp. 3,500 207
---------
16,572
---------
CONSUMER SERVICES - 2.5%
AMR Corp. (a) 14,700 1,205
King World Productions, Inc. (a) 78,600 2,771
MGM Grand, Inc. (a) 35,300 1,333
Northwest Airlines Corp. Class A (a) 11,600 436
UAL Corp. 18,900 907
---------
6,652
---------
ENERGY - 9.7%
Amoco Corp. 21,700 1,497
Apache Corp. 26,500 778
Atlantic Richfield Co. 27,810 3,247
Burlington Resources, Inc. 20,600 878
Cooper Cameron Corp. (a) 8,800 464
Exxon Corp. 86,200 7,015
Halliburton Co. 1,100 58
Mobil Corp. 40,600 4,578
Occidental Petroleum Corp. 8,600 200
Smith International, Inc. (a) 19,100 664
Sonat Offshore Drilling, Inc. 45,400 2,480
Texaco, Inc. 23,200 2,059
USX-Marathon Group 66,800 1,394
---------
25,312
---------
FINANCE - 13.1%
Advanta Corp. Class A 18,000 878
BankAmerica Corp. 71,900 5,572
Barnett Banks, Inc. 7,600 499
Bear Stearns Cos., Inc. 188,065 4,396
Charter One Financial, Inc. 9,700 369
Chase Manhattan Corp. 8,400 625
CIGNA Corp. 16,400 1,904
Comerica, Inc. 100,600 4,904
Donaldson, Lufkin & Jenrette, Inc. 11,100 351
Edwards (A.G.), Inc. 62,500 1,750
FINOVA Group, Inc. 2,400 132
Greenpoint Financial Corp. 7,900 281
Lehman Brothers Holdings, Inc. 2,300 49
Mercury General Corp. 20,100 905
Merrill Lynch & Co., Inc. 3,900 239
Morgan (J.P.) & Co., Inc. 38,400 3,365
NationsBank Corp. 52,200 4,444
Old Republic International Corp. 13,200 294
Progressive Corp. 9,300 506
Southern National Corp. 43,600 1,362
SouthTrust Corp. 17,300 510
Student Loan Marketing Association 13,300 978
---------
34,313
---------
GENERAL BUSINESS - 3.4%
Belo (A.H.) Corp. Class A 64,000 2,568
Media General, Inc. Class A 27,600 859
SBC Communications, Inc. 48,700 2,271
Tribune Co. 11,500 827
Washington Post Co. Class B 7,600 2,457
---------
8,982
---------
SHELTER - 0.8%
Georgia Pacific Corp. 25,100 1,867
USG Corp. (a) 6,500 185
---------
2,052
---------
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
TECHNOLOGY - 16.5%
Ascend Communications, Inc. 80,200 $ 4,200
BMC Software, Inc. (a) 2,500 186
Cadence Design Systems, Inc. 73,350 2,173
COMPAQ Computer Corp. (a) 9,000 510
Computer Associates
International, Inc. 58,500 3,071
Compuware Corp. (a) 62,100 2,670
Dell Computer Corp. 46,000 3,082
Gateway 2000, Inc. (a) 84,600 3,775
General Dynamics Corp. 2,700 173
Honeywell, Inc. 51,700 3,005
International Rectifier Corp. 14,100 270
Komag, Inc. 13,000 271
McDonnell Douglas Corp. 64,800 3,248
MEMC Electronic Materials, Inc. (a) 51,000 1,798
Northrop Grumman Corp. 200 14
SCI Systems, Inc. (a) 1,800 80
Softkey International, Inc. (a) 177,200 3,079
Storage Technology Corp. (a) 115,900 4,390
Tektronix, Inc. 117,600 4,557
Western Digital Corp. (a) 76,400 2,685
---------
43,237
---------
TRANSPORTATION - 1.2%
CSX Corp. 27,500 1,392
Norfolk Southern Corp. 3,300 275
Tidewater, Inc. 34,400 1,320
---------
2,987
---------
UTILITIES - 12.7%
360 Communications Co. (a) 14,100 337
Ameritech Corp. 93,800 4,842
AT&T Corp. 36,800 1,932
Bell Atlantic Corp. 4,600 259
BellSouth Corp. 72,000 2,610
Boston Edison Co. 10,100 234
Central & Southwest Corp. 9,100 240
Century Telephone Enterprises, Inc. 45,700 1,548
Coastal Corp. 3,600 143
Consolidated Edison Co. 90,000 2,351
Consolidated Natural Gas Co. 12,200 663
DQE, Inc. 50,300 1,396
El Paso Natural Gas Co. 53,700 2,235
Entergy Corp. 19,700 500
GTE Corp. 44,600 1,756
Long Island Lighting Co. 112,400 1,939
National Fuel & Gas Co. 22,200 821
NYNEX Corp. 44,400 1,915
Ohio Edison Co. 47,700 1,002
Pacific Telesis Group 46,100 1,492
Southern New England
Telecommunications Corp. 47,100 1,796
Telephone & Data Systems, Inc. 7,700 328
Texas Utilities Co. 14,300 586
Unicom Corp. 500 12
Williams Cos. (The) 45,200 2,254
---------
33,191
---------
TOTAL COMMON STOCKS
(cost $236,563) 259,304
---------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 0.8%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 411 411
Valiant Money Market Fund
Class A (b) 1,555 1,555
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,966) 1,966
---------
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
MARKET
VALUE
(000)
---------
TOTAL INVESTMENTS
(identified cost $238,529)(c) - 99.8% $ 261,270
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 618
---------
NET ASSETS - 100.0% $ 261,888
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial
statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $238,529,022)(Note 2) . . . . . . . . . $ 261,269,833
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527,727
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,480
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,139
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . 2,683
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,134,862
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . $ 26,822
Accrued fees to affiliates and trustees. . . . . . . . . . 181,715
Other accrued expenses . . . . . . . . . . . . . . . . . . 38,260
---------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,797
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,888,065
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . $ 1,147,797
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . 16,401,666
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . 22,740,811
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . 18,535
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 221,579,256
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,888,065
--------------
--------------
Net asset value, offering and redemption price per share
($261,888,065 divided by 18,535,480 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . $14.13
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,656,976
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,728
--------------
Total Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,667,704
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,755,268
Administrative fees. . . . . . . . . . . . . . . . . . . . . . 73,095
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 73,350
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . 103,500
Professional fees. . . . . . . . . . . . . . . . . . . . . . . 19,580
Registration fees. . . . . . . . . . . . . . . . . . . . . . . 40,591
Shareholder servicing fees . . . . . . . . . . . . . . . . . . 82,427
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . 252,084
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . 11,059
Amortization of deferred organization expenses . . . . . . . . 4,011
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 18,389
--------------
Expenses before waiver . . . . . . . . . . . . . . . . . . . . 2,433,354
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . (877,634)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,555,720
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,111,984
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . 24,526,130
Net change in unrealized appreciation or depreciation of investments . . . . . . . 2,855,735
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 27,381,865
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . $ 31,493,849
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 4,111,984 $ 3,591,635
Net realized gain (loss) from investments . . . . . . . . . . . . . 24,526,130 14,350,812
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . 2,855,735 12,642,981
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . . 31,493,849 30,585,428
Distributions to shareholders:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . (3,841,381) (3,400,221)
Net realized gain on investments. . . . . . . . . . . . . . . . . . (21,256,519) (672,007)
Increase (decrease) in net assets from Fund share transactions . . . . 57,151,504 41,062,973
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 63,547,453 67,576,173
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 198,340,612 130,764,439
-------------- --------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$1,147,797 and $877,194, respectively). . . . . . . . . . . . . . . $ 261,888,065 $ 198,340,612
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . 7,991,136 $ 108,492,783 6,774,979 $ 84,324,212
Fund shares issued to shareholders
in reinvestments of distributions . . . 1,766,096 23,537,447 306,609 3,699,510
Fund shares redeemed . . . . . . . . . . . (5,455,654) (74,878,726) (3,687,136) (46,960,749)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . . . 4,301,578 $ 57,151,504 3,394,452 $ 41,062,973
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994 1993 1992*
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 13.93 $ 12.06 $ 11.95 $ 9.78 $ 10.00
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . .24 .28 .24 .18 .05
Net realized and unrealized
gain (loss) on investments . . . . . . . . . . . 1.64 1.93 .28 2.17 (.27)
----------- ----------- ----------- ----------- -----------
Total Income From Investment Operations . . . . . . 1.88 2.21 .52 2.35 (.22)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . (.24) (.28) (.23) (.18) --
Net realized gain on investments. . . . . . . . . . (1.44) (.06) (.09) -- --
In excess of net realized gain on investments . . . -- -- (.09) -- --
----------- ----------- ----------- ----------- -----------
Total Distributions . . . . . . . . . . . . . . . . (1.68) (.34) (.41) (.18) --
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 14.13 $ 13.93 $ 12.06 $ 11.95 $ 9.78
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . 14.67 18.81 4.41 24.24 (2.20)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
net assets (b)(c) . . . . . . . . . . . . . . . .66 .68 .58 .60 .18
Operating expenses, gross, to average
net assets (b)(c) . . . . . . . . . . . . . . . 1.04 1.06 .96 1.25 1.90
Net investment income to average net assets (b) . . 1.76 2.25 2.16 2.13 2.69
Portfolio turnover (b). . . . . . . . . . . . . . . 150.68 129.98 127.20 57.65 None
Net assets, end of year ($000 omitted). . . . . . . 261,888 198,341 130,764 62,549 12,408
Per share amount of fees waived ($ omitted)(c). . . .0510 .0466 .0410 .0314 .0112
Per share amount of fees reimbursed ($ omitted) . . -- -- -- .0225 .0202
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . .0404 N/A N/A N/A N/A
</TABLE>
* For the period May 4, 1992 (commencement of operations) to August 31, 1992.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1992 are annualized.
(c) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Matrix Equity Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 238,534,842 $ 28,119,434 $ (5,384,443) $ 22,734,991
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in foreign-denominated investments, and certain securities sold
at a loss. Accordingly, the Fund may periodically make reclassifications
among certain of its capital accounts without impacting its net asset
value.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $380,168,784 and $339,628,425, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the year ended August 31,
1996, the Adviser voluntarily agreed to waive one-half of its advisory fee
to the Fund. The Investment Company also has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. During the year ended August 31, 1996, the Fund paid $64,028 to
the Distributor in addition to other amounts paid to non-related party
distributors.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $80,761 and $1,666 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated brokerage dealer of the Fund's
Adviser. The commissions paid to SSBSI were $143,583 for the year ended
August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
$1,000 for attending the annual audit committee meeting, and reimbursement
for out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 84,129
Administration fees 11,446
Custodian fees 10,948
Distribution fees 9,656
Shareholder servicing fees 10,730
Transfer agent fees 51,543
Trustees' fees 3,263
----------
$ 181,715
----------
----------
5. DIVIDENDS
On September 3, 1996, the Board of Trustees declared a dividend of $.0620
from net investment income, payable on September 11, 1996 to shareholders
of record September 4, 1996.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
MATRIX EQUITY FUND
TAX INFORMAITON
August 31, 1996
The Fund paid distributions of $.0604 per share from net long-term capital gains
during its taxable year ended August 31, 1996. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $8,822,345 as capital gain dividends
for its taxable year ended August 31, 1996.
Please consult a tax advisor for questions about federal or state income tax
laws.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES MATRIX EQUITY FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
S&P 500 INDEX FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 22
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 28
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES S&P 500 INDEX FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the S&P 500 Index Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSGA
FUNDS. In the coming year you will notice the new logo and name on all fund
materials. SSgA is the investment management business of State Street Bank
and Trust Company, a 200 year old pioneer and leader in the world of
financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES S&P 500 INDEX FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James May, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the S&P 500 Index Fund
since May 1995. Mr. May has been an Assistant Vice President since April 1996
and a portfolio manager in the US Structured Products Group of State Street
since January 1994. From 1991 to 1993, he served as an Investment Support
Analyst in the US Passive Services Group of State Street Global Advisors. There
are four other portfolio managers working with Mr. May in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES S&P 500 INDEX FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: To replicate the total return of the S&P 500 Composite Index.
INVESTS IN: Equity securities.
STRATEGY: The Fund's holdings are composed of the 500 stocks in the S&P 500
Composite Index. The Index is designed to best capture the price performance of
a large cross-section of the US publicly traded stock market.
[Graph]
DATES S&P 500 INDEX FUND S&P 500-Registered Trademark- INDEX**
Inception* $10,000 $10,000
1993 $10,806 $10,842
1994 $11,377 $11,435
1995 $13,779 $13,887
1996 $16,323 $16,475
SEVEN SEAS SERIES S&P 500 INDEX FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------------- ------------ ---------
1 Year $ 11,846 18.46%
Inception $ 16,323 14.30%+
STANDARD & POOR'S -Registered Trademark- 500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------------- ------------ ---------
1 Year $ 11,864 18.64%
Inception $ 16,475 14.59%+
SEE RELATED NOTES ON PAGE 7.
PERFORMANCE REVIEW
The Seven Seas Series S&P 500 Index Fund seeks to replicate the total
return of the Standard & Poor's 500 Composite Stock Price Index. To
accomplish this, the Fund seeks to hold each security in the S&P 500
Index in the same weighting as they appear in the Index.
The Fund closed the fiscal year with a one-year return of 18.46% which
closely mirrors the S&P 500 benchmark return of 18.64%. This replication
of the Index allows the Fund's performance to be very similar to the
performance of the Index. The Fund's slight deviation from the benchmark
return is attributable to payment of fund operating expenses. Index
results do not reflect fees or expenses of any kind.
PORTFOLIO HIGHLIGHTS
The 500 stocks of the S&P 500 Index represent approximately 75%
of the market value of all US common stocks. Standard and Poor's Corporation
chooses the 500 stocks to capture the price performance of a large
cross-section of the US publicly
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES S&P 500 INDEX FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
traded stock market. The Index is also structured to approximate the general
distribution of industries in the US economy and not necessarily that of the 500
largest companies.
The large capitalization rally that began in late 1994 and early 1995 continued
through the last fiscal year. Well-known blue chip stocks continued to
outperform smaller capitalization stocks which benefited the S&P 500.
The past year was another record setting year. The S&P 500 Index continued to
close at new highs. During the second quarter of 1996, the S&P 500 total
capitalization topped $5 trillion.
Strong employment figures have reportedly rekindled investors' fear of
inflation. July unemployment figures rattled the markets and were largely
responsible for the -4.42% return. Despite investor fear that the US economy was
heating up and anticipation that the Federal Reserve might raise interest rates,
the market slightly rebounded in August with an S&P 500 Index one month return
of 2.11%.
The best performing sector in the S&P 500 Index for the past fiscal year was
Healthcare with a return of 31.86%. The Financial and Technology sectors
followed closely with returns of 25.66% and 23.73%, respectively.
The Manager believes the Fund has successfully fulfilled its investment
objective, to closely match the return of the S&P 500 Index.
The Fund's ten largest equity holdings represented 16.9% of the portfolio. Four
of the top ten equity holdings were in the consumer basics sector, with the
second largest concentration within the top ten holdings being comprised of
energy stocks.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
General Electric Co. 2.6%
Coca-Cola Co. (The) 2.4
Exxon Corp. 1.9
AT&T Corp. 1.6
Merck & Co., Inc. 1.5
Royal Dutch Petroleum Co. - ADR 1.5
Philip Morris Cos., Inc. 1.4
Microsoft Corp. 1.4
Johnson & Johnson 1.3
Intel Corp. 1.3
-----------------------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on December 30, 1992. Index comparison began
December 31, 1992.
**The Standard & Poor's 500-Registered Trademark- Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's
Corporation to best capture the price performance of a large cross-section
of the US publicly traded stock market. The Index is structured to
approximate the general distribution of industries in the US economy.
+Annualized.
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", S&P 500-
Registered Trademark-", "Standard & Poor's 500" and "500" are trademarks of
Standard & Poor's Corporation and have been licensed for use by The Seven Seas
Series Fund. The Product is not sponsored, endorsed, sold or promoted by S&P,
and S&P makes no representation regarding the advisability of investing in the
Product.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series S&P 500 Index Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the three fiscal years in the period then ended and for the period December
30, 1992 (commencement of operations) to August 31, 1993. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the three fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period December 30, 1992
(commencement of operations) to August 31, 1993 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 95.4%
BASIC INDUSTRIES - 6.9%
Air Products & Chemicals, Inc. 15,100 $ 827
Alcan Aluminum, Ltd. 30,600 960
Alco Standard Corp. 17,500 763
Allegheny Teldyne, Inc. 25,178 510
Aluminum Co. of America 24,200 1,503
ARMCO, Inc. (a) 15,200 67
ASARCO, Inc. 5,800 150
Barrick Gold Corp. 51,900 1,401
Battle Mountain Gold Co. 33,100 281
Bemis Co., Inc. 6,900 206
Bethlehem Steel Corp. (a) 14,800 152
Boise Cascade Corp. 7,000 236
Champion International Corp. 13,200 568
Cincinnati Milacron, Inc. 4,500 89
Crown Cork & Seal Co., Inc. 17,500 818
Cyprus Amax Minerals Co. 16,600 353
Dow Chemical Co. 33,200 2,648
du Pont (E.I.) de Nemours & Co. 75,500 6,200
Eastman Chemical Co. 11,125 622
Echo Bay Mines, Ltd. 25,000 248
Engelhard Corp. 22,025 449
FMC Corp. (a) 4,900 314
Freeport McMoRan Copper & Gold, Inc. Class B 31,400 922
Goodrich (B.F.) Co. 7,000 263
Grace (W.R.) & Co. 13,400 879
Great Lakes Chemical Corp. 8,700 500
Hercules, Inc. 15,400 766
Homestake Mining Co. 26,300 434
Illinois Tool Works, Inc. 16,000 1,106
Inco, Ltd. 26,500 855
Inland Steel Industries, Inc. 7,500 129
International Paper Co. 39,973 1,599
James River Corp. of Virginia 11,300 294
Kimberly-Clark Corp. 38,218 2,995
Mallinckrodt Group, Inc. 9,800 397
Mead Corp. 7,600 435
Minnesota Mining & Manufacturing Co. 56,600 3,891
Monsanto Co. 79,600 2,557
Morton International, Inc. 20,000 743
Nalco Chemical Co. 9,000 289
Newmont Mining Corp. 13,312 704
Nucor Corp. 11,700 547
Phelps Dodge Corp. 9,400 569
Placer Dome, Inc. 35,200 845
Potlatch Corp. 4,000 151
PPG Industries, Inc. 26,400 1,304
Praxair, Inc. 20,700 851
Reynolds Metals Co. 8,600 460
Rohm & Haas Co. 9,100 569
Santa Fe Pacific Gold Corp. 25,460 331
Sigma Aldrich Corp. 6,700 353
Stone Container Corp. 13,800 191
Temple-Inland, Inc. 8,000 395
Union Camp Corp. 9,600 466
Union Carbide Corp. 18,400 796
USX-U.S. Steel Group 11,200 308
Westvaco Corp. 13,500 386
Willamette Industries, Inc. 7,400 457
Worthington Industries, Inc. 11,900 241
---------
48,343
---------
CAPITAL GOODS - 5.5%
Ball Corp. 4,000 94
Boston Scientific Corp. (a) 23,500 1,078
Briggs & Stratton Corp. 4,000 174
Browning-Ferris Industries, Inc. 28,900 737
Case Corp. 10,100 460
Caterpillar, Inc. 26,800 1,846
Cooper Industries, Inc. 14,800 599
Crane Co. 4,600 184
Cummins Engine Co., Inc. 5,800 218
Deere & Co. 36,000 1,431
Dover Corp. 15,300 671
DSC Communications Corp. (a) 15,800 468
Emerson Electric Co. 30,400 2,546
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Fluor Corp. 11,400 $ 730
Foster Wheeler Corp. 5,900 254
General Electric Co. 225,100 18,711
General Signal Corp. 6,300 253
Giddings & Lewis, Inc. 4,500 59
Grainger (W.W.), Inc. 7,000 473
Harnischfeger Industries, Inc. 6,600 249
Ingersoll-Rand Co. 15,100 646
ITT Industries, Inc. (a) 15,800 361
Johnson Controls, Inc. 5,800 409
Millipore Corp. 6,200 237
NACCO Industries, Inc. Class A 1,300 63
National Service Industries, Inc. 7,200 274
Pall Corp. 15,200 357
Parker-Hannifin Corp. 10,700 417
Raychem Corp. 5,900 405
Timken Co. 4,400 167
TRINOVA Corp. 4,100 129
Tyco International, Ltd. 20,400 862
Varity Corp. (a) 5,700 286
Westinghouse Electric Corp. 56,300 922
WMX Technologies, Inc. 66,900 2,116
---------
38,886
---------
CONSUMER BASICS - 20.7%
Abbott Laboratories 106,400 4,801
Albertson's, Inc. 34,500 1,462
Allergan, Inc. 8,600 334
ALZA Corp. (a) 11,100 304
American Brands, Inc. 24,600 999
American Home Products Corp. 85,200 5,048
American Stores Co. 19,600 806
Amgen, Inc. (a) 36,100 2,103
Archer-Daniels-Midland Co. 75,154 1,334
Bard (C.R.), Inc. 8,400 260
Bausch & Lomb, Inc. 7,800 258
Baxter International, Inc. 37,400 1,669
Becton, Dickinson & Co. 17,000 695
Beverly Enterprises, Inc. (a) 13,200 135
Biomet, Inc. (a) 15,500 240
Black & Decker Corp. 11,700 462
Bristol-Myers Squibb Co. 67,700 5,941
Campbell Soup Co. 34,000 2,214
Clorox Co. 7,100 665
Coca-Cola Co. (The) 339,000 16,950
Colgate-Palmolive Co. 19,800 1,609
Columbia/HCA Healthcare Corp. 60,955 3,436
Community Psychiatric Centers (a) 8,200 66
ConAgra, Inc. 33,800 1,424
Corning, Inc. 31,100 1,159
CPC International, Inc. 19,800 1,364
Fleming Cos., Inc. 6,100 98
General Mills, Inc. 21,600 1,188
Giant Food, Inc. Class A 8,200 276
Gillette Co. 60,300 3,844
Great Atlantic & Pacific Tea Co., Inc. 4,900 131
Heinz (H.J.) Co. 50,550 1,592
Hershey Foods Corp. 10,500 915
Humana, Inc. (a) 22,500 422
Johnson & Johnson 180,900 8,909
Kellogg Co. 29,400 1,985
Kroger Co. (a) 17,300 733
Lilly (Eli) & Co. 74,500 4,265
Manor Care, Inc. 8,500 292
Medtronic, Inc. 31,800 1,654
Merck & Co., Inc. 166,400 10,920
PepsiCo, Inc. 212,800 6,118
Pfizer, Inc. 85,800 6,092
Pharmacia & Upjohn, Inc. 69,025 2,899
Philip Morris Cos., Inc. 112,400 10,088
Pioneer Hi-Bred International, Inc. 11,400 628
Procter & Gamble Co. 93,100 8,274
Quaker Oats Co. 18,200 598
Ralston-Purina Group 14,200 888
Rubbermaid, Inc. 21,100 559
Sara Lee Corp. 66,300 2,088
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Schering-Plough Corp. 50,300 $ 2,811
Snap-On Tools Corp. 6,000 274
St. Jude Medical, Inc. 9,850 353
Stanley Works 12,200 336
SYSCO Corp. 24,500 787
Tenet Healthcare Corp. (a) 27,400 575
Tupperware Corp. (a) 8,100 354
U.S. Surgical Corp. 8,600 314
Unilever NV 21,800 3,128
United Healthcare Corp. 24,900 962
UST Corp. 26,300 789
Warner-Lambert Co. 36,500 2,172
Whitman Corp. 14,200 318
Winn-Dixie Stores, Inc. 20,600 708
Wrigley (Wm.), Jr. Co. 15,800 855
---------
145,930
---------
CONSUMER DURABLES - 2.5%
Chrysler Corp. 101,400 2,953
Cooper Tire & Rubber Co. 11,300 220
Dana Corp. 14,200 426
Eaton Corp. 10,700 593
Echlin, Inc. 8,600 262
Fleetwood Enterprises, Inc. 6,200 172
Ford Motor Co. 158,400 5,306
General Motors Corp. 101,900 5,070
Genuine Parts Co. 16,900 725
Goodyear Tire & Rubber Co. 20,700 944
Maytag Corp. 15,400 310
PACCAR, Inc. 5,495 249
Whirlpool Corp. 10,100 495
---------
17,725
---------
CONSUMER NON-DURABLES - 6.5%
Alberto Culver Co. Class B 4,100 170
Anheuser-Busch Cos., Inc. 33,700 2,553
Avon Products, Inc. 18,300 876
Brown-Forman Distillers, Inc. Class B 9,400 341
Brunswick Corp. 14,200 300
Charming Shoppes, Inc. (a) 13,200 87
Circuit City Stores, Inc. 14,000 441
Coors (Adolph) Co. Class B 3,900 77
Dayton Hudson Corp. 29,100 1,004
Dillard Department Stores, Inc. Class A 15,500 527
Eastman Kodak Co. 46,700 3,386
Federated Department Stores, Inc. (a) 27,500 952
Fruit of the Loom, Inc. Class A (a) 10,300 286
Gap, Inc. 39,100 1,368
Hasbro, Inc. 11,800 434
Home Depot, Inc. (The) 64,766 3,441
International Flavors & Fragrances, Inc. 15,100 649
Jostens, Inc. 5,214 97
K mart Corp. 65,600 656
Limited, Inc. (The) 36,027 666
Liz Claiborne, Inc. 10,200 354
Longs Drug Stores, Inc. 2,900 116
Lowe's Cos., Inc. 21,800 788
Mattel, Inc. 37,707 995
May Department Stores Co. 33,700 1,533
Melville Corp. 14,300 604
Mercantile Stores, Inc. 5,000 264
Newell Co. 21,700 675
NIKE, Inc. Class B 19,400 2,095
Nordstrom, Inc. 11,000 428
Penney (J.C.) Co., Inc. 30,500 1,613
Pep Boys - Manny, Moe & Jack 8,000 268
Polaroid Corp. 5,600 237
PriceCostco, Inc. (a) 26,100 519
Reebok International, Ltd. 10,500 378
Rite Aid Corp. 11,500 367
Russell Corp. 5,200 166
Seagram Co., Ltd. 50,500 1,673
Sears Roebuck & Co. 53,300 2,345
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Springs Industries, Inc. 2,500 $ 113
Stride Rite Corp. 6,200 53
SuperValu, Inc. 9,500 267
TJX Cos., Inc. 9,700 310
Toys "R" Us, Inc. (a) 36,900 1,089
V.F. Corp. 8,600 505
Wal-Mart Stores, Inc. 311,500 8,255
Walgreen Co. 33,400 1,102
Woolworth Corp. (a) 17,600 374
---------
45,797
---------
CONSUMER SERVICES - 2.4%
AMR Corp. (a) 12,100 992
Bally Entertainment Group 6,100 166
Darden Restaurants, Inc. 20,800 166
Delta Air Lines, Inc. 10,800 765
Disney (Walt) Co. 91,362 5,208
Harrah's Entertainment, Inc. (a) 13,700 260
HFS, Inc. 17,200 1,030
Hilton Hotels Corp. 6,400 684
ITT Corp. 15,800 841
King World Productions, Inc. (a) 4,900 173
Luby's Cafeterias, Inc. 2,900 69
Marriot International, Inc. 17,100 938
McDonald's Corp. 94,800 4,396
Outboard Marine Corp. 3,800 64
Ryan's Family Steak Houses, Inc. (a) 5,900 49
Shoney's, Inc. (a) 5,400 49
Southwest Airlines Co. 19,300 442
USAir Group, Inc. (a) 8,500 152
Wendy's International, Inc. 16,500 334
---------
16,778
---------
ENERGY - 8.8%
Amerada Hess Corp. 12,500 636
Amoco Corp. 66,900 4,616
Ashland, Inc. 8,300 308
Atlantic Richfield Co. 21,375 2,496
Baker Hughes, Inc. 19,600 593
Burlington Resources, Inc. 17,400 742
Chevron Corp. 88,000 5,181
Dresser Industries, Inc. 25,000 725
Exxon Corp. 168,300 13,695
Halliburton Co. 15,500 816
Helmerich & Payne, Inc. 3,000 118
Kerr-McGee Corp. 7,000 402
Louisiana Land & Exploration Co. 4,500 256
McDermott International, Inc. 8,500 176
Mobil Corp. 53,200 5,998
NorAm Energy Corp. 16,400 240
Occidental Petroleum Corp. 43,200 1,004
Oryx Energy Co. (a) 15,800 276
PanEnergy Corp. 20,600 682
Pennzoil Co. 6,400 342
Phillips Petroleum Co. 35,700 1,446
Rowan Cos., Inc. (a) 10,700 165
Royal Dutch Petroleum Co. - ADR 72,600 10,845
Santa Fe Energy Resources, Inc. (a) 11,800 139
Schlumberger, Ltd. 33,200 2,801
Sun Co., Inc. 10,255 242
Tenneco, Inc. 23,400 1,164
Texaco, Inc. 35,800 3,177
Unocal Corp. 33,200 1,137
USX-Marathon Group 39,700 829
Western Atlas, Inc. (a) 7,600 462
---------
61,709
---------
FINANCE - 13.6%
Aetna, Inc. 20,002 1,323
Ahmanson (H.F.) & Co. 16,700 422
Alexander & Alexander Services, Inc. 6,200 98
Allstate Corp. 59,194 2,642
American Express Co. 65,500 2,866
American General Corp. 28,000 1,022
American International Group, Inc. 63,750 6,056
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
AON Corp. 14,500 $ 732
Banc One Corp. 62,172 2,386
Bank of Boston Corp. 21,600 1,139
Bank of New York Co., Inc. 54,100 1,508
BankAmerica Corp. 49,600 3,844
Bankers Trust New York Corp. 10,600 824
Barnett Banks, Inc. 12,800 840
Beneficial Corp. 7,600 428
Boatmen's BancShares, Inc. 21,100 1,124
Chase Manhattan Corp. 59,064 4,393
Chubb Corp. (The) 23,300 1,034
CIGNA Corp. 10,400 1,208
Citicorp 65,500 5,453
Comerica, Inc. 15,700 765
CoreStates Financial Corp. 30,335 1,255
Dean Witter, Discover & Co. 23,393 1,170
Federal Home Loan Mortgage Corp. 24,400 2,156
Federal National Mortgage Association 147,100 4,560
Fifth Third Bancorp 14,100 747
First Bank System, Inc. 19,762 1,270
First Chicago NBD Corp. 42,048 1,792
First Union Corp. 39,175 2,502
Fleet Financial Group, Inc. 35,875 1,498
General Re Corp. 11,100 1,608
Golden West Financial Corp. 8,100 450
Great Western Financial Corp. 18,700 463
Green Tree Financial Corp. 19,200 667
Household International Corp. 13,300 1,054
ITT Hartford Group, Inc. 15,800 833
Jefferson-Pilot Corp. 9,650 496
KeyCorp 31,699 1,272
Lincoln National Corp. 14,100 624
Loews Corp. 15,900 1,189
Marsh & McLennan Cos., Inc. 9,900 921
MBNA Corp. 30,525 927
Mellon Bank Corp. 18,500 1,024
Merrill Lynch & Co., Inc. 23,700 1,452
MGIC Investment Corp. 8,600 545
Morgan (J.P.) & Co., Inc. 25,500 2,234
Morgan Stanley Group, Inc. 20,900 998
National City Corp. 29,900 1,125
NationsBank Corp. 40,600 3,456
Norwest Corp. 50,000 1,881
PNC Bank Corp. 47,200 1,475
Providian Corp. 12,900 534
Republic New York Corp. 8,000 529
SAFECO Corp. 17,100 566
Salomon, Inc. 14,100 635
St. Paul Cos., Inc. 11,600 600
SunTrust Banks, Inc. 31,300 1,201
Torchmark Corp. 9,700 412
Transamerica Financial Corp. 9,200 627
Travelers, Inc. 64,388 2,793
U.S. Bancorp of Oregon 20,800 796
UNUM Corp. 10,000 635
USF&G Corp. 14,900 240
USLIFE Corp. 5,300 155
Wachovia Corp. 23,200 1,061
Wells Fargo & Co. 13,266 3,300
---------
95,835
---------
GENERAL BUSINESS - 3.6%
American Greetings Corp. Class A 11,000 283
Automatic Data Processing, Inc. 39,800 1,657
Avery Dennison Corp. 7,300 373
Block (H&R) Co., Inc. 14,200 355
Comcast Corp. Special Class A 32,800 529
Computer Sciences Corp. (a) 10,200 714
CUC International, Inc. (a) 33,000 1,134
Deluxe Corp. 11,100 425
Donnelley (R.R.) & Sons Co. 21,100 688
Dow Jones & Co., Inc. 13,300 520
Dun & Bradstreet Corp. 23,000 1,325
Ecolab, Inc. 9,500 289
First Data Corp. 30,200 2,356
Gannett Co., Inc. 19,100 1,280
Harcourt General, Inc. 10,000 479
Harland (John H.) Co. 3,900 98
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Interpublic Group Cos., Inc. 10,700 $ 484
Knight-Ridder, Inc. 13,100 442
McGraw-Hill, Inc. 13,500 554
Meredith Corp. 3,700 159
Moore Corp., Ltd. 13,200 231
New York Times Co. Class A 13,300 416
Safety-Kleen Corp. 8,200 141
SBC Communications, Inc. 82,600 3,851
Service Corp. International 16,000 902
Tele-Communications, Inc. Class A (a) 88,400 1,304
Time Warner, Inc. 53,200 1,776
Times Mirror Co. Series A 15,200 659
Tribune Co. 8,700 625
Viacom, Inc. Class B (a) 50,611 1,594
---------
25,643
---------
SHELTER - 0.6%
Armstrong World Industries, Inc. 5,300 328
Centex Corp. 4,100 132
Georgia Pacific Corp. 12,400 922
Kaufman & Broad Home Corp. 4,100 50
Louisiana Pacific Corp. 14,800 322
Masco Corp. 21,200 617
Owens-Corning Fiberglas Corp. (a) 7,000 255
Pulte Corp. 3,800 95
Sherwin-Williams Co. 11,600 507
Weyerhaeuser Co. 27,500 1,227
---------
4,455
---------
TECHNOLOGY - 12.9%
3Com Corp. (a) 22,200 1,035
Advanced Micro Devices, Inc. (a) 17,900 228
AlliedSignal, Inc. 38,400 2,371
Amdahl Corp. (a) 15,700 156
AMP, Inc. 29,532 1,130
Andrew Corp. 7,712 343
Apple Computer, Inc. 16,600 403
Applied Materials, Inc. 24,200 584
Autodesk, Inc. 6,000 138
Bay Networks, Inc. 25,700 707
Boeing Co. 46,900 4,244
Cabletron Systems, Inc. (a) 9,500 580
Ceridian Corp. (a) 9,100 388
Cisco Systems, Inc. 87,600 4,610
COMPAQ Computer Corp. (a) 36,000 2,039
Computer Associates International, Inc. 49,675 2,608
Data General Corp. (a) 7,000 79
Digital Equipment Corp. (a) 20,600 796
EG&G, Inc. 6,900 129
EMC Corp. (a) 30,400 585
General Dynamics Corp. 8,600 552
General Instrument Corp. (a) 16,300 446
Harris Corp. 5,400 332
Hewlett-Packard Co. 137,300 6,007
Honeywell, Inc. 17,500 1,017
Intel Corp. 111,500 8,892
Intergraph Corp. (a) 7,800 69
International Business Machines Corp. 73,800 8,441
Lockheed Martin Corp. 27,091 2,279
LSI Logic Corp. (a) 17,600 385
McDonnell Douglas Corp. 30,300 1,519
Micron Technology, Inc. 28,200 642
Microsoft Corp. (a) 80,400 9,849
Motorola, Inc. 79,700 4,254
National Semiconductor Corp. (a) 18,300 336
Northern Telecom, Ltd. 34,400 1,716
Northrop Grumman Corp. 7,700 552
Novell, Inc. (a) 49,800 517
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Oracle Systems Corp. 88,625 $ 3,113
Perkin-Elmer Corp. 5,900 306
Pitney Bowes, Inc. 20,400 984
Raytheon Co. 32,800 1,689
Rockwell International Corp. 29,400 1,529
Scientific-Atlanta, Inc. 10,300 139
Seagate Technology (a) 14,900 715
Shared Medical Systems 3,200 174
Silicon Graphics, Inc. (a) 21,500 500
Sun Microsystems, Inc. 24,800 1,345
Tandem Computers, Inc. (a) 16,600 174
Tandy Corp. 8,600 379
Tektronix, Inc. 4,900 190
Tellabs, Inc. (a) 11,900 753
Texas Instruments, Inc. 25,600 1,197
Textron, Inc. 11,600 990
Thomas & Betts Corp. 5,900 217
TRW, Inc. 8,900 823
Unisys Corp. (a) 22,700 133
United Technologies Corp. 16,500 1,860
Xerox Corp. 44,000 2,415
---------
90,583
---------
TRANSPORTATION - 1.3%
Burlington Northern, Inc. 21,469 1,718
Caliber Systems, Inc. 5,700 99
Conrail, Inc. 10,600 722
Consolidated Freightways, Inc. 7,000 161
CSX Corp. 28,500 1,443
Federal Express Corp. 7,800 584
Laidlaw, Inc. Class B 40,000 385
Navistar International Corp. (a) 10,550 103
Norfolk Southern Corp. 17,700 1,476
Ryder System, Inc. 11,500 326
Union Pacific Corp. 27,800 2,026
Yellow Corp. (a) 2,800 37
---------
9,080
---------
UTILITIES - 10.1%
Airtouch Communications, Inc. (a) 68,000 1,870
Alltel Corp. 25,800 729
American Electric Power Co., Inc. 25,300 1,050
Ameritech Corp. 75,300 3,887
AT&T Corp. 217,700 11,429
Baltimore Gas & Electric Co. 20,100 523
Bell Atlantic Corp. 59,400 3,341
BellSouth Corp. 133,900 4,854
Carolina Power & Light Co. 20,800 725
Central & Southwest Corp. 27,900 736
CINergy Corp. 21,426 643
Coastal Corp. 14,400 571
Columbia Gas System, Inc. 6,900 388
Consolidated Edison Co. 31,600 825
Consolidated Natural Gas Co. 12,900 701
Dominion Resources, Inc. 23,700 886
DTE Energy Co. 19,900 567
Duke Power Co. 27,600 1,290
Eastern Enterprises, Inc. 2,600 95
Edison International 60,600 1,053
Enron Corp. 34,200 1,372
ENSERCH Corp. 8,700 175
Entergy Corp. 30,900 784
FPL Group, Inc. 24,900 1,102
GPU, Inc. 16,100 507
GTE Corp. 131,400 5,174
Houston Industries, Inc. 35,200 766
MCI Communications Corp. 92,800 2,332
Niagara Mohawk Power Corp. 19,200 158
NICOR, Inc. 7,000 220
Northern States Power Co. 9,300 424
NYNEX Corp. 59,600 2,570
Ohio Edison Co. 20,700 435
ONEOK, Inc. 3,200 88
Pacific Enterprises 11,200 335
Pacific Gas & Electric Co. 57,300 1,296
Pacific Telesis Group 58,000 1,878
PacifiCorp. 38,800 781
Peco Energy Co. 30,200 710
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Peoples Energy Corp. 5,400 $ 184
PP&L Resources, Inc. 22,100 497
Public Service Enterprise Group, Inc. 33,200 900
Sonat, Inc. 11,800 521
Southern Co. 91,400 2,068
Sprint Corp. 59,800 2,429
Texas Utilities Co. 30,600 1,255
U.S. West Communications Group 63,700 1,879
U.S. West Media Group 64,100 1,162
Unicom Corp. 29,100 669
Union Electric Co. 13,800 516
Williams Cos. (The) 13,827 690
WorldCom, Inc. 52,100 1,087
---------
71,127
---------
TOTAL COMMON STOCKS
(cost $563,969) 671,891
---------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
SHORT-TERM INVESTMENTS - 5.1%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b)(d) $ 30,636 $ 30,636
United States Treasury Bills (b)(c)(d)
4.950% due 09/19/96 200 199
5.115% due 09/19/96 2800 2793
Valiant Money Market Fund
Class A (b) 2,430 2,430
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $36,058) 36,058
---------
TOTAL INVESTMENTS
(identified cost $600,027)(e) - 100.5% 707,949
OTHER ASSETS AND LIABILITIES,
NET - (0.5%) (3,266)
---------
NET ASSETS - 100.0%
$ 704,683
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity. (Unaudited)
(d) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(e) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
FUTURES CONTRACTS August 31, 1996
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- -------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Financial Futures Contracts
Expiration date 12/96 92 $ (300)
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (*) $ (300)
-------------
-------------
(*) At August 31, 1996, United States Treasury Bills
valued at $2,992 were held as collateral by the custodian
in connection with open futures contracts held by the Fund.
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $600,026,700)(Note 2) . . . . . . . . . . . . . . . . . . . $ 707,948,610
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,782,026
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,752,140
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,392
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,259
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,497,427
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,369,525
Accrued fees to affiliates and trustees. . . . . . . . . . . . . . . . . . . . 76,019
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,847
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . 324,413
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,814,804
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 704,682,623
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,910,414
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,152,630
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,921,910
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,842)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,911
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559,948,600
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 704,682,623
--------------
--------------
Net asset value, offering and redemption price per share
($704,682,623 divided by 48,910,781 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . $14.41
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $81,737) . . . . . . . . . . . . . . . . . . . . $ 15,099,094
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,698
--------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,222,792
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 609,089
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,521
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,166
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,689
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,776
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,193
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . 199,851
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,517
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,145
Amortization of deferred organization expenses . . . . . . . . . . . . . . 6,987
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,940
--------------
Expenses before waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 1,709,874
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . . . . . . . (609,089)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,785
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,122,007
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,080,156
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,071,267
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,366,781
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,465,867)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,052,337
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . $ 95,174,344
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,122,007 $ 10,818,404
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,080,156 6,220,503
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,071,267 4,235,443
Net change in unrealized appreciation or depreciation of:. . . . . . . . . . . . . . . .
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,366,781 50,483,111
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,465,867) 580,200
--------------- ---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . 95,174,344 72,337,661
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,346,365) (9,950,577)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,876,026) (1,022,577)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . 93,531,144 122,123,121
---------- ---------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,483,097 183,487,628
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545,199,526 361,711,898
--------------- ---------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$3,910,414 and $3,131,469, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 704,682,623 $ 545,199,526
--------------- ---------------
--------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . 28,848,452 $ 405,663,643 29,817,446 $ 349,805,925
Fund shares issued to shareholders
in reinvestments of distributions . . . . . . . . 2,045,239 27,581,669 978,683 10,716,644
Fund shares redeemed . . . . . . . . . . . . . . . (24,529,017) (339,714,168) (21,450,886) (238,399,448)
--------------- --------------- --------------- ---------------
Net increase (decrease). . . . . . . . . . . . . . 6,364,674 $ 93,531,144 9,345,243 $ 122,123,121
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year
ended August 31 and other performance information derived from the financial statements.
1996 1995 1994 1993*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . $ 12.81 $ 10.89 $ 10.72 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . .32 .29 .26 .15
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.98 1.95 .29 .65
---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . 2.30 2.24 .55 .80
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (.31) (.29) (.26) (.08)
Net realized gain on investments . . . . . . . . . . . . . . . . . . (.39) (.03) (.07) --
In excess of net realized gain on investments. . . . . . . . . . . . -- -- (.05) --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . (.70) (.32) (.38) (.08)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 14.41 $ 12.81 $ 10.89 $ 10.72
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . 18.46 21.11 5.29 8.06
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
net assets (b)(c) . . . . . . . . . . . . . . . . . . . . . . . . . .18 .19 .15 .15
Operating expenses, gross, to average
net assets (b)(c) . . . . . . . . . . . . . . . . . . . . . . . . . .28 .29 .25 .35
Net investment income to average
net assets (b). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.32 2.76 2.69 3.02
Portfolio turnover (b) . . . . . . . . . . . . . . . . . . . . . . . 28.72 38.56 7.97 48.10
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . 704,683 545,200 361,712 238,666
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . .0135 .0107 .0030 .0027
Per share amount of fees reimbursed ($ omitted). . . . . . . . . . . -- -- .0067 .0071
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . . . . . . . . . . . . . .0115 N/A N/A N/A
</TABLE>
* For the period December 30, 1992 (commencement of operations) to
August 31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period August 31, 1993 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series S&P 500 Index Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities, fixed-income securities and options are valued
on the basis of the closing bid price. Futures contracts are valued on the
basis of the last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- -------------- --------------
$ 601,320,368 $ 118,983,218 $ (12,354,936) $ 106,628,282
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in options, futures
and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
interest) at Fedwire closing time of the underlying securities remains at
least equal to 100% of the repurchase price. The Adviser or third-party
custodian will notify the seller to immediately increase the collateral on
the repurchase agreement to 102% of the repurchase price if collateral
falls below 100%.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
These instruments offer unique characteristics and risks that assist the
Fund to meet its investment objective.
The Fund typically uses derivatives for cash equitization. Cash
equitization is a technique that is used by the Fund through the use of
options and futures to earn "market-like" returns with the Fund's excess
and liquidity reserve cash balances. By purchasing certain instruments, a
fund may more effectively achieve the desired portfolio characteristics
that allow the fund to meet its investment objective. The Fund uses futures
and options contracts solely for the purpose of cash management. The
primary risks associated with the use of derivatives are generally
categorized as market risk.
FUTURES: The Fund is currently utilizing exchange-traded futures contracts.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Fund and the prices of futures contracts and the possibility of
an illiquid market. Changes in initial settlement value are accounted for
as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases and
sales of investment securities, excluding short-term investments, futures
contracts and repurchase agreements, aggregated to $228,788,116 and
$164,670,081, respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
year ended August 31, 1996, were as follows:
FUTURES CONTRACTS
----------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
--------- -------------
Outstanding at August 31, 1995 96 $ 26,071,575
Contracts opened 714 230,651,350
Contracts closed (718) (226,191,883)
--------- -------------
Outstanding at August 31, 1996 92 $ 30,531,042
--------- -------------
--------- -------------
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .10% of its average daily net assets. For the year ended August 31,
1996, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceed .15% of its average
daily net assets on an annual basis. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. During the year ended August 31, 1996, the Fund paid $124,877 to
the Distributor in addition to other amounts paid to non-related party
distributors.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
customers of these Agents. For the year ended August 31, 1996, the Fund
incurred expenses of $185,509 from the Adviser. The Fund did not incur any
expenses from SSBSI or Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $11,820 for the year ended August 31,
1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Administration fees $ 11,465
Custodian fees 14,074
Distribution fees 9,306
Shareholder servicing fees 13,207
Transfer agent fees 19,140
Trustees' fees 8,827
---------
$ 76,019
---------
---------
5. DIVIDENDS
On September 3, 1996, the Board of Trustees declared a dividend of $.0793
from net investment income, payable on September 11, 1996, to shareholders
of record September 4, 1996.
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
S&P 500 INDEX FUND
TAX INFORMATION
August 31, 1996
The Fund paid distributions of $.3286 per share from net long-term capital gains
during its taxable year ended August 31, 1996. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $13,276,060 as capital gain dividends
for its taxable year ended August 31, 1996.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES S&P 500 INDEX FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
28 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
SMALL CAP FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 22
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES SMALL CAP FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Small Cap Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA Funds.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES SMALL CAP FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Jeffrey Adams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Small Cap Fund since December
1994. Mr. Adams has been with State Street since 1990, as a portfolio manager
for the past four years, and as an account administrator for two years prior to
that. There are four other portfolio managers working with Mr. Adams in managing
the Fund.
Annual Report 5
<PAGE>
SEVEN SEAS SERIES SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return.
INVESTS IN: Equity securities; 65% of which is in securities of smaller
capitalized issuers.
STRATEGY: Fund Managers make the majority of purchase selections in the $100
million to $1.5 billion range, based on the small cap growth criteria.
[Graph]
<TABLE>
<CAPTION>
DATES SMALL CAP FUND S&P-Registered Trademark-400 MIDCAP INDEX RUSSELL 2000-Registered Trademark-INDEX
Inception* <C> <C> <C>
<C> $10,000 $10,000 $10,000
1992 $10,090 $10,245 $10,055
1993 $12,478 $12,751 $13,321
1994 $12,964 $13,341 $14,111
1995 $16,859 $16,077 $17,045
1996 $20,760 $17,988 $18,890
</TABLE>
THE SEVEN SEAS SERIES SMALL CAP FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- -------------- -------------- --------------
1 Year 12,314 23.14%
Inception 20,760 19.16%+
STANDARD & POOR'S-Registered Trademark-
MIDCAP 400 INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- -------------- -------------- --------------
1 Year 11,188 11.89%
Inception 17,988 15.13%+
RUSSELL 2000-Registered Trademark- INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- -------------- -------------- --------------
1 Year 11,082 10.82%
Inception 18,890 16.49%+
PERFORMANCE REVIEW
The Seven Seas Small Cap Fund ended its first full year under the active small
cap process with strong performance. The Fund had a one year return of 23.14%
for the fiscal year ended August 31, 1996. The Fund outperformed its benchmark,
the Russell 2000, by 12.32 percentage points. The Fund outperformed the Russell
2000 Index in the fourth calendar quarter of 1995 by 1.6%, and in the first,
second, and third calendar quarters of 1996 by 2.3%, 1.2%, and 5.3%,
respectively. Since the construction of the portfolio focuses on maintaining the
overall characteristics similar to the Index, our relative outperformance is due
in large part to our stock selection, and not making bets on the direction of
the economy.
PORTFOLIO HIGHLIGHTS
The overall characteristics of the Fund are intended to be similar to the
Russell 2000 Index. The universe of investable stocks is comprised of, but not
limited to, issues found in the Russell 2000 Index. The underlying investment
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
philosophy is to purchase stocks with increasing earnings estimates at a "fair"
price. By focusing on stock selection, and maintaining similar characteristics
as the Index, the Fund minimizes macro-economic bets such as changes in interest
rates and industry timing. This approach helped the Fund outperform the Index
over the past year.
The performance of the small cap market started out strong in 1996, as indicated
by the Russell 2000 Index return of 15.1% through the end of May. The correction
that occurred in June and July of 1996 adversely impacted the returns of small
cap stocks versus large cap stocks. The Russell 2000 Index over the two month
period lost 12.5%, whereas the S&P 500 Composite Index over the same period lost
only 4.1%. This downturn was in part due to the economic uncertainty caused by
inflationary fears which gripped financial markets in July.
The recent downturn may have been an overreaction as small cap stocks rebounded
in August. The Russell 2000 Index gained 5.5% whereas the S&P 500 Index gained
2.1% in August.
The Fund's ten largest equity holdings comprised 18.1% of the portfolio with
California Federal Bancorp, Inc. representing the largest single holding at
2.2%. The largest sector concentration within this group was non-durable type
securities, and the second largest was in the finance sector.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
California Federal Bancorp, Inc. 2.2%
Tech Data Corp. 2.1
Cytec Industries, Inc. 1.9
Smith International, Inc. 1.8
Ross Stores, Inc. 1.8
CMAC Investment Corp. 1.7
Precision Castparts Corp. 1.7
Claire's Stores, Inc. 1.7
Tiffany & Co. 1.6
PHH Group, Inc. 1.6
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,00 GRAPH AND TABLE ON THE
PRECEDING PAGE.
*The Fund commenced operations on July 1, 1992. Index comparison also began
July 1, 1992.
**The Standard & Poor's-Registered Trademark- MidCap 400 Index is composed
of 400 domestic stocks chosen for market size, liquidity and industry
group representation. It is a market-weighted index (stock price times
shares outstanding), with each stock affecting the Index in proportion
to its market value.
+The Russell 2000-Registered Trademark- Index is comprised of the 2,000
smallest securities in the Russell 3000-Registered Trademark- Index,
representing approximately 12% of the Russell 3000 total market
capitalization. The Index is reconstituted annually.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Small Cap Fund (the "Fund"), as
of August 31, 1996, and the related statement of operations for the fiscal year
then ended, the statements of changes in net assets for each of the two fiscal
years in the period then ended, and the financial highlights for each of the
four fiscal years in the period then ended and for the period July 1, 1992
(commencement of operations) to August 31, 1992. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the four fiscal
years in the period then ended and for the period July 1, 1992 (commencement of
operations) to August 31, 1992 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 98.2%
BASIC INDUSTRIES - 7.1%
Amcast Industrial Corp. $ 4,100 $ 73
Cleveland-Cliffs, Inc. 11,100 433
Commercial Metals Co. 5,300 160
Cytec Industries, Inc. 30,300 1,053
Dexter Corp. 1,100 32
Precision Castparts Corp. 19,400 948
Rouge Steel Co. Class A 4,500 101
Texas Industries, Inc. 12,100 788
WHX Corp. (a) 32,100 328
---------
3,916
---------
CAPITAL GOODS - 7.3%
Allied Products Corp. 5,400 140
Barnes Group, Inc. 2,400 119
Belden, Inc. 3,900 106
Cascade Corp. 6,100 70
Global Industrial
Technologies, Inc. (a) 31,300 603
Kaydon Corp. 5,900 265
Manitowoc Co., Inc. 4,650 146
Measurex Corp. 12,500 344
Sanmina Corp. 19,800 693
Tennant Co. 400 9
TRINOVA Corp. 22,600 709
United Waste Systems, Inc. 29,000 840
---------
4,044
---------
CONSUMER BASICS - 12.0%
Alpharma, Inc. Class A 2,000 32
American HomePatient, Inc. 11,850 290
Bindley Western Industries, Inc. 800 14
Chemed Corp. 100 4
Church and Dwight Co., Inc. 9,100 192
Dura Pharmaceuticals, Inc. 22,400 773
Genesis Health Ventures, Inc. 7,200 184
Health Management Systems, Inc. 32,100 883
Herbalife International, Inc. 6,200 79
International Multifoods Corp. 6,000 100
Invacare Corp. 28,600 844
Lincare Holdings, Inc. (a) 23,100 855
MMI Companies, Inc. 3,000 96
NovaCare, Inc. (a) 34,600 311
Quality Food Centers, Inc. (a) 3,700 114
Smith's Food & Drug Centers, Inc.
Class B 10,137 299
Sofamor/Danek Group, Inc. (a) 5,900 170
Target Therapeutics, Inc. 3,300 106
Universal Health Services, Inc.
Class B 34,800 887
Whole Foods Market, Inc. (a) 11,600 385
---------
6,618
---------
CONSUMER DURABLES - 3.4%
Arctic Cat, Inc. 3,500 37
Carlisle Cos., Inc. 2,500 129
Coachmen Industries, Inc. 23,200 432
Ethan Allen Interiors, Inc. 7,800 209
Excel Industries, Inc. 8,000 124
Furniture Brands
International, Inc. (a) 39,400 473
Libbey, Inc. 700 20
Toro Co. 13,900 434
Winnebago Industries, Inc. 3,400 27
---------
1,885
---------
CONSUMER NON-DURABLES - 9.5%
Carson Pirie Scott & Co. (a) 1,200 30
Claire's Stores, Inc. 28,300 934
CompUSA, Inc. 1,000 40
Coors (Adolph) Co. Class B 10,800 213
Guilford Mills, Inc. 3,600 81
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Mohawk Industries, Inc. (a) $ 27,800 $ 636
Oshkosh B' Gosh, Inc. Class A 2,500 43
Ross Stores, Inc. 25,400 978
St. John Knits, Inc. 22,000 877
Stein Mart, Inc. (a) 25,300 519
Tiffany & Co. 26,000 907
---------
5,258
---------
CONSUMER SERVICES - 6.2%
Alaska Air Group, Inc. (a) 1,300 27
Applebee's International, Inc. 28,200 814
Bally Entertainment Group 8,400 229
Carmike Cinemas, Inc. (a) 8,200 198
Comair Holdings, Inc. 14,850 356
Continental Airlines, Inc. Class B 33,800 765
GC Companies, Inc. (a) 3,100 115
Marcus Corp. 2,850 68
Regis Corp. 16,950 415
Ruby Tuesday, Inc. 21,600 448
---------
3,435
---------
ENERGY - 5.8%
Belco Oil & Gas Corp. (a) 18,800 517
Camco International, Inc. 12,400 420
KCS Energy, Inc. 800 25
Marine Drilling Co, Inc. (a) 10,700 91
Newfield Exploration Co. (a) 3,900 174
Parker & Parsley Petroleum Co. 5,400 134
Smith International, Inc. (a) 28,800 1,001
Vintage Petroleum, Inc. 33,000 833
---------
3,195
---------
FINANCE - 20.1%
Aames Financial Corp. 15,500 758
Allied Group, Inc. 3,500 135
American Bankers Insurance
Group, Inc. 11,700 553
Astoria Financial Corp. 31,000 829
California Federal Bancorp, Inc. (a) 52,700 1,199
Capital RE Corp. 1,800 68
CCB Financial Corp. 6,000 320
City National Corp. 50,200 885
CMAC Investment Corp. 15,400 963
Cullen Frost Bankers, Inc. 4,600 130
Enhance Financial Services
Group, Inc. 4,800 138
Fremont General Corp. 32,300 876
Horace Mann Educators Corp. 9,000 309
Leader Financial Corp. 3,400 169
MAF Bancorp, Inc. 660 17
Magna Group, Inc. 14,200 351
Money Store, Inc. 27,000 648
Orion Capital Corp. 11,900 598
Peoples Heritage
Financial Group 20,900 455
Provident Bancorp, Inc. 1,650 65
Quick & Reilly
Group, Inc. (The) 1,875 55
Resource Bancshares
Mortgage Group 7,838 96
Security Capital Corp. 3,400 206
Security Connecticut Corp. 3,700 112
TCF Financial Corp. 16,800 628
Zions Bancorp 6,500 560
---------
11,123
---------
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
GENERAL BUSINESS - 5.0%
American Business Products, Inc. $ 900 $ 18
Career Horizons, Inc. 19,200 670
Logicon, Inc. 11,400 338
National Data Corp. 17,100 718
New England Business Service, Inc. 6,600 102
PHH Group, Inc. 31,200 901
---------
2,747
---------
MISCELLANEOUS - 0.7%
Developers Diversified Realty 8,700 285
Federal Realty Investment Trust 4,400 103
---------
388
---------
SHELTER - 6.9%
Centex Corp. 23,500 755
Champion Enterprises, Inc. 36,600 695
Continental Homes Holding Corp. 37,400 720
Fibreboard Corp. (a) 6,400 191
Kaufman & Broad Home Corp. 10,700 131
Lennar Corp. 31,400 703
Redman Industries, Inc. 5,000 113
U.S. Home Corp. (a) 21,500 480
---------
3,788
---------
TECHNOLOGY - 7.2%
Esterline Technologies Corp. (a) 36,500 753
GaSonics International Corp. 1,400 11
Hadco Corp. (a) 8,800 227
Medic Computer Systems, Inc. 16,600 579
Picturetel Corp. 10,500 343
SCI Systems, Inc. (a) 13,000 580
Tech Data Corp. (a) 44,200 1,166
Wyle Laboratories 9,300 299
---------
3,958
---------
TRANSPORTATION - 1.8%
APL, Ltd. 1,900 45
M.S. Carriers, Inc. (a) 2,600 56
Seacor Holdings, Inc. (a) 20,000 900
---------
1,001
---------
UTILITIES - 5.2%
Central Hudson Gas
& Electric Corp. 5,400 163
CILCORP, Inc. 4,800 203
Commonwealth Energy System 15,600 365
Eastern Enterprises, Inc. 13,200 483
Eastern Utilities Associates 16,600 268
Lincoln Telecommunications Co. 4,200 65
New Jersey Resources Corp. 3,000 86
Northwestern Public Service Co. 1,900 55
ONEOK, Inc. 2,100 57
Rochester Gas & Electric Corp. 16,200 302
Sierra Pacific Resources 14,500 370
United Illuminating Co. 900 31
Western Gas Resources, Inc. 15,400 221
WICOR, Inc. 4,600 164
---------
2,833
---------
TOTAL COMMON STOCKS
(cost $48,602) 54,189
---------
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
SHORT-TERM INVESTMENTS - 2.1%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 1,169 $ 1,169
TOTAL SHORT-TERM INVESTMENTS
(cost $1,169) 1,169
---------
TOTAL INVESTMENTS
(identified cost $49,771)(c) - 100.3% 55,358
OTHER ASSETS AND LIABILITIES,
NET - (0.3%) (150)
---------
NET ASSETS - 100.0% $ 55,208
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $49,771,248)(Note 2) . . . . . . . . . . . . $ 55,358,126
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,883
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,255
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 3,096
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,430,360
LIABILITIES
Payables (Note 4):
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . $ 163,973
Accrued fees to affiliates and trustees. . . . . . . . . . . . . 41,995
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 16,370
-------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,338
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,208,022
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 15,093
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . 4,311,904
Unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . 5,586,878
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,165
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,290,982
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,208,022
-------------
-------------
Net asset value, offering and redemption price per share
($55,208,022 divided by 3,165,253 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . $ 17.44
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 458,719
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,533
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464,252
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . $ 276,229
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . 10,629
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 27,293
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . 25,184
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . 11,348
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . 29,709
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . 11,505
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . 26,421
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 1,625
Amortization of deferred organization expenses . . . . . . . . . 3,737
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 11,086
-------------
Expenses before reimbursement. . . . . . . . . . . . . . . . . . 434,766
Expenses reimbursed by Adviser . . . . . . . . . . . . . . . . . (66,461)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,305
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,947
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . 4,781,702
Net change in unrealized appreciation or depreciation of investments . . . . . . . 2,395,398
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7,177,100
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . $ 7,273,047
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 95,947 $ 104,606
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,781,702 46,859
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . -- (24,880)
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . 2,395,398 3,176,878
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . . 7,273,047 3,303,463
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (143,509) (156,946)
Net realized gain on investments . . . . . . . . . . . . . . . . . . (357,587) (1,255,304)
In excess of net realized gain on investments. . . . . . . . . . . . -- (112,206)
Increase (decrease) in net assets from Fund share transactions . . . . 25,134,629 (4,193,484)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 31,906,580 (2,414,477)
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 23,301,442 25,715,919
------------- -------------
Net Assets at End of Year
(including undistributed net investment income of
$15,093 and $62,655, respectively) . . . . . . . . . . . . . . . . . $ 55,208,022 $ 23,301,442
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . 2,112,827 $ 33,923,420 1,602,127 $ 20,263,993
Fund shares issued to shareholders
in reinvestments of distributions. . 30,787 462,930 137,019 1,512,935
Fund shares redeemed . . . . . . . . . (594,383) (9,251,721) (2,287,103) (25,970,412)
------------- ------------ ------------- ------------
Net increase (decrease). . . . . . . . 1,549,231 $ 25,134,629 (547,957) $ (4,193,484)
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995+ 1994 1993 1992*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 14.42 $ 11.88 $ 12.24 $ 10.09 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .04 .13 .21 .22 .04
Net realized and unrealized gain on investments . . 3.25 3.19 .24 2.14 .05
-------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . 3.29 3.32 .45 2.36 .09
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . (.07) (.15) (.21) (.21) --
Net realized gain on investments . . . . . . . . . . (.20) (.58) (.60) -- --
In excess of net realized gain on investments. . . . -- (.05) -- -- --
-------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . (.27) (.78) (.81) (.21) --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 17.44 $ 14.42 $ 11.88 $ 12.24 $ 10.09
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN (%)(A). . . . . . . . . . . . . . . . . . 23.14 30.04 3.90 23.66 .90
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average
net assets (b)(c). . . . . . . . . . . . . . . . . 1.00 .97 .30 .25 .25
Operating expenses, gross, to average
net assets (b)(c). . . . . . . . . . . . . . . . . 1.18 1.58 .81 1.18 1.71
Net investment income to average
net assets (b) . . . . . . . . . . . . . . . . . . .26 .81 1.73 1.85 2.55
Portfolio turnover (b) . . . . . . . . . . . . . . . 76.85 192.88 44.86 81.14 4.59
Net assets, end of year ($000 omitted) . . . . . . . 55,208 23,301 25,716 34,815 9,392
Per share amount of fees waived
($ omitted)(c) . . . . . . . . . . . . . . . . . . -- .0261 .0046 .0083 .0021
Per share amount of fees reimbursed
($ omitted)(c) . . . . . . . . . . . . . . . . . . .0277 .0730 .0582 .1040 .0226
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . .0368 N/A N/A N/A N/A
</TABLE>
+ Prior to November 22, 1994, the Fund was passively managed as the S&P
Midcap Index Fund.
* For the period July 1, 1992 (commencement of operations) to
August 31, 1992.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1992 are annualized.
(c) See Note 4 for currrent period amounts.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Small Cap Fund (the "Fund"). Prior to November 22,
1994, the Fund was passively managed under the name of The Seven Seas
Series S&P Midcap Index Fund. Effective November 23, 1994, the name and
investment objective of the Fund was changed pursuant to a shareholder
vote. The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
Futures contracts are valued on the basis of last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost", a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- -------------- --------------
$ 49,771,418 $ 7,555,194 $ (1,968,486) $ 5,586,708
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in foreign denominated investments, redemptions in kind, and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
DERIVATIVES: To the extent permitted by the investment objective,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index. The
Fund's use of derivatives includes exchange-traded futures and options on
futures. These instruments offer unique characteristics and risks that
assist the Fund in meeting its investment objective.
FUTURES: The Fund may utilize futures contracts to a limited extent. The
primary risks associated with the use of futures contracts are an imperfect
correlation between the change in market value of the securities held by
the Fund and the prices of futures contracts, and the possibility of an
illiquid market. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated
at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For for the year ended August 31, 1996, purchases
and sales of investment securities, excluding short-term investments
aggregated to $53,051,135 and $27,699,258, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objective, policies, and limitations. From the inception date of the Fund
to November 22, 1994, the Fund paid a fee to the Adviser at the annual rate
of .20% of its average daily net assets. Effective November 23, 1994,
pursuant to a shareholder vote, the Fund pays a fee to the Adviser
calculated daily and paid monthly, at an annual rate of .75% of its average
daily net assets. For the year ended
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
August 31, 1996, the Adviser voluntarily agreed to reimburse the Fund for
all expenses in excess of 1.00% of average daily net assets on an annual
basis. As of August 31, 1996, the receivable due from the Adviser for
expenses in excess of the expense cap has been netted against the Adviser
fee payable. The Investment Company also has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $10,648 and $857 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $37,694 for the year ended August 31,
1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 31,663
Administration fees 1,326
Custodian fees 2,568
Distribution fees 1,407
Shareholder servicing fees 1,252
Transfer agent fees 3,125
Trustees' fees 654
---------
$ 41,995
---------
---------
5. DIVIDENDS
On September 3, 1996, the Board of Trustees declared a dividend of $.0047
from net investment income payable on September 11, 1996, to shareholders
of record on September 4, 1996.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES SMALL CAP FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- -------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Fund Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
ACTIVE INTERNATIONAL FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 21
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 27
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INTERNATIONAL MARKETS
ENTAIL DIFFERENT RISKS THAN THOSE TYPICALLY ASSOCIATED WITH DOMESTIC MARKETS,
INCLUDING CURRENCY FLUCTUATIONS, POLITICAL AND ECONOMIC INSTABILITY, ACCOUNTING
CHANGES AND FOREIGN TAXATION. SECURITIES MAY BE LESS LIQUID AND MORE VOLATILE.
PLEASE SEE THE PROSPECTUS FOR FURTHER DETAILS. RUSSELL FUND DISTRIBUTORS, INC.,
IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Active International Fund. I hope
you find this information to be a useful tool as you review your overall
investment strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA FUNDS.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Robert Rubano, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Active
International Fund since its inception in March 1995. Mr. Rubano has been with
State Street since 1990 as a portfolio manager of active international funds.
There are seven other portfolio managers working with Mr. Rubano in managing the
Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide long-term capital growth.
INVESTS IN: Equity securities of foreign issuers.
STRATEGY: Fund Managers will concentrate investments in holdings that are
composed of, but not limited to, countries included in the Morgan Stanley
Capital International Europe, Australia, Far East ("MSCI EAFE") Index. Through
the use of propriety model, a quantitative selection process is used to find the
best security relative to the underlying country.
[Graph]
DATES ACTIVE INTERNATIONAL FUND MSCI EAFE INDEX**
Inception* $10,000 $10,000
1995 $10,890 $10,933
1996 $11,567 $11,794
PERFORMANCE REVIEW
The Seven Seas Series Active International Fund posted a return of 6.22% for
the fiscal year ended August 31, 1996. The Fund's return was comparable to
the Fund's benchmark, the MSCI EAFE Index which rose 7.87% over the same
period. The difference in performance is primarily attributable to operating
expenses incurred by the Fund. The Index does not incur expenses of any kind.
PORTFOLIO HIGHLIGHTS
Japan, the largest country in the portfolio and the benchmark, always has a
significant impact on the Fund's return. In local currency terms the market
fared quite well as Japanese stocks were up over 20%. However, these equity
gains were lost due to the depreciating yen which fell from 99 yen to the
dollar in August of 1995 to 108 yen per dollar at August 31, 1996. The
Managers of the Fund had anticipated the yen's fall, and hedged the yen's
exposure into US dollars. This proved very profitable for the Fund. The Fund
has recently removed the hedge as the Manager now believes the yen to be
fairly valued.
SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ----------
1 Year $ 10,622 6.22%
Inception $ 11,567 10.33%+
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(NET DIVIDEND)
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ----------
1 Year $ 10,787 7.87%
Inception $ 11,794 11.63%+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
While there have been some concerns about the rate at which the Japanese economy
is growing, there are signs that the economy is increasing its recovery pace.
Corporate earnings are forecasted to grow at double digit rates for at least the
next two years and Japan currently has some of the lowest interest rates in the
world. Given these positive economic indicators and the currently inexpensive
levels at which Japanese equities are trading, the Fund continues to maintain
its overweighted position in Japan.
In Europe the Fund continues to favor the two counties at the heart of the
European Union, France and Germany. Due to the monetary ties between these two
countries, the recent interest rate cuts by the Bundesbank have brightened the
outlooks for both countries. France and Germany each contributed to the Fund's
performance as these markets returned 9.3% and 10.9%, respectively, over the
fiscal year. Elsewhere in Europe hopes for Italy have brightened as the interim
government of Prime Minister Dini was replaced by a coalition government headed
by the communist party.
The market rallied over 13% during the month after the election.
The Fund's holdings in the emerging markets have been very beneficial to Fund
returns especially those holdings in Brazil and Hungary. In Hungary, strong
economic growth and the availability of new issues helped push the stock market
up almost 15%.
Investments in Brazilian equities returned over 15% for the one year ended
August 31, 1996 as investors were spurred on by the prospects of an increase in
the rate of privatization by the Brazilian government.
Looking forward, the returns in the international stock market are expected to
be closely tied to the rate at which these economies recover from their recent
recessions.
The Fund's ten largest equity holdings comprised 11.3% of the portfolio. Five of
these top equity holdings were held in the Pacific Basin countries.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Singapore Telecommunications, Ltd. 1.4%
Korea International Trust - IDR 1.3
Cheung Kong Holdings, Ltd. 1.2
Norsk Hydro AS 1.2
Telecom Italia di Risp 1.1
Societe Nationale Elf d'Acquitaine 1.1
Brazil Fund, Inc. 1.0
Matsushita Electric Industrial Co., Ltd. 1.0
BASF AG 1.0
Sakura Bank 1.0
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on March 7, 1994. Index comparisons began
March 1, 1994.
**Morgan Stanley Capital International Europe, Australia, Far East Index is
an index composed of an arithmetic, market value-weighted average of the
performance of over 1,100 securities listed on the stock exchanges of the
countries of Europe, Australia, and the Far East. The index is calculated
on a total-return basis, which includes reinvestment of net dividends
after deduction of withholding taxes.
+Annualized
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Active International Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets and the
financial highlights for the fiscal year then ended and for the period March 7,
1995 (commencement of operations) to August 31, 1995. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets and the financial highlights for the
fiscal year then ended and for the period March 7, 1995 (commencement of
operations) to August 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 91.7%
ARGENTINA - 1.2%
Acindar Industria Argentina
de Aceros SA Class B (a) 56,871 $ 40
Alpargatas (a) 78,752 42
Banco de Galicia 9,786 51
Dalmine Siderca SA 62,707 79
Juan Minetti SA 6,775 17
Ledesma 41,805 49
Naviera Perez Companc Class B 11,139 64
Telefonica de Argentina Class B 43,668 103
YPF SA Class D 9,198 193
---------
638
---------
AUSTRIA - 0.7%
Austrian Airlines (a) 300 42
BWT AG 400 47
Fotex (Regd) (a) 22,000 16
Oester Elektrizita Class A 1,100 80
OMV AG 920 92
Perlmooser Zementwerke AG 970 62
Steyr-Daimler-Puch (a) 3,100 48
----------
387
----------
BRAZIL - 2.3%
Banco Bradesco SA NPV 5,669,500 41
Banco Itau SA NPV 275,200 102
Brazil Fund, Inc. 25,600 550
Sider Nacional cia NPV 3,015,400 70
Telecomunicacoes Brasileiras NPV 8,331,500 504
----------
1,267
----------
COLOMBIA - 0.9%
Banco Ganadero SA Class B - ADR 10,900 279
Banco Industrial Colombiano
SA - ADR 2,600 49
Cementos Diamante SA - GDR 14,300 145
----------
473
----------
CZECH REPUBLIC - 1.4%
CEZ (a) 6,600 262
Chemopetrol Group AS 1,500 77
Cokoladovny AS (a) 300 41
Inzenyrske a Prumyslove
Stavby AS (a) 100 13
SPT Telecom AS (a) 2,800 367
---------
760
---------
FINLAND - 0.8%
America Group Class A 2,200 54
Enso OY Series A (a) 5,200 44
Kesko 3,800 62
Kymmene OY (a) 1,400 32
Merita, Ltd. Series A (a) 9,700 21
Nokia AB Series A 3,700 157
Rautaruukki OY 4,700 41
---------
411
---------
FRANCE - 10.1%
Alcatel Alsthom 5,550 430
Banque Nationale Paris 822 30
Casino Guich-Perr 7,100 280
CGIP 1,369 326
Christian Dior 3,150 380
Cie de St. Gobain 2,967 367
Credit Local de France 800 66
Credit Lyonnais Cert d'Invest. (a) 900 20
Credit National 4,710 302
De Dietrich et Compagnie SA (a) 2,000 84
Eurafrance 771 312
Galeries Lafayette (a) 200 57
Gascogne 1,561 136
Groupe Andre SA 2,184 164
GTM ENTREPROSE 2,263 136
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Guyenne et Gascogne 100 $ 36
IDIA (a) 5,500 217
La Rochette (a) 15,100 87
Peugeot SA 3,125 358
Rhone-Poulenc SA Class A - ADR 1,725 45
Sanofi SA 5,732 453
Societe Nationale Elf d'Aquitaine 7,869 573
Strafor-Facom SA 3,647 285
UFB Locabail (a) 3,500 306
Usinor Sacilor 3,362 47
---------
5,497
---------
GERMANY - 8.6%
Allianz AG Holding (Regd) (a) 50 89
Allianz AG Holding (Regd) 100 178
AMB - Aachener & Muenchener
Beteiligung (Regd) 400 327
Bankgesellschaft Berlin AG 3,500 72
BASF AG 18,000 536
Bayer AG 2,350 84
Bayerische Hypotheken-und
Wechsel Bank AG 4,750 135
BHF - Bank AG 5,250 144
Commerzbank AG 1,000 231
Continental AG 16,700 283
Daimler-Benz AG (a) 2,000 109
DBV Holding AG (Regd) 550 197
Degussa AG 300 106
Gerresheimer Glas (a) 1,000 223
Holsten Brauere AG 1,000 231
IKB Deutsche Industriebank AG 900 177
Kolbenschmidt AG (a) 19,100 234
Schmalbach Lubeca AG (a) 1,250 237
Siemens AG 7,000 370
Thyssen AG (a) 900 164
Veba AG 2,100 110
Viag AG (a) 228 82
Viag AG 800 292
Victoria Holding AG (Regd) 150 101
---------
4,712
---------
HONG KONG - 7.6%
Cathay Pacific Airways 248,000 412
Cheung Kong Holdings, Ltd. 96,000 674
Great Eagle Holdings 70,751 205
Guoco Group, Ltd. 36,000 171
Hang Lung Development Co. (a) 178,000 336
Hang Seng Bank (a) 15,000 154
Harbour Centre Development 43,000 58
Hong Kong Electric 96,000 287
Hong Kong Telecommunications 245,200 411
Hutchison Whampoa, Ltd. (a) 33,000 200
Jardine International Motor 64,000 83
Lai Sun Garment International 138,000 178
New Asia Realty & Trust
Class A 33,000 121
Peregrine Investment
Holdings, Ltd. 130,000 183
Sun Hung Kai Properties, Ltd. (a) 24,000 234
Wing Lung Bank 45,000 261
Yue Yuen Industrial 586,000 168
---------
4,136
---------
HUNGARY - 0.7%
Danubius Hotel (Regd) (a) 3,323 61
Egis Gyogyszergyar (a) 3,392 230
Fotex (Regd) (a) 27,803 21
Pick Szeged Rt 1,144 54
Skala Coop (a) 1,945 22
---------
388
---------
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
ITALY - 5.4%
Assicurazioni Generali SPA 8,000 $ 177
Banca Commerciale Italiana 77,000 146
Banca Pop di Bergamo CV 4,000 59
Banco Ambrosiano Veneto di Risp 2,300 3
Danieli & Co. di Risp 14,000 44
Ente Nazionale Idrocarburi
SPA (Regd) 104,000 454
Fiat SPA di Risp 170,000 263
Fidis 54,000 130
I.F.I.L. Risp NC 131,000 173
Istituto Mobiliane Italiano 34,000 268
Montefibre di Risp 44,300 20
R.A.S. di Risp 58,500 259
Recordati di Risp 36,000 120
Stet di Risp 50,000 121
Telecom Italia di Risp 362,000 581
Telecom Italia Mobile SPA - di Risp 20,000 24
Toro Assicurazioni 9,000 98
---------
2,940
---------
JAPAN - 34.0%
Aichi Machine Industries 23,000 154
Amada Co., Ltd. 25,000 235
Amada Sonoike Co. 37,000 222
Aoyama Trading Co. (a) 8,900 235
Aplus Co., Ltd. 35,000 136
Asahi Bank (a) 41,000 457
Asahi Denka Kogyo 23,000 196
Atsugi Nylon Industry 42,000 186
Bank of Tokyo - Mitsubishi (a) 13,000 264
Brother Industries 37,000 192
Bunka Shutter Co. 54,000 393
Chubu Electric Power Co., Inc. 4,000 88
Chugoku Electric Power 5,700 120
Chuo Trust & Banking 11,000 112
Citizen Watch Co., Ltd. (a) 30,000 241
Dai Ichi Katei Denki (a) 35,000 172
Daishinku Corp. 17,000 189
Daiwa Bank (a) 45,000 292
Eiden Sakakiya Co., Ltd. 16,000 199
Fuji Photo Film Co. 13,000 391
Fujita Corp. 51,000 202
Godo Steel 25,000 167
Gunze, Ltd. 29,000 163
Hisamitsu Pharmaceutical Co. 20,000 175
Hitachi Transportation Systems 19,000 192
Hitachi, Ltd. 16,000 147
Hokkai Can Co. 29,000 209
Hokkaido Takushoku Bank, Ltd. 96,000 247
Hokuriku Electric Power 8,600 186
Inabata & Co. 30,000 213
Ines Corp. (a) 11,000 201
Intec, Inc. 14,000 215
Joshin Denki Co. 12,000 156
Kawasho Corp. (a) 48,000 191
Keiyo Bank, Ltd. 6,000 30
Kinseki 14,000 218
Life Co., Ltd. 53,000 202
Makita Corp. 16,000 230
Matsushita Electric
Industrial Co., Ltd. 32,000 539
Mitsubishi Gas & Chemical 24,000 99
Mitsui Real Estate Sales Co. 14,000 263
Miyuki Keori Co., Ltd. 21,000 220
Naigai Co., Ltd. 41,000 195
Nichia Steel Works 28,000 204
Nichiei Construction 19,000 182
Nichimo Co. (a) 12,000 51
Nippon Hume Pipe 33,000 216
Nippon Shinpan Co. 32,000 204
Nippon Valqua Industries 34,000 149
Nissan Motor Co., Ltd. (a) 45,000 337
Nisshinbo Industries, Inc. (a) 22,000 202
Nissho Corp. 15,000 152
Nittoc Construction Co. 19,000 158
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Noritz Corp. 13,000 $ 203
Okabe Co. 21,000 193
Optec Dai-Ichi Denko 45,000 190
Orient Corp. (a) 45,000 271
Ryoden Trading Co. 23,000 182
Ryosan Co. 9,000 224
Sakura Bank 56,000 531
Sanwa Bank 12,000 212
Sanyo Special Steel Co. 78,000 291
Seino Transportation 16,000 236
Settsu Corp. (a) 109,000 325
Shin Meiwa Industries 24,000 218
Shinko Shoji Co. 15,000 192
Shiseido Co., Ltd. 22,000 267
Sumisho Computer Systems Corp. 15,000 214
Sumitomo Realty & Development (a) 42,000 295
Suntelephone Co. 2,000 13
SXL Corp. 12,000 112
Takiron Co., Ltd. 32,000 187
Tanabe Seiyaku Co. 29,000 209
Teikoku Hormone Manufacturing Co. 16,000 219
Tenma Corp. 10,000 208
Toda Kogyo Corp. 28,000 206
Toenec Corp. 7,000 57
Tokai Bank 31,000 368
Tokimec, Inc. (a) 31,000 152
Tokyo Style Co. 13,000 208
Toshiba Engineering
& Construction 23,000 201
Toyo Information Systems 11,000 141
Toyo Trust & Banking 15,000 130
Toyota Motor Corp. 19,000 458
Uchida Yoko Co. 42,000 251
Victor Co. of Japan 12,000 148
Yamato Kogyo Co. 12,000 129
Yasuda Trust & Banking (a) 25,000 125
---------
18,555
---------
NETHERLANDS - 0.4%
ABN AMRO Holdings NV 1,123 61
Pirelli Tyre Holding NV (a) 6,618 63
Stad Rotterdam CVA 1,511 54
Van Ommeren (Kon) CVA 1,394 55
---------
233
---------
NORWAY - 3.7%
Aker AS Series B 9,400 176
Bergesen DY AS Series B 6,400 133
Christiania Bank OG Kreditkasse 46,200 116
Den Norske Creditbank AS 36,800 118
Det Norske Luftfartselskap AS Series B 10,756 104
Kvaerner Industries AS Series B 6,300 206
Leif Hoegh & Co. AS 1,200 21
Norsk Hydro AS 14,500 666
Norske Skogindustrier AS Class A 5,400 166
Nycomed ASA Series B (a) 3,889 46
Petroleum Geo-Services AS (a) 5,600 155
Saga Petroleum AS Series A 8,300 126
---------
2,033
---------
PORTUGAL - 1.1%
Banco Chemical SA 3,900 42
Banco Comercial Portuguese (Regd) 5,305 63
Banco Internacional do Funchal
SA Rights (a) 6,600 8
Banco Internacional Funchal SA (a) 754 6
Banif Banco International do
Funchal (a) 6,600 54
Corticeira Amorim SGPS 4,600 53
Investimentos Participacoes e
Gestao SA (a) 2,400 44
Jeronimo Martins SGPS 700 65
Mague Gestao e Partipacoes 1,700 30
Modelo Continente SGPS SA 3,200 92
Portucel Industrial SA (a) 2,300 16
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Portugal Telecom SA (a) 2,100 $ 56
Soja de Portugal 4,000 40
Soporcel SA (a) 900 21
---------
590
---------
SINGAPORE - 7.1%
Development Bank
of Singapore, Ltd. (Alien Market) 37,000 434
Far East Levingston 37,000 178
Hong Kong Land Holdings, Ltd. 193,000 438
Jardine Strategic Holdings, Ltd. 30,000 96
Keppel Bank 77,000 219
Keppel Bank 2000 Warrants (a) 7,250 8
Keppel Corp. 2,000 15
Mandarin Oriental
International, Ltd. (a) 257,000 357
Metro Holdings, Ltd. 56,400 206
Neptune Orient Lines, Ltd. 199,000 177
Overseas Chinese Banking
(Alien Market)(a) 15,400 185
Singapore Airlines, Ltd.
(Alien Market) 35,000 371
Singapore Land 21,000 136
Singapore Telecommunications, Ltd. 305,000 741
United Engineers 35,000 61
United Industrial Corp., Ltd. 255,000 243
---------
3,865
---------
SOUTH KOREA - 1.3%
Korea International Trust - IDR (a) 18* 720
---------
720
---------
SPAIN - 0.2%
Banco Central Hispano
Americano SA (Regd) 950 19
Dragados y Construcciones SA 1,300 16
Repsol SA 400 13
Telefonica de Espana 1,100 20
Union Electrica Fenosa 6,750 42
---------
110
---------
SWITZERLAND - 2.3%
Baloise Holdings (Regd) 30 64
Banca del Gottardo Class B (BR) 55 30
Banque Cant Vaudoise (BR) 220 65
Bobst AG (BR) 50 68
Ciba Geigy AG (BR) 75 95
CS Holdings (Regd) 470 49
Ems-Chemie Holding AG 10 40
Forbo Holding AG (Regd) 155 64
Hero (BR) 55 28
Nestle SA (Regd) 125 146
Pargesa Holdings SA (BR) 25 28
Rieter Holdings, Ltd. (Regd) (a) 95 24
Roche Holdings Genusscheine AG NPV 30 229
Sandoz AG (Regd) 205 244
Schweiz Bankverein (Regd) 380 74
Winterthur (Regd) 45 27
---------
1,275
---------
UNITED KINGDOM - 1.9%
Abbey National PLC 5,200 48
ASDA-MFI Group PLC 30,800 54
Associated British Foods PLC 7,600 47
Barclays Bank PLC 1,722 24
British Telecom PLC 2,400 14
Burton Group PLC 46,400 110
Cable & Wireless PLC 12,280 81
General Accident PLC 3,500 36
Glaxo Wellcome PLC 2,600 37
Greenalls Group PLC 5,400 49
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Hammerson Property PLC 7,600 $ 46
Hyder PLC 3,600 41
Lonrho PLC 15,100 41
Mirror Group News PLC 13,000 40
North West Water PLC 4,800 45
Royal Bank of Scotland Group PLC 5,800 44
Severn Trent Water PLC 4,737 45
Smith & Nephew PLC 14,776 45
Sun Alliance Group PLC 8,767 55
Wimpey (George), Ltd. PLC 20,700 44
Yorkshire Water PLC 8,983 96
---------
1,042
---------
TOTAL COMMON STOCKS
(cost $49,605) 50,032
---------
PREFERRED STOCKS - 4.4%
AUSTRIA - 1.0%
Allgemeine Baugesellschaft 2,400 114
Bau Holdings AG 1,200 54
Creditanstalt-Bankverein 2,120 96
EA Generali AG 500 67
Z Landerbank Bank Austria AG 5,600 232
---------
563
---------
BRAZIL - 1.5%
Acos Villares SA NPV (a) 60,000 15
Banco Nacional SA NPV 871,000 16
Companhia Siderurgica
Belgo-Mineira NPV 890,000 60
Electrobras Series B NPV 1,155,800 317
Paranapanemasa (Regd) 2,749,700 18
Petroleo Brasileiro SA NPV 700,300 84
Sider Riograndense NPV 3,317,950 48
Siderurgica Tubarao NPV 3,091,600 49
Telepar Tel Parana NPV 85,500 41
UNIPAR SA Class B 102,800 55
Vale Rio Doce (cia) NPV 4,844 94
---------
797
---------
GERMANY - 1.8%
Dyckerhoff AG 233 51
RWE AG (a) 16,500 495
Volkswagen AG 1,550 431
---------
977
---------
ITALY - 0.1%
Compagnia Assicuratrice Unipol 38,000 75
---------
75
---------
TOTAL PREFERRED STOCKS
(cost $2,419) 2,412
---------
PRINCIPAL
AMOUNT
(000)
---------
LONG-TERM INVESTMENTS - 0.4%
GERMANY - 0.1%
Bayerische Hypotheken - und
Wechsel - Bank AG (conv.)
9.250% due 12/31/01 DM 80 74
---------
74
---------
ITALY - 0.3%
Italy, Republic of (conv.)
5.000% due 06/28/01 $ 150 151
---------
151
---------
TOTAL LONG-TERM INVESTMENTS
(cost $223) 225
---------
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
SHORT-TERM INVESTMENTS - 2.8%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 246 $ 246
Student Loan Marketing Association
Discount Note
5.160% due 09/03/96 (b) 1,289 1,289
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,535) 1,535
---------
Total Investments
(identified cost $53,782)(c) - 99.3% 54,204
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 391
---------
NET ASSETS - 100.0% $ 54,595
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
IDR - International Depositary Receipt.
* Reflected in units. 1 IDR unit = 1,000 shares.
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------ --------- ---------
Basic Industries 9.2% $ 5,003
Capital Goods 9.8 5,364
Consumer Basics 5.4 2,959
Consumer Durable Goods 8.1 4,423
Consumer Non-Durables 7.6 4,152
Consumer Services 2.8 1,545
Energy 5.6 3,045
Finance 22.0 12,028
General Business 4.1 2,203
Miscellaneous 9.1 4,967
Shelter 1.9 1,047
Technology 2.4 1,293
Transportation 1.5 813
Utilities 6.6 3,602
Long-Term Investments 0.4 225
Short-Term Investments 2.8 1,535
--------- ---------
Total Investments 99.3 54,204
Other Assets and Liabilities, Net 0.7 391
--------- ---------
NET ASSETS 100.0% $ 54,595
--------- ---------
--------- ---------
% OF MARKET
NET VALUE
GEOPGRAHIC DIVERSIFICATION ASSETS (000)
- -------------------------- --------- ---------
Europe 40.6% $ 22,218
Japan 34.0 18,555
Pacific Basin 14.7 8,001
Latin America 5.9 3,175
Short-Term Investments - U.S. 2.8 1,535
Asia 1.3 720
--------- ---------
Total Investments 99.3 54,204
Other Assets and Liabilities, Net 0.7 391
--------- ---------
NET ASSETS 100.0% $ 54,595
--------- ---------
--------- ---------
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $53,781,885)(Note 2). . . . . . . . . . . . . $ 54,203,887
Foreign currency holdings (identified cost $496,912) . . . . . . . . . . . . . . . . 502,816
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,335
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,844
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,639
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,153
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 30,928
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,036,602
LIABILITIES
Payables (Note 4):
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . $ 257,932
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . 67,189
Accrued fees to affiliates and trustees. . . . . . . . . . . . . . 39,352
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 22,587
Closed forward foreign currency exchange contracts (Note 2). . . . . 54,741
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,801
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,594,801
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 523,680
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . 338,162
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,002
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 6,752
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,983
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,299,222
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,594,801
-------------
-------------
Net asset value, offering and redemption price per share
($54,594,801 divided by 4,982,837 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . $10.96
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends (net of foreign taxes withheld of $89,222) . . . . . . . . . . . . . . . $ 726,228
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,766
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847,994
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294,486
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . 23,662
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 133,278
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . 10,949
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 26,117
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . 32,396
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . 10,086
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . 11,941
Trustee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,113
Amortization of deferred organization expenses . . . . . . . . . . 8,824
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,816
-------------
Expenses before waivers. . . . . . . . . . . . . . . . . . . . . . 578,668
Expenses waived by Adviser . . . . . . . . . . . . . . . . . . . . (186,020)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,648
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,346
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,562
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 1,422,213
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,965
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (950,961)
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150,779
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . $ 1,606,125
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995*
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 455,346 $ 69,067
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,562 (9,108)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,422,213 (21,718)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,965 122,037
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (950,961) 957,713
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . 1,606,125 1,117,991
Distributions to shareholders from net investment income . . . . . . . . . . . . . . . . . . . . . (1,441,642) --
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . 29,244,816 24,067,511
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,409,299 25,185,502
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,185,502 --
------------- -------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$523,680 and $49,810, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,594,801 $ 25,185,502
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995*
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 3,712,988 $ 40,966,566 2,340,535 $ 24,359,411
Fund shares issued to shareholders
in reinvestments of distributions. . . . . . . . . . . . . . . . 129,404 1,336,577 -- --
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . (1,173,125) (13,058,327) (26,965) (291,900)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . 2,669,267 $ 29,244,816 2,313,570 $ 24,067,511
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
* For the period March 7, 1995 (commencement of operations) to August 31, 1995.
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995*
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Year . . . . . . . . . . . . . . . . . . $ $10.89 $ 10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . .36 .03
Net realized and unrealized gain (loss) on investments . . . . . . . .28 .86
------------ ------------
Total Income From Investment Operations. . . . . . . . . . . . . . . .64 .89
------------ ------------
LESS DISTRIBUTIONS:
Net investment income (e). . . . . . . . . . . . . . . . . . . . . . (.57) --
------------ ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 10.96 $ 10.89
------------ ------------
------------ ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . 6.22 8.90
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c). . . . . . . . 1.00 1.79
Operating expenses, gross, to average net assets (b)(c). . . . . . . 1.47 2.56
Net investment income to average net assets (b). . . . . . . . . . . 1.16 1.11
Portfolio turnover (b) . . . . . . . . . . . . . . . . . . . . . . . 22.02 7.17
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . 54,595 25,186
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . .1459 .0207
Average commission rate paid per share of security ($ omitted)(d). . .0021 N/A
</TABLE>
* For the period March 7, 1995 (commencement of operations) to
August 31, 1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period March 7, 1995 (commencement
of operations) to August 31, 1995 are annualized.
(c) See Note 4 for current period amounts.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share of security and commission paid per share of
security may vary from that of domestic markets.
(e) Includes gains from foreign currency-related transactions. See Note 2.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Active International Fund (the "Fund"). The
Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
fair market value of such securities.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 54,051,805 $ 2,988,624 $ (2,836,542) $ 152,082
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1996:
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- -------------- --------------
$ 1,460,166 $ (1,454,505) $ (5,661)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books; and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into foreign currency exchange spot contracts and forward
foreign currency exchange contracts ("contracts"). Contracts are recorded
at market value. Certain risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts. Realized gains or losses arising from such transactions are
included in net realized gain (or loss) from foreign currency-related
transactions. There were no open contracts as of August 31, 1996.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
INVESTMENT IN INTERNATIONAL MARKETS: Investing in international markets may
involve special risks and considerations not typically associated with
investing in the United States. These risks include revaluation of
currencies, future adverse political and economic developments and
liquidity concerns resulting from thinner markets. Moreover, securities
issued in these markets may be less liquid and their prices more volatile
than
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
those of comparable securities in the United States. The Prospectus
contains further information and details regarding these risks.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the for the year ended August 31, 1996,
purchases and sales of investment securities, excluding short-term
investments, aggregated to $39,365,081 and $8,087,144, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the year ended August 31,
1996, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceeded 1.00% on an annual
basis. The Investment Company also has contracts with the adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all international funds: $0 up to and
including $500 million - .07%, over $500 million to and including $1
billion - .06%, over $1 billion to and including $1.5 billion - .04%, over
$1.5 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
furnishing assistance to investors on an ongoing basis, and for the
reimbursement of direct out-of-pocket expenses incurred by the Distributor
in connection with the distribution and marketing of shares of the
Investment Company and the servicing of investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $9,816 and $270 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 20,188
Administration fees 2,743
Custodian fees 11,702
Distribution fees 928
Shareholder servicing fees 1,174
Transfer agent fees 1,973
Trustees' fees 644
----------
39,352
----------
----------
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
ACTIVE INTERNATIONAL FUND
TAX INFORMATION
August 31, 1996
The Fund paid foreign taxes of $89,222 and recognized $739,890 of foreign source
income during the taxable year ended August 31, 1996. Pursuant to Section 853 of
the Internal Revenue Code, the Fund designates $.0179 per share of foreign taxes
paid and $.1485 of gross income earned from foreign sources in the taxable year
ended August 31, 1996.
Please consult a tax advisor for questions about federal or state
income tax laws.
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES ACTIVE INTERNATIONAL FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
YIELD PLUS FUND
August 31, 1996
Annual Report
TABLE OF CONTENTS
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 22
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Yield Plus Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA Funds.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the Yield Plus Fund since early
1996. Ms. Williams has been with State Street since February 1994 as the Mutual
Funds unit head responsible for oversight of money market and other short-term
funds. Prior to joining State Street Bank she was a portfolio manager with PNC
Bank and the Calvert Group. There are four other portfolio managers working with
Ms. Williams in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality, investment grade, debt instruments; including US
Government Treasuries and Agencies, corporate bonds, asset-backed securities,
mortgage-backed securities, and high quality money market instruments
maintaining duration to one year or less.
STRATEGY: Fund Managers base their decisions on the relative attractiveness of
different investments which can vary depending on the general level of interest
rates as well as supply/demand imbalances in the market. The Fund seeks a view
to outperform a typical money market fund over time.
[Graph]
DATES YIELD PLUS FUND SALOMON 3-MONTH T-BILL** SALOMON 6-MONTH T-BILL****
INCEPTION $10,000 $10,000 $10,000
1993 $10,285 $10,256 $10,273
1994 $10,660 $10,621 $10,650
1995 $11,301 $11,213 $11,271
1996 $11,948 $11,813 $11,888
PERFORMANCE REVIEW
The Fund had a one year return of 5.73% for the fiscal year ended August 31,
1996. Although the Fund is not a money market fund, it is managed in a manner
to provide higher returns than typically available from a money fund, without
substantially increasing duration risk. The Fund outperformed its benchmarks,
the Salomon Brothers 3-Month and 6-Month Treasury Bill Indexes of 5.35% and
5.47%, respectively by 0.38 and 0.26 percentage points.
During the period since the last fiscal year, the Fund adopted a policy to
use the Salomon Brothers 3-Month Treasury Bill Index as its broad-based
benchmark versus the Salomon Brothers 1-Year Treasury Bill Index. The
duration of the 3-Month Index more closely approximates the targeted duration
of the Fund. This Index is a better representation for reporting performance
and risk than the 1-Year index.
The assets of the Fund declined from $1.45 billion last year end to
approximately $920 million by August 31, 1996. This decline largely
represented temporary shifts away from enhanced cash investment during the
rising interest rate environment of the last several months.
SEVEN SEAS SERIES YIELD PLUS FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ----------
1 Year $ 10,573 5.73%
Inception $ 11,948 4.79%+
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ----------
1 Year $ 10,535 5.35%
Inception $ 11,813 4.44%+
NARROWLY BASED INDEX:
SALOMON BROTHERS 6-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ----------
1 Year $ 10,547 5.47%
Inception $ 11,888 4.62%+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION
PORTFOLIO HIGHLIGHTS
In the last year, fixed income yields held low through February 1996 by
recessionary fears, gave way to higher bond yields fueled by better than
expected economic growth in the second half of the year. Last December and
January, two interest rate moves of 25 basis points each brought the Fed Funds'
target rate down to 5.25%, where it remained for the rest of the year. Despite
this relatively quiet Fed activity, short-term interest rates traded in a wide
range. One- and three-month LIBOR (London Interbank Offering Rate) dropped close
to 70 basis points before rising in March. One year LIBOR fell 110 basis points
to 4.99% in February, but closed the year at 6.31%, 20 basis points higher than
it started. Similarly, one-year Treasuries traded from 5.97% down to 4.79% and
back up to 5.91% by the end of August.
These dramatic shifts in short-term interest rates reflected the market's
anticipation of Federal Reserve moves, which proved more volatile than the
actual Fed activity done.
As a short-term investment fund, the Fund maintains a portfolio duration
approximating the 90 day maximum average maturity permitted for SEC-registered
money market funds. The securities held in the Fund are typically securities
which would not be eligible for money market investments primarily because they
have longer maturities than those permitted in a money market fund. Duration is
controlled through interest rate reset features on certain investments and
hedging in the futures market. By pursuing this strategy, the Fund is able to
capitalize on the greater credit and maturity risk premiums available in
longer-term securities while limiting duration risk. This type of investment
strategy allows the Fund to avoid the overwhelming demand for short-term
securities from money market type funds.
The Fund continues to focus its investments on high quality fixed and floating
rate corporate bonds and fixed and floating rate AAA-rated asset-backed
securities. Specific securities are selected based on relative value analysis.
The Fund is actively traded to reposition itself and take advantage of market
inefficiencies.
The Fund's ten largest issuers comprised 55.7% of the portfolio. Within this
group, 30.9% represented asset-backed securities, and 25.3% represented
corporate bonds and notes.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Superior Wholesale Inventory
Financing Trust 7.6%
Carco Auto Loan Master Trust 6.5
Premier Auto Trust 6.4
MBNA Master Credit Card Trust II 5.3
Merrill Lynch & Co., Inc. 5.2
Advanta Credit Card Master Trust 5.1
Associates Corp. North America 5.1
Wells Fargo & Co. 5.1
NationsBank Corp. 4.8
Den Danske Grand Cayman 4.6
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH
AND TABLE ON THE PRECEDING PAGE.
*The Fund commenced operations on November 9, 1992. Index comparisons began
November 1, 1992.
++Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
++++The total return calculated for the Salomon Brothers 6-Month Treasury
Bills Index includes principal gain or loss, income and reinvestment of
proceeds. The Index is based on a rolling maturity concept and holding the
bond to maturity. For example, the Index will continue, at any point,
issues with 1-6 months of remaining maturity.
+Annualized
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Yield Plus Fund (the "Fund"),
as of August 31, 1996, and the related statement of operations for the fiscal
year then ended, the statements of changes in net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the three fiscal years in the period then ended and for the period November 9,
1992 (commencement of operations) to August 31, 1993. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period November 9, 1992 (commencement
of operations) to August 31, 1993 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
LONG-TERM INVESTMENTS - 90.5%
ASSET-BACKED SECURITIES - 42.9%
Advanta Credit Card Master Trust
Series 1993-4 Class A
5.570% due 12/31/00(b) $ 5,000 $ 5,013
Series 1995-F Class A2
5.611% due 08/01/03 (b) 15,000 15,023
Advanta Credit Card Master Trust II
Series 1995-D Class A1
5.611% due 02/01/04 (b) 25,000 25,023
Carco Auto Loan Master Trust
Series 1992-2 Class A
5.787% due 09/15/99 (b) 12,150 12,184
Series 1993-1 Class A
5.717% due 01/18/00 (b) 10,000 10,028
Series 1995-1 Class A
5.581% due 06/15/00 (b) 35,000 35,044
Case Equipment Loan Trust
Series 1993 Class A
4.300% due 05/15/99 823 803
Series 1994-A Class A2
4.650% due 08/15/99 4,219 4,172
Series 1996-A Class A2
5.500% due 02/15/03 7,500 7,407
First Chicago Master Trust II
Series 1995-N Class A
5.581% due 12/15/00 (b) 5,000 5,006
Ford Credit Auto Loan Master Trust
Series 1992-2 Class A
7.375% due 04/15/99 13,300 13,404
Series 1994-1 Class A
5.687% due 07/15/01 (b) 15,050 15,088
Household Affinity Credit Card
Master Trust I
Series 1994-1 Class A
5.571% due 05/15/01 (b) 17,400 17,411
Main Place Funding Corp.
Series 1995-1
5.616% due 07/17/98 (b) 25,000 25,000
MBNA Master Credit Card Trust II
Series 1994-D Class A
5.570% due 03/15/00 (b) 12,000 12,015
Series 1995-I Class A
5.591% due 03/15/03 (b) 35,000 35,065
NationsBank Auto Grantor Trust
Series 1995-A Class A
5.850% due 06/15/02 5,098 5,074
Premier Auto Trust
Series 1993-6 Class A2
4.650% due 11/02/99 5,746 5,656
Series 1993-6 Class A3
5.668% due 11/02/99 (b) 13,729 13,739
Series 1994-4 Class A-3
6.200% due 10/02/97 2,937 2,938
Series 1995-1 Class A3
7.700% due 01/04/98 10,594 10,617
Series 1995-4 Class A2
5.511% due 04/06/98 (b) 13,409 13,409
Series 1995-4 Class A3
5.900% due 07/06/99 10,000 9,982
Standard Credit Card Master Trust I
Series 1995-11 Class A
5.590% due 11/15/00 (b) 34,000 34,000
Superior Wholesale Inventory
Financing Trust
Series 1995-A Class A
5.551% due 08/15/00 (b) 67,400 67,400
---------
400,501
---------
CORPORATE BONDS AND
NOTES - 44.2%
Associates Corp. of North America
6.625% due 07/15/99 45,000 44,853
Beneficial Corp. (MTN)
6.030% due 06/17/97 17,000 16,985
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
CIT Group Holdings, Inc.
5.625% due 04/01/98 $ 10,000 $ 9,859
CIT Group Holdings, Inc. (MTN)
5.460% due 05/19/97 (b) 5,650 5,642
Commercial Credit Group, Inc.
5.500% due 05/15/98 5,000 4,892
CoreStates Capital Corp. (MTN)
5.409% due 09/17/97 (b) 15,000 15,012
Dean Witter Discover & Co.
5.469% due 08/10/98 (b) 5,000 4,995
Dean Witter Discover & Co. (MTN)
5.629% due 09/29/97 (b) 20,000 20,025
First Bank Systems, Inc. (MTN)
5.479% due 03/19/97 (b) 6,000 6,001
First Bank Systems, Inc. (MTN)
Series F
5.569% due 10/21/98 (b) 15,000 15,015
First Chicago Corp. (MTN)
5.835% due 12/13/99 (b) 5,000 5,015
First Union Corp.
5.679% due 02/24/98 (b) 25,000 25,032
Ford Motor Credit Co. (MTN)
5.840% due 10/21/97 (b) 10,000 10,022
5.867% due 11/01/97 (b) 15,000 15,033
6.420% due 02/04/98 10,000 9,996
5.750% due 02/22/99 (b) 5,000 5,012
General Electric Capital Corp. (MTN)
5.460% due 08/11/97 (b) 4,000 4,000
General Motors Acceptance
Corp. (MTN)
7.875% due 02/28/97 5,400 5,449
Household Finance Co. (MTN)
5.510% due 08/04/97 (b) 5,000 4,989
7.910% due 02/06/98 10,000 10,197
5.591% due 07/06/98 (b) 10,000 10,013
Household International, Inc.
5.671% due 05/27/97 (b) 6,000 6,005
Merrill Lynch & Co., Inc. (MTN)
5.832% due 02/05/99 (b) 15,000 15,009
5.900% due 02/15/00 (b) 16,000 16,080
Merrill Lynch & Co. Inc. (MTN)
Series B
5.860% due 01/22/99 (b) 15,000 15,010
NationsBank Corp. (MTN)
5.592% due 08/25/98 (b) 37,500 37,502
5.802% due 11/18/99 (b) 5,000 4,999
Sears Roebuck & Co. (MTN)
5.579% due 11/14/97 (b) 25,000 25,058
Wells Fargo & Co. (MTN)
5.600% due 12/29/97 (b) 30,000 29,988
5.637% due 07/01/98 (b) 15,000 14,942
---------
412,630
---------
EURODOLLAR BONDS - 1.6%
BankAmerica Corp.
5.875% due 02/19/97 (b) 5,000 5,009
PepsiCo, Inc. (MTN)
7.750% due 02/28/97 5,000 5,038
8.000% due 12/28/97 5,000 5,096
---------
15,143
---------
UNITED STATES GOVERNMENT
AGENCIES - 0.4%
Student Loan Marketing Association
Series 1995-1 Class A1
5.785% due 04/26/04 (b) 4,030 4,034
---------
4,034
---------
UNITED STATES GOVERNMENT
TREASURIES - 1.4%
United States Treasury Notes
5.625% due 06/30/97 500 499
5.875% due 04/30/98 5,580 5,547
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
5.500% due 11/15/98 $ 2,000 $ 1,963
6.250% due 08/31/00 5,000 4,926
---------
12,935
---------
TOTAL LONG-TERM INVESTMENTS
(cost $845,251) 845,243
---------
SHORT-TERM INVESTMENTS - 4.5%
Den Danske Grand Cayman - ETD
5.312% due 09/03/96 (a)(d) 40,794 40,794
Federal Home Loan Bank
Consolidated Discount Notes
5.345% due 10/23/96 (a)(c)(d) 1,000 992
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $41,786) 41,786
---------
TOTAL INVESTMENTS
(identified cost $887,037)(e) - 95.0% 887,029
OTHER ASSETS AND LIABILITIES,
Net - 5.0% 46,456
---------
NET ASSETS - 100.0% $ 933,485
---------
---------
(a) Rate noted is yield-to-maturity.
(b) Adjustable or floating-rate securities.
(c) Held as collateral by the custodian in connection with futures contracts
sold short by the Fund.
(d) At cost, which appoximates market.
(e) See Note 2 for federal income tax information.
ABBREVIATIONS:
ETD - Eurodollar Time Deposit.
MTN - Medium Term Note.
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
FUTURES CONTRACTS
SOLD SHORT (NOTES 2 AND 3)
Eurodollar Futures Contract
Expiration date 09/96 102 $ 203
Eurodollar Futures Contract
Expiration date 12/96 84 281
Eurodollar Futures Contract
Expiration date 03/97 85 5
Eurodollar Futures Contract
Expiration date 12/97 15 53
Eurodollar Futures Contract
Expiration date 12/98 100 7
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Sold Short (*) $ 549
-------------
-------------
(*) At August 31, 1996, Federal Home Loan Bank
Consolidated Discount Notes valued at $992 were
held as collateral by the custodian in connection with
open futures contracts sold short by the Fund.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $887,036,917)(Note 2) . . . . . . . . . . . . $887,028,528
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,180,449
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,916,002
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,061,765
Daily variation margin on futures contracts (Notes 2 and 3) . . . . . . . . . . . 98,725
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,075
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 10,156
------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934,308,700
LIABILITIES
Payables (Note 4):
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,202
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . 411,567
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 266,581
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 7,732
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824,082
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $933,484,618
------------
------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,180
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . (2,540,373)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,389)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,200
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,362
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935,389,638
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $933,484,618
------------
------------
Net asset value, offering and redemption price per share
($933,484,618 divided by 93,361,775 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $10.00
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
Investment Income
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,328,367
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,461,407
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 384,596
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 260,299
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 256,977
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 37,621
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . 30,357
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 320,725
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . 75,673
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 65,299
Amortization of deferred organization expenses. . . . . . . . . . 8,568
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 52,656
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,954,178
------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,374,189
------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,020,779
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,203,274)
Options written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,400
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,375,306)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,532,975
Options written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,400)
------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,826)
------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . .
$ 77,364,363
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 77,374,189 $ 73,436,453
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,020,779 (1,862,940)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . (2,203,274) (451,766)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . 39,400 (49,325)
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,375,306) 5,828,065
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . 1,532,975 (1,937,250)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . (24,400) 24,400
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . . 77,364,363 74,987,637
Distributions to shareholders:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . (77,330,064) (73,436,453)
In excess of net investment income. . . . . . . . . . . . . . . . . -- (46,394)
In excess of net realized gain on investments . . . . . . . . . . . -- (1,122,354)
Increase (decrease) in net assets from Fund share transactions . . . . (513,646,970) 88,251,273
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . (513,612,671) 88,633,709
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 1,447,097,289 1,358,463,580
-------------- --------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of $1,180 and
accumulated distributions in excess of net investment income
of $46,394, respectively) . . . . . . . . . . . . . . . . . . . . . $ 933,484,618 $1,447,097,289
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . 147,331,895 $ 1,473,440,740 144,902,377 $ 1,447,298,600
Fund shares issued to shareholders
in reinvestments of distributions . 7,635,703 76,373,328 7,206,031 71,958,014
Fund shares redeemed . . . . . . . . . (206,334,762) (2,063,461,038) (143,360,605) (1,431,005,341)
--------------- --------------- --------------- ---------------
Net increase (decrease). . . . . . . . (51,367,164) $ (513,646,970) 8,747,803 $ 88,251,273
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994 1993*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . $ 10.00 $ 9.99 $ 10.01 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . .56 .56 .38 .27
Net realized and unrealized
gain (loss) on investments . . . . . . . . . . . . .00 .02 (.02) .01
----------- ----------- ----------- -----------
Total Income From Investment Operations . . . . . . . .56 .58 .36 .28
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . (.56) (.56) (.38) (.27)
In excess of net investment income. . . . . . . . . . -- (.00) -- --
In excess of net realized gain on investments . . . . -- (.01) -- --
----------- ----------- ----------- -----------
Total Distributions . . . . . . . . . . . . . . . . . (.56) (.57) (.38) (.27)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . $ 10.00 $ 10.00 $ 9.99 $ 10.01
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . 5.73 6.01 3.65 2.85
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b). . .36 .38 .35 .38
Net investment income to average net assets (b) . . . 5.59 5.64 3.82 3.54
Portfolio turnover (b). . . . . . . . . . . . . . . . 97.05 199.69 142.68 137.86
Net assets, end of year ($000 omitted). . . . . . . . 933,485 1,447,097 1,358,464 589,594
Per share amount of fees waived ($ omitted) . . . . . -- -- -- .00042
</TABLE>
* For the period November 9, 1992 (commencement of operations) to
August 31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1993 are annualized.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Yield Plus Fund (the "Fund"). The Investment Company
is a registered and diversified open-end investment company, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and operates
under a First Amended and Restated Master Trust Agreement, dated October
13, 1993, as amended (the "Agreement"). The Investment Company's Agreement
permits the Board of Trustees to issue an unlimited number of full and
fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price. Futures contracts are valued on the basis
of the last sale price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required. At August
31, 1996, the Fund had a net tax basis capital loss carryover of
$1,797,175, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2004.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 887,230,915 $ 647,203 $ (849,590) $ (202,387)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in options, futures,
mortgage-backed securities, and certain securities sold at a loss.
Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting its net asset value.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
delivery of the underlying securities. The market value of these securities
(including accrued interest) on acquisition date is required to be an
amount equal to at least 102% of the repurchase price. The Fund's Adviser
will monitor repurchase agreements daily to determine that the market value
(including accrued interest) at Fedwire closing time of the underlying
securities remains at least equal to 100% of the repurchase price. The
Adviser or third-party custodian will notify the seller to immediately
increase the collateral on the repurchase agreement to 102% of the
repurchase price if collateral falls below 100%.
DERIVATIVES: To the extent permitted by the investment objective,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index. The
Fund's use of derivatives includes exchange-traded futures and options on
futures. These instruments offer unique characteristics and risks that
assist the Fund in meeting its investment objective.
The Fund typically uses derivatives for hedging purposes. Hedging
techniques are utilized by the Fund to limit or control risks, such as
adverse movements in interest rates. The primary risk associated with
options and futures is generally categorized as market risk.
OPTIONS: The Fund may purchase and sell (write) call and put options on
securities, securities indexes, and futures, provided such options are
traded on a national securities exchange or in an over-the-counter market.
The Fund may also purchase and sell put and call options on foreign
currencies.
When the Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. The Fund receives a premium on the sale
of an option but gives up the opportunity to profit from any increase in
stock value above the exercise price of the option, and when the Fund
writes a put option it is exposed to a decline in the price of the
underlying security. If an option which the Fund has written either expires
on its stipulated expiration date or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss, if the cost of a
closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
call option which the Fund has written is exercised, the Fund realizes a
capital gain or loss from the sale of the underlying security, and the
proceeds from such sale are increased by the premium originally received.
When a put option which a Fund has written is exercised, the amount of the
premium originally received will reduce the cost of the security which a
Fund purchases upon exercise of the option.
The Fund's use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets
and Liabilities. The face or contract amounts of those instruments reflect
the extent of the Fund exposure to off-balance-sheet risk. The risks may be
caused by an imperfect correlation between movements in the price of the
instrument and the price of the underlying securities and interest rates.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
FUTURES: The Fund is currently utilizing exchange-traded futures contracts.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Funds and the prices of futures contracts and the possibility
of an illiquid market. Changes in initial settlement value are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations, short-term investments, futures and options contracts,
and repurchase agreements aggregated to $954,934,781, $1,367,337,818, and
$18,000,000, respectively.
For the year ended August 31, 1996, purchases and sales of US Government
and Agency obligations, excluding short-term investments, futures and
option contracts, and repurchase agreements aggregated to $294,627,893 and
$297,797,789, respectively.
OPTIONS: Fund transactions in written options for the year ended August 31,
1996 were as follows:
CALL OPTIONS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
Outstanding at August 31, 1995 100 $ 39,400
Written -- --
Terminated (100) (39,400)
--------- --------
Outstanding at August 31, 1996 -- $ --
--------- --------
--------- --------
FUTURES TRANSACTIONS: Fund transactions in futures contracts during the
year ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS FUTURES CONTRACTS
SOLD SHORT PURCHASED
---------------------------- ----------------------------
AGGREGATE AGGREGATE
NUMBER OF FACE VALUE OF NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1) CONTRACTS CONTRACTS (1)
--------- --------------- --------- -------------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1995 1,027 $ 963,425,600 -- $ --
Contracts opened 2,509 2,378,036,000 429 405,446,800
Contracts closed (3,150) (2,977,573,400) (429) (405,446,800)
--------- --------------- --------- -------------
Outstanding at August 31, 1996 386 $ 363,888,200 -- $ --
--------- --------------- --------- -------------
--------- --------------- --------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened. Three month Eurodollar financial futures contracts
have a notional face amount of $1,000,000 and an equivalent duration of 13
weeks or .25 years.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing, and
transfer agent services to the Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $319,625 and $1,100 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 226,731
Administration fees 5,687
Custodian fees 8,198
Distribution fees 4,623
Shareholder servicing fees 2,746
Transfer agent fees 4,997
Trustees' fees 13,599
----------
$ 266,581
----------
----------
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES YIELD PLUS FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
US TREASURY MONEY MARKET FUND
PRIME MONEY MARKET FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 10
US Treasury Money Market Fund Financial Statements . . . . . . . . . . . . 11
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Prime Money Market Fund Financial Statements . . . . . . . . . . . . . . . 16
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 27
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUNDS AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVES AND OPERATIONS OF THE FUNDS, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC., IS THE
DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES US TREASURY AND PRIME MONEY MARKET FUNDS
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the US Treasury and Prime Money Market
Funds. I hope you find this information to be a useful tool as you review your
overall investment strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA
Funds. In the coming year you will notice the new logo and name on all fund
materials. SSgA is the investment management business of State Street Bank and
Trust Company, a 200 year old pioneer and leader in the world of financial
services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US TREASURY AND PRIME MONEY MARKET FUNDS
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the US Treasury and Prime Money
Market Funds since her arrival at State Street in February 1994. Ms. Williams is
the Mutual Funds Unit Head responsible for oversight of money market and other
short-term funds. Prior to joining State Street, she was a portfolio manager
with PNC Bank and the Calvert Group. There are seven other portfolio managers
working with Ms. Williams in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES US TREASURY AND PRIME MONEY MARKET FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: Obligations issued, guaranteed, or backed by the US Government.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[Graph]
<TABLE>
<CAPTION>
<S> <C> <C>
DATES US TREASURY MONEY MARKET FUND SALOMON BROTHERS 3-MONTH T-BILL INDEX**
Inception* $10,000 $10,000
1994 $10,251 $10,277
1995 $10,813 $10,851
1996 $11,399 $11,431
</TABLE>
PERFORMANCE REVIEW
In the last year, fixed income yields held low through February 1996 by
recessionary fears, gave way to higher bond yields fueled by better than
expected economic growth in the second half of the year. Last December and
January, two interest rate moves of 25 basis points each brought the Fed Funds'
target rate down to 5.25%, where it remained for the rest of the year. Despite
this relatively quiet Fed activity, short-term interest rates traded in a wide
range. One- and three-month LIBOR (London Interbank Offering Rate) dropped close
to 70 basis points before rising in March. One year LIBOR fell 110 basis points
to 4.99% in February, but closed the year at 6.31%, 20 basis points higher than
it started. Similarly, one-year Treasuries traded from 5.97% down to 4.79% and
back up to 5.91% by the end of August. These dramatic shifts in short-term
interest rates reflected the market's anticipation of Federal Reserve moves,
which proved much more volatile than the actual Fed activity.
THE SEVEN SEAS SERIES US TREASURY MONEY MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ------------------ ------------------ ------------------
1 Year $ 10,542 5.42%
Inception $ 11,399 4.88%+
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ------------------ ------------------ ------------------
1 Year $ 10,535 5.35%
Inception $ 11,431 4.98%+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US TREASURY MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The Seven Seas Series US Treasury Money Market Fund had a one year return of
5.42% for the year ended August 31, 1996. This compares favorably to the Salomon
Brothers 3-Month Treasury Bill Index return of 5.35% for the same one year
period. The performance of the Fund is net of actual expenses, whereas the
return of the Index does not include expenses of any kind.
PORTFOLIO HIGHLIGHTS
The Fund's assets grew from $161 million to $189 million over the year. The
growth of new assets may be attributed to the Fund's receipt of a AAAm rating
from Standard & Poor's Corporation. This rating corresponds with the underlying
investments and the management style of the Fund. The Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in obligations of or backed by the US Government.
The rating of mutual funds are opinions of the investment quality of shares of
the mutual fund which invest in short-term fixed income obligations. The
Standard & Poor's Corporation assigns ratings across a wide spectrum of
comparable funds. They usually require investment guidelines that may, in
certain instances, be more conservative than otherwise allowed a fund under
applicable law.
Despite Federal Reserve policy remaining relatively stable over the period, the
market traded in wider ranges depending on the perception for the next move in
interest rates. As such, there were opportunities to extend the maturity of the
Fund during weakness in the market to enhance the Fund's yield. The average
maturity ranged between 35 and 55 days, well within parameters required by
Standard & Poor's to maintain the AAAm rating.
-----------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on December 1, 1993. Index comparison also
began on December 1, 1993.
**Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the
US Government. There can be no assurance that a money market fund will be able
to maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
THE SEVEN SEAS SERIES PRIME MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality money market instruments including certificates of
deposit, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[Graph]
DATES PRIME MONEY MARKET FUND SALOMON BROTHERS 3-MONTH T-BILL INDEX**
Inception* $10,000 $10,000
1994 $10,209 $10,200
1995 $10,803 $10,769
1996 $11,409 $11,344
PERFORMANCE REVIEW
In the last year, fixed income yields held low through February 1996
by recessionary fears, gave way to higher bond yields fueled by better
than expected economic growth in the second half of the year. Last
December and January, two interest rate moves of 25 basis points each
brought the Fed Funds' target rate down to 5.25%, where it remained
for the rest of the year. Despite this relatively quiet Fed activity,
short-term interest rates traded in a wide range. One- and three-month
LIBOR (London Interbank Offering Rate) dropped close to 70 basis points
before rising in March. One year LIBOR fell 110 basis points to 4.99%
in February, but closed the year at 6.31%, 20 basis points higher
than it started. Similarly, one-year Treasuries traded from 5.97%
down to 4.79% and back up to 5.91% at the end of August. These dramatic
shifts in short-term interest rates reflected the market's anticipation
of Federal Reserve moves, which proved more volatile than the actual
Fed activity.
SEVEN SEAS SERIES PRIME MONEY MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ------------------ ------------------ ------------------
1 Year $ 10,560 5.60%
Inception $ 11,409 5.37%+
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ------------------ ------------------ ------------------
1 Year $ 10,535 5.35%
Inception $ 11,344 5.17%+
SEE RELATED NOTES ON PAGE 9.
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES PRIME MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The Fund experienced a period of very rapid growth with assets climbing to a
high of over $2 billion in February 1996. Thereafter, assets declined as
investors moved to higher yielding direct investments. The Fund returned 5.60%
for the year ended August 31, 1996 as compared to the Salomon Brothers 3-Month
Treasury Bill Index return of 5.35%. The performance return of the Fund is net
of fund operating expenses whereas Index returns do not include fees or expenses
of any kind. The Salomon Brothers Treasury Bill Index was chosen as a standard,
well-known representation of money market rates.
PORTFOLIO HIGHLIGHTS
Despite the volatility of assets and heavy inflows during periods of declining
rates and steady outflows during periods of rising rates fund performance
remained strong and managed these swings by remaining in very liquid
instruments. Average maturity was held shorter than comparable funds except
during periods of heavy outflows.
Fund investments included floating rate and fixed rate notes based on relative
value in the marketplace. A core holding of floating rate notes allowed the Fund
to participate in attractive rates which reset with changes in interest rates.
One- and three-month LIBOR were the preferred indices for the resets. A small
percentage of Fund investments were linked to the Fed Funds and Prime rates.
In fiscal 1996, the Fund sought and received an Am rating from Standard & Poor's
Corporation. The ratings of mutual funds are opinions on the investment quality
of shares of the mutual fund which invest in short-term fixed income
obligations. The Standard & Poor's Corporation assigns ratings across a wide
spectrum of comparable funds. Standard & Poor's usually require investment
guidelines that may, in certain instances, be more conservative than otherwise
allowed a fund under applicable law. The Fund was managed consistently with its
objective of providing safety of principal and liquidity by investing in high
quality investments and providing competitive returns.
The Fund's five largest holdings by investment type represented 95.3% of the
portfolio with 47.8% of the Fund in shorter-term corporate bonds and notes. This
was followed by Eurodollar time deposits and US Government securities,
respectively.
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Corporate Bonds and Notes 47.8%
Eurodollar Time Deposits 19.4
United States Government Agencies 14.6
Repurchase Agreements 8.7
Yankee Certificates of Deposit 4.8
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
*The Fund commenced operations on February 22, 1994. Index comparison
began March 1, 1994.
**Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statements of assets and liabilities and
statements of net assets of each of the Funds of The Seven Seas Series Fund (in
this report comprised of US Treasury Money Market and Prime Money Market Funds
(the "Funds")), as of August 31, 1996, and the related statements of operations,
the statements of changes in net assets and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds enumerated above as of August 31, 1996, the results of their operations,
the changes in their net assets and the financial highlights for each of the
periods indicated therein in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-----------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT TREASURIES - 32.5%
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . $ 13,000 5.220% 09/17/96 $ 12,973
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 5,000 5.245 09/17/96 4,990
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 3,400 5.271 09/17/96 3,393
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 10,000 5.409 12/05/96 9,863
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 5,000 4.979 03/06/97 4,871
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 400 5.610 05/01/97 386
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 400 5.611 05/01/97 386
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 5,000 5.610 05/29/97 4,801
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . 5,000 5.460 08/21/97 4,731
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 5,000 7.500 01/31/97 5,053
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 5,000 6.625 03/31/97 5,031
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 5,000 6.500 04/30/97 5,028
----------
TOTAL UNITED STATES GOVERNMENT TREASURIES - (cost $61,506) . . . . . 61,506
----------
TOTAL INVESTMENTS (amortized cost $61,506) - 32.5% . . . . . . . . . 61,506
----------
REPURCHASE AGREEMENTS - 46.6%
Agreement with Bankers Trust of $44,000
acquired August 30, 1996 at 5.280% to be repurchased at $44,026
on September 3, 1996, collateralized by:
$43,935 United States Treasury Notes,
7.250% due 11/30/96 valued at $44,892 . . . . . . . . . . . 44,000
Agreement with Union Bank of Switzerland of $44,000
acquired August 30, 1996 at 5.280% to be repurchased at $44,026
on September 3, 1996, collateralized by:
$44,272 United States Treasury Notes,
7.500% due 01/31/97 valued at $44,881 . . . . . . . . . . . 44,000
----------
TOTAL REPURCHASE AGREEMENTS (cost $88,000) . . . . . . . . . . . . . 88,000
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $149,506)(a) - 79.1% . . . . . . . . . . . . . . . . . . . . . 149,506
----------
OTHER ASSETS AND LIABILITIES, Net - 20.9% (Note 3) . . . . . . . . . 39,498
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . $ 189,004
----------
----------
</TABLE>
(a) The identified cost for federal income tax purposes is the same as shown
above.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . $ 61,506,366
Repurchase agreements (cost $88,000,000)(Note 2) . . . . . . . . . . . . . . . . . 88,000,000
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,226,793
Investments matured (Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . 59,425,000
From Adviser (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,511
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,465
Deferred organization expenses (Note 2) . . . . . . . . . . . . . . . . . . . . . . 24,125
-------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,231,260
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 824,041
Investments purchased. . . . . . . . . . . . . . . . . . . . . . 21,356,440
Accrued fees to affiliates and trustees. . . . . . . . . . . . . 19,286
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 27,550
-------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,227,317
-------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 189,003,943
-------------
-------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . $ (99,944)
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,115
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,914,772
-------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 189,003,943
-------------
-------------
Net asset value, offering and redemption price per share
($189,003,943 divided by 189,115,148 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $1.00
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,254,777
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . $ 466,951
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . 53,003
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 72,973
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . 22,784
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . 15,333
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . 47,066
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 8,180
Amortization of deferred organization expenses . . . . . . . . . 10,757
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 12,123
-------------
Expenses before reimbursements . . . . . . . . . . . . . . . . . 709,170
Expenses reimbursed by Adviser . . . . . . . . . . . . . . . . . (335,610)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373,560
-------------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,881,217
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . 73,973
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . $ 9,955,190
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . $ 9,881,217 $ 9,954,307
Net realized gain (loss) from investments. . . . . . . . . . . . . 73,973 89,724
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . 9,955,190 10,044,031
Distributions to shareholders from net investment income . . . . . . (9,880,916) (9,954,307)
Increase (decrease) in net assets from Fund share transactions . . . 28,036,991 5,945,016
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 28,111,265 6,034,740
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . 160,892,678 154,857,938
------------- -------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . $ 189,003,943 $ 160,892,678
------------- -------------
------------- -------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 349,834,136 775,196,955
Fund shares issued to shareholders in reinvestments of distributions 1,235,206 2,433,268
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . (323,032,351) (771,685,207)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . 28,036,991 5,945,016
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994*
------------- ------------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
------------- ------------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . .0529 .0536 .0249
------------- ------------- ------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . (.0529) (.0536) (.0249)
------------- ------------- ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
------------- ------------- ------------
------------- ------------- ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . 5.42 5.48 2.51
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c). . . . . . . .20 .13 .13
Operating expenses, gross, to average net assets (b)(c). . . . . . .38 .39 .38
Net investment income to average net assets (b). . . . . . . . . . 5.29 5.38 3.28
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . 189,004 160,893 154,858
Per share amount of fees reimbursed ($ omitted)(c) . . . . . . . . .0018 -- --
Per share amount of fees waived ($ omitted). . . . . . . . . . . . -- .0018 .0019
</TABLE>
* For the period December 1, 1993 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------
<S> <C> <C> <C> <C>
EURODOLLAR CERTIFICATES OF DEPOSIT - 2.3%
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . $ 25,000 5.080% 02/28/97 $ 24,938
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $24,938). . 24,938
----------
CORPORATE BONDS AND NOTES - 50.4%
AIG Corp. (MTN)(a).. . . . . . . . . . . . . . . . . . . . 26,000 5.738 01/15/97 26,000
Associates Corp. (MTN) . . . . . . . . . . . . . . . . . . 5,000 4.500 09/30/96 4,995
Avco Financial Services, Inc.. . . . . . . . . . . . . . . 8,500 7.500 11/15/96 8,537
BankAmerica Corp. (Illinois) . . . . . . . . . . . . . . . 12,900 5.700 05/28/97 12,877
BankAmerica National Trust & Savings Association . . . . . 10,000 5.070 01/29/97 9,998
Bayerische Landesbank (a). . . . . . . . . . . . . . . . . 50,000 5.292 01/15/97 49,987
CIT Group Holdings, Inc. (MTN)(a). . . . . . . . . . . . . 25,000 5.300 10/30/96 24,996
Citicorp (MTN)(a). . . . . . . . . . . . . . . . . . . . . 5,000 5.765 12/09/96 5,003
Comercia Bank, Michigan (a). . . . . . . . . . . . . . . . 50,000 5.394 02/14/97 50,000
Dean Witter Discover & Co. (MTN)(a). . . . . . . . . . . . 5,000 5.610 11/15/96 5,002
Dean Witter Discover & Co. (MTN)(a). . . . . . . . . . . . 10,000 5.762 11/22/96 10,003
Dean Witter Discover & Co. (MTN)(a). . . . . . . . . . . . 3,800 5.772 01/15/97 3,802
Dean Witter Discover & Co. (MTN)(a). . . . . . . . . . . . 10,000 5.610 03/03/97 10,009
FCC National Bank (MTN)(a) . . . . . . . . . . . . . . . . 20,000 5.300 11/06/96 19,997
FCC National Bank (MTN)(a) . . . . . . . . . . . . . . . . 25,000 5.360 11/21/96 24,997
First Chicago Corp. (MTN)(a) . . . . . . . . . . . . . . . 5,000 5.727 12/10/96 5,001
Ford Motor Credit Co.. . . . . . . . . . . . . . . . . . . 6,000 8.000 12/01/96 6,034
General Electric Capital Corp. (MTN)(a). . . . . . . . . . 25,000 5.621 01/17/97 25,000
Household Finance Corp. (MTN)(a) . . . . . . . . . . . . . 30,000 5.709 08/11/97 30,052
Household International, Inc. (MTN)(a) . . . . . . . . . . 5,000 5.672 05/27/97 5,005
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . . 25,000 5.750 10/28/96 24,998
IBM Credit Corp. (MTN) . . . . . . . . . . . . . . . . . . 10,000 5.450 04/01/97 9,990
Key Bank of New York (a) . . . . . . . . . . . . . . . . . 25,000 5.280 09/06/96 25,000
Merrill Lynch & Co., Inc. (MTN)(a) . . . . . . . . . . . . 17,000 5.568 10/07/96 16,999
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . 15,000 5.950 06/06/97 14,994
Norwest Corp. (MTN). . . . . . . . . . . . . . . . . . . . 25,000 4.960 02/20/97 25,000
Old Kent Bank & Trust Co. (MTN). . . . . . . . . . . . . . 12,500 7.500 01/31/97 12,609
PNC Bank . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.650 09/18/96 20,002
</TABLE>
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------
<S> <C> <C> <C> <C>
Transamerica Financial Corp. . . . . . . . . . . . . . . . $ 12,500 6.750% 08/15/97 $ 12,591
Wachovia Bank (MTN)(a) . . . . . . . . . . . . . . . . . . 25,000 5.305 01/17/97 24,991
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . 10,000 5.582 09/16/96 10,000
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . 5,000 5.632 10/11/96 5,001
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . 12,500 5.632 09/05/97 12,510
----------
TOTAL CORPORATE BONDS AND NOTES (cost $551,980). . . . . . 551,980
----------
DOMESTIC COMMERCIAL PAPER - 1.4%
General Electric Capital Corp. . . . . . . . . . . . . . . 15,000 5.280 09/12/96 14,976
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $14,976) . . . . . . 14,976
----------
FOREIGN COMMERCIAL PAPER - 1.4%
Woolwich Building Society. . . . . . . . . . . . . . . . . 15,000 5.430 10/29/96 14,869
----------
TOTAL FOREIGN COMMERCIAL PAPER (cost $14,869). . . . . . . 14,869
----------
EURODOLLAR TIME DEPOSITS - 20.4%
Caisse Des Depots. . . . . . . . . . . . . . . . . . . . . 50,000 5.281 09/03/96 50,000
Den Danske Bank . . . . . . . . . . . . . . . . . . . . . 48,950 5.312 09/03/96 48,950
Harris Trust & Savings Bank. . . . . . . . . . . . . . . . 25,000 5.218 09/03/96 25,000
Republic National Bank . . . . . . . . . . . . . . . . . . 50,000 5.312 09/03/96 50,000
Union Bank of Switzerland, Grand Cayman. . . . . . . . . . 50,000 5.312 09/03/96 50,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $223,950) . . . . . . 223,950
----------
UNITED STATES GOVERNMENT AGENCIES - 15.4%
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . 25,000 5.372 10/02/96 24,997
Federal Home Loan Mortgage Corp. . . . . . . . . . . . . . 15,000 5.640 08/28/97 14,963
Federal National Mortgage Association (a). . . . . . . . . 15,000 5.295 12/03/96 14,996
Federal National Mortgage Association . . . . . . . . . . 10,000 4.780 02/14/97 9,996
Federal National Mortgage Association (a). . . . . . . . . 24,000 5.348 03/06/97 23,982
Federal National Mortgage Association (a). . . . . . . . . 30,000 5.252 04/15/97 29,981
Federal National Mortgage Association (a). . . . . . . . . 50,000 5.445 09/12/97 49,959
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $168,874). . 168,874
----------
</TABLE>
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------
<S> <C> <C> <C> <C>
YANKEE CERTIFICATES OF DEPOSIT - 5.0%
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . $ 10,000 5.730% 08/13/97 $ 9,977
Westpac. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.340 03/04/97 24,993
Westpac. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.610 04/02/97 19,998
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $54,968). . . . 54,968
----------
TOTAL INVESTMENTS (amortized cost $1,054,555) - 96.3%. . . 1,054,555
----------
REPURCHASE AGREEMENTS - 9.1%
Agreement with UBS Securities, Inc. of $100,000
Acquired August 30, 1996 at 5.280% to be repurchased
at $100,059 on September 3, 1996, collateralized by:
$102,902 United States Treasury Notes,
4.750% due 08/31/98 valued at $102,294. . . . . . 100,000
----------
TOTAL REPURCHASE AGREEMENTS (cost $100,000). . . . . . . . 100,000
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS - 105.4%
(cost $1,154,555)(b) . . . . . . . . . . . . . . . . . . . 1,154,555
OTHER ASSETS AND LIABILITIES - (5.4%). . . . . . . . . . . (58,924)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . $1,095,631
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
ABBREVIATIONS:
MTN - Medium Term Note.
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . $ 1,054,555,183
Repurchase agreements (identified cost $100,000,000)(Note 2) . . . . . . . . . . . 100,000,000
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,731,581
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,781
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . 14,711
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,163,318,256
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,895,613
Investments purchased. . . . . . . . . . . . . . . . . . . . . . 62,592,188
Accrued fees to affiliates and trustees. . . . . . . . . . . . . 185,700
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 13,482
---------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,686,983
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,095,631,273
---------------
---------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . $ (82,654)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,725
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094,618,202
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,095,631,273
---------------
---------------
Net asset value, offering and redemption price per share
($1,095,631,273 divided by 1,095,725,470 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . $1.00
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,496,690
Expenses (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,221,865
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . 429,434
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . 310,366
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . 274,219
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . 22,598
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . 14,532
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . 369,950
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . 5,856
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . 59,626
Amortization of deferred organization expenses . . . . . . . . . 7,692
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 55,239
--------------
Expenses before reimbursements . . . . . . . . . . . . . . . . . 3,771,377
Expenses reimbursed by Adviser . . . . . . . . . . . . . . . . . (809,259)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,962,118
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,534,572
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments (Notes 2 and 3). . . . . . . . . . . . . . (124,029)
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . $ 80,410,543
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,534,572 $ 50,679,037
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . (124,029) 57,767
--------------- ---------------
Net increase in net assets resulting from operations . . . . . . . . . . . 80,410,543 50,736,804
Distributions to shareholders from net investment income . . . . . . . . . (80,546,114) (50,679,037)
Increase (decrease) in net assets from Fund share transactions . . . . . . 19,136,746 644,348,603
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 19,001,175 644,406,370
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . 1,076,630,098 432,223,728
--------------- ---------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,095,631,273 $ 1,076,630,098
--------------- ---------------
--------------- ---------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,851,518,552 4,335,495,297
Fund shares issued to shareholders in reinvestments of distributions . . . 15,477,655 2,419,607
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,847,859,461) (3,693,566,301)
--------------- ---------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . 19,136,746 644,348,603
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . .0546 .0567 .0207
------------ ------------ ------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . (.0546) (.0567) (.0207)
------------ ------------ ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . 5.60 5.82 2.09
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c). . . . . . . . .20 .14 .16
Operating expenses, gross, to average net assets (b)(c). . . . . . . .25 .27 .32
Net investment income to average net assets (b). . . . . . . . . . . 5.44 5.76 4.00
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . . 1,095,631 1,076,630 432,224
Per share amount of fees waived ($ omitted). . . . . . . . . . . . . -- .0013 .0007
Per share amount of fees reimbursed ($ omitted)(c) . . . . . . . . . .0006 -- .0001
</TABLE>
* For the period February 22, 1994 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on two portfolios
(collectively, the "Funds") The Seven Seas Series US Treasury Money Market
Fund (the "Treasury Money Market Fund") and The Seven Seas Series Prime
Money Market Fund (the "Prime Money Market Fund"). The Investment Company
is a registered and diversified open-end investment company, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and operates
under a First Amended and Restated Master Trust Agreement, dated October
13, 1993, as amended (the "Agreement"). The Investment Company's Agreement
permits the Board of Trustees to issue an unlimited number of full and
fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of their
financial statements.
SECURITY VALUATION: The Funds' portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Funds utilize the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each funds' shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. Therefore, the Funds paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1996, the Treasury Money Market Fund had a net tax basis capital
loss carryover of $99,944, which may be applied against any realized net
taxable gains in each succeeding year or until its
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
expiration date of August 31, 2003. As permitted by tax regulations, the
Prime Money Market Fund intends to defer a net realized capital loss of
$126,971 incurred from November 1, 1995 to August 31, 1996, and treat it as
arising in fiscal year 1997.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Funds declare and record
dividends on net investment income daily and pay them monthly. Capital gain
distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Funds to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Funds may periodically make reclassifications among
certain of their capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: Each Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the
Funds, through their custodian or third-party custodian, receive delivery
of the underlying securities. The market value of these securities
(including accrued interest) on acquisition date is required to be an
amount equal to at least 102% of the repurchase price. The Funds' Adviser
will monitor repurchase agreements daily to determine that the market value
(including accrued interest) at Fedwire closing time of the underlying
securities remains at least equal to 100% of the repurchase price. The
Adviser or third-party custodian will notify the seller to immediately
increase the collateral on the repurchase agreement to 102% of the
repurchase price if collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Prime Money Market
Fund aggregated to $37,686,782,427, $359,634,125, and $37,377,146,000,
respectively.
For the year ended August 31, 1996, purchases, sales, and maturities of US
Government and Agency obligations, excluding repurchase agreements, for the
Funds aggregated to the following:
<TABLE>
<CAPTION>
PURCHASES SALES MATURITIES
---------------- ---------------- ----------------
<S> <C> <C> <C>
Treasury Money Market Fund $ 617,802,832 $ 119,499,144 $ 477,168,000
Prime Money Market Fund 565,374,324 343,442,469 144,010,000
</TABLE>
Two United States Treasury Notes with a total principal amount of
$59,425,000 and coupons of 7.25% and 6.25% matured on August 31, 1996.
They were purchased at a discount to settle on September 3, 1996. The
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
settlement amount of these matured notes has been recorded as Receivable
for Investments Matured on the Statement of Assets and Liabilities. The
accretion of the discount has been pro-rated through the settlement date.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Funds in accordance with their investment
objectives, policies, and limitations. For these services, the Treasury
Money Market and Prime Money Market Funds pay a fee to the Adviser,
calculated daily and paid monthly, at the annual rate of .25% and .15%, of
their average daily net assets, respectively. The Adviser voluntarily
agreed to reimburse the Treasury Money Market and Prime Money Market Funds
for all expenses in excess of .20% of their average daily net assets on an
annual basis, respectively. As of August 31, 1996, the receivable due from
the Adviser for expenses in excess of the expense cap has been netted
against the Adviser fee payable. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing, and transfer
agent services to the Funds.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Funds (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the
Investment Company is authorized to make payments to the Distributor, or
any Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The Funds have entered into service agreements with the Adviser, State
Street Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Funds pay
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Treasury Money Market and Prime Money Market Funds incurred shareholder
servicing expenses of $47,066 and $369,950, respectively, from the Adviser.
The Funds did not incur any expenses from SSBSI or Commercial Banking
during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Funds' responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Funds' shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Funds will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996 for either Fund.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE AS
FOLLOWS:
<TABLE>
<CAPTION>
US TREASURY MONEY MARKET FUND PRIME MONEY MARKET FUND
----------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Administration fees $ 4,624 Advisory fees $ 82,622
Custodian fees 6,264 Administration fees 27,040
Distribution fees 2,002 Custodian fees 21,040
Shareholder servicing fees 4,015 Distribution fees 17,704
Transfer agent fees 59 Shareholder servicing fees 23,170
Trustees' fees 2,322 Transfer agent fees 916
---------- Trustees' fees 13,208
$ 19,286 ----------
---------- $ 185,700
---------- ----------
----------
</TABLE>
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES US TREASURY MONEY MARKET AND
PRIME MONEY MARKET FUNDS
Two International Place, 35th Floor
Boston Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
GROWTH AND INCOME FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 21
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES GROWTH AND INCOME FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Growth and Income Fund. I hope you
find this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA Funds.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale.
Creative thinking combined with quantitative tools distinguishes SSgA's
investment management style. These vital strengths are brought to life through
our proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES GROWTH AND INCOME FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Brenton H. Dickson, Senior Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Growth and Income
Fund since its inception in September 1993. He is a member of the Board of
Directors of the Boston Security Analyst Society and a portfolio manager of the
Personal Trust Stock Common Trust Funds. There are five other portfolio managers
working with Mr. Dickson in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Achieve long-term capital growth, current income, and growth of
income.
INVESTS IN: Equity securities.
STRATEGY: Fund Manger's concentrate purchases for the Fund in holdings in the
range of $500 million to $50 billion in market capitalization. Stock selection
focuses on individual companies and the strength of their fundamental business
characteristics.
[Graph]
DATES GROWTH AND INCOME FUND S&P-Registered Trademark- 500 INDEX**
Inception* $10,000 $10,000
1994 $10,623 $10,547
1995 $12,287 $12,809
1996 $13,954 $15,196
PERFORMANCE REVIEW
For the one year ended August 31, 1996, the Fund's total return was 13.57%
including all expenses, compared to 18.64% for the Standard & Poor's 500
Composite Stock Price Index. Fund performance is net of operating expenses,
whereas Index results do not include expenses of any kind.
The Fund's results were hurt by its 8.5% exposure to foreign securities. Non-US
equity markets as measured by the Morgan Stanley EAFE Index was up only 7.87%
for the period compared to the strong performance of the US equity markets.
While the Fund's significantly overweighted position in technology stocks
contributed positively to performance in recent months, this posture hurt
returns during the fiscal year as the total return of the Standard & Poor's
technology sector was only 7.5%.
PORTFOLIO HIGHLIGHTS
While the economy has expanded at a modest pace in recent years, profits have
been strong as corporations have downsized, streamlined operations, and employed
newer and more efficient technologies. Yet, even though we are in one of the
longest business expansions in history, most companies are still unable to raise
prices, in part because international trade barriers are falling and competition
is increasing. While cost cutting through restructuring should continue for many
years, the future impact is likely to be less dramatic. This, combined with
Federal Reserve Board restrictive actions to keep inflation low, should result
in a more difficult corporate profit environment over the remainder of the
cycle. Therefore, equity investors are likely to become more selective and focus
on companies with recognized brand franchises, as well as those that are
favorably impacted by longer-term secular trends such as the aging of the `baby
boom' generation. (Rising medical spending and increasing savings as the
population grows older should benefit segments of the health care and financial
service industries.)
SEVEN SEAS SERIES GROWTH AND INCOME FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ---------------- ------------- ----------
1 Year $ 11,357 13.57%
Inception $ 13,954 11.75%
STANDARD & POOR'S-Registered Trademark- 500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ---------------- ------------- ----------
1 Year $ 11,864 18.64%
Inception $ 15,196 14.97%
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Over the next year or so, some multinational corporations may experience good
relative earnings growth as the economies of other industrial nations respond to
lower interest rates and stimulative central bank policies. Consequently, most
of the companies held in the Fund are both industry leaders and have significant
direct and indirect foreign exposure. In addition to holding a number of
financial service and health care companies, the Fund continues to be
overweighted in strategically positioned technology stocks.
The Fund is well diversified, with at least some exposure to the major sectors
of the U.S. economy. The individual holdings are believed to have favorable
long term growth prospects as well as being attractively valued at the current
time.
The Fund's ten largest equity holdings were 29.1% of the portfolio. Within this
group, 6.0% represented the finance related sector, and 5.8% represented those
in the technology sector.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Franklin Resource, Inc. 3.2
AT&T Corp. 3.1
Intel Corp. 3.0
Comcast Corp. Special Class A 2.9
Home Depot, Inc. (The) 2.9
Merek & Co., Inc. 2.8
Warner-Lambert Co. 2.8
AlliedSignal, Inc. 2.8
Unocal Corp. 2.8
American General Corp. 2.8
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Growth and Income Fund commenced operations on September 1, 1993.
Index comparison also began on September 1, 1993.
** The Standard & Poor's -Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's
Corporation to best capture the prior performance of a large cross-section
of the US publicly traded stock market. The Index is structured to
approximate the general distribution of industries in the US economy.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Growth and Income Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the two fiscal years in the period then ended, and for the period September
1, 1993 (commencement of operations) to August 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period September 1, 1993
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 95.3%
BASIC INDUSTRIES - 7.1%
Brush Wellman, Inc. 70,000 $ 1,330
Ethyl Corp. 120,000 1,080
Schulman (A.), Inc. 70,000 1,523
---------
3,933
---------
CAPITAL GOODS - 2.5%
Caterpillar, Inc. 20,000 1,378
---------
1,378
---------
CONSUMER BASICS - 18.2%
American Home Products Corp. 24,000 1,422
Bristol-Myers Squibb Co. 15,000 1,316
CPC International, Inc. 19,000 1,309
Merck & Co., Inc. 24,000 1,575
Panamerican Beverages, Inc.
Class A 35,600 1,504
Procter & Gamble Co. 17,000 1,511
Warner-Lambert Co. 26,000 1,547
---------
10,184
---------
CONSUMER DURABLES - 2.2%
Ford Motor Co. 37,000 1,240
---------
1,240
---------
CONSUMER NON-DURABLES - 5.2%
Eastman Kodak Co. 18,000 1,305
Home Depot, Inc. (The) 30,000 1,594
---------
2,899
---------
CONSUMER SERVICES - 2.3%
Disney (Walt) Co. 23,000 1,311
---------
1,311
---------
ENERGY - 7.5%
Exxon Corp. 16,000 1,302
Halliburton Co. 25,000 1,316
Unocal Corp. 45,000 1,541
---------
4,159
---------
FINANCE - 13.5%
American Express Co. 32,000 1,400
American General Corp. 42,000 1,533
American International Group, Inc. 15,000 1,425
Franklin Resources, Inc. 30,000 1,785
Morgan (J.P.) & Co., Inc. 16,000 1,402
---------
7,545
---------
GENERAL BUSINESS - 5.5%
Comcast Corp. Special Class A 100,000 1,613
Reuters Holdings PLC
Class B - ADR 21,000 1,467
---------
3,080
---------
TECHNOLOGY - 20.6%
AlliedSignal, Inc. 25,000 1,544
Boeing Co. 16,000 1,448
Cisco Systems, Inc. 20,000 1,052
Digital Equipment Corp. (a) 39,000 1,506
Electronic Data Systems Corp. 25,000 1,362
Intel Corp. 21,000 1,675
Lucent Technologies, Inc. 20,000 737
Microsoft Corp. (a) 12,000 1,470
Motorola, Inc. 13,000 694
---------
11,488
---------
UTILITIES - 10.7%
Alltel Corp. 50,000 1,412
AT&T Corp. 33,000 1,732
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
GTE Corp. 36,000 $ 1,418
Vodafone Group PLC - ADR 37,000 1,401
---------
5,963
---------
TOTAL COMMON STOCKS
(cost $43,334) 53,180
---------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 3.7%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 2,084 2,084
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,084) 2,084
---------
MARKET
VALUE
(000)
---------
TOTAL INVESTMENTS
(identified cost $45,418)(c) - 99.0% $ 55,264
OTHER ASSETS AND LIABILITIES,
NET - 1.0% 559
---------
NET ASSETS - 100.0% $ 55,823
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $45,418,429)(Note 2). . . . . . . . . . . . . $ 55,264,185
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,018
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486,539
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 18,596
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,891,804
LIABILITIES
Payables (Note 4):
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . $ 8,907
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 50,994
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 9,234
------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,135
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,822,669
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 171,010
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . 2,129,211
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . 9,845,756
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,180
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,672,512
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,822,669
-------------
-------------
Net asset value, offering and redemption price per share
($55,822,669 divided by 4,179,758 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $13.36
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,074,303
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,436
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078,739
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 437,548
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 14,921
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 23,771
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 21,617
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 16,300
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . 21,270
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 13,646
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . 153,380
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 1,624
Amortization of deferred organization expenses. . . . . . . . . . 9,326
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 9,570
------------
Expenses before reimbursements. . . . . . . . . . . . . . . . . . 722,973
Expenses reimbursed by Adviser. . . . . . . . . . . . . . . . . . (233,947)
------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,026
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589,713
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . 2,142,238
Net change in unrealized appreciation or depreciation of investments . . . . . . . . 3,615,661
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,757,899
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . $ 6,347,612
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 589,713 $ 567,186
Net realized gain (loss) from investments . . . . . . . . . . . . . 2,142,238 444,901
Net change in unrealized appreciation
or depreciation of investments. . . . . . . . . . . . . . . . . . 3,615,661 4,623,985
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . . 6,347,612 5,636,072
Distributions to shareholders:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . (607,292) (509,390)
Net realized gain on investments. . . . . . . . . . . . . . . . . . (162,843) --
Increase (decrease) in net assets from Fund share transactions . . . . 6,361,040 12,010,923
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 11,938,517 17,137,605
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 43,884,152 26,746,547
------------- -------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$171,010 and $181,126, respectively). . . . . . . . . . . . . . . . $ 55,822,669 $ 43,884,152
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . . . 2,139,756 $ 27,678,947 2,456,856 $ 26,579,867
Fund shares issued to shareholders
in reinvestments of distributions . . . . 62,567 784,258 48,392 505,648
Fund shares redeemed . . . . . . . . . . . . (1,693,695) (22,102,165) (1,379,737) (15,074,592)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . . . . 508,628 $ 6,361,040 1,125,511 $ 12,010,923
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994*
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . $ 11.95 $ 10.51 $ 10.00
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . .15 .18 .15
Net realized and unrealized gain (loss) on investments. . . 1.46 1.44 .47
----------- ----------- -----------
Total Income From Investment Operations . . . . . . . . . . 1.61 1.62 .62
----------- ----------- -----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . (.16) (.18) (.11)
Net realized gain on investments. . . . . . . . . . . . . . (.04) -- --
----------- ----------- -----------
Total Distributions . . . . . . . . . . . . . . . . . . . . (.20) (.18) (.11)
----------- ----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . $ 13.36 $ 11.95 $ 10.51
----------- ----------- -----------
----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . 13.57 15.66 6.23
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c) . . . .95 .95 .95
Operating expenses, gross, to average net assets (b)(c) . . 1.40 1.61 1.44
Net investment income to average net assets (b) . . . . . . 1.15 1.72 1.75
Portfolio turnover (b). . . . . . . . . . . . . . . . . . . 38.34 39.32 36.48
Net assets, end of year ($000 omitted). . . . . . . . . . . 55,823 43,884 26,747
Per share amount of fees waived ($ omitted) . . . . . . . . -- -- .0002
Per share amount of fees reimbursed ($ omitted)(c). . . . . .0574 .0685 .0418
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . . . . . . . . .0436 N/A N/A
</TABLE>
* For the period September 1, 1993 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios, which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Growth and Income Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement, to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts
business trust, the sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- -------------- --------------
$ 45,420,679 $ 11,100,886 $ (1,257,380) $ 9,843,506
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in foreign-denominated
investments and certain securities sold at a loss. Accordingly, the Fund
may periodically make reclassifications among certain of its capital
accounts without impacting its net asset value.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1996:
UNDISTRIBUTED ADDITIONAL
NET INVESTMENT PAID-IN
INCOME CAPITAL
-------------- --------------
$ 7,463 $ (7,463)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases and
sales of investment securities, excluding short-term investments aggregated
to $23,978,027 and $18,967,451, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .85% of its average daily net assets. For the year ended August 31,
1996, the Adviser voluntarily agreed to reimburse the Fund for all expenses
in excess of .95% of average daily net assets on an annual basis. As of
August 31, 1996, the receivable due from the Adviser for expenses in excess
of the expense cap has been netted against the Adviser fee payable. The
Investment Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the
Investment Company is authorized to make payments to the Distributor, or
any Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $12,877 and $769 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
was incurred. The Trustees or a majority of the Fund's shareholders have
the right, however, to terminate the Distribution Plan and all payments
thereunder at any time. The Fund will not be obligated to reimburse the
Distributor for carryover expenses subsequent to the Distribution Plan's
termination or noncontinuance. There were no carryover expenses as of
August 31, 1996.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $15,495 for the year ended August 31,
1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 20,496
Administration fees 1,347
Custodian fees 2,035
Distribution fees 984
Shareholder servicing fees 1,259
Transfer agent fees 24,191
Trustees' fees 682
----------
$ 50,994
----------
----------
5. DIVIDENDS
On September 3, 1996 the Board of Trustees declared a dividend of $.0391
from net investment income, payable on September 11, 1996 to shareholders
of record September 4, 1996.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
GROWTH AND INCOME FUND
TAX INFORMATION
August 31, 1996
The Fund paid distributions of $.0426 per share from net long-term capital gains
during its taxable year ended August 31, 1996. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $162,843 as capital gain dividends
for its taxable year August 31, 1996.
Please consult a tax advisor for questions about federal or state income tax
laws.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES GROWTH AND INCOME FUND
Two International Place 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
INTERMEDIATE FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 21
"THE SEVEN SEAS SERIES FUND-Registered Trademark" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES INTERMEDIATE FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Intermediate Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA
Funds. In the coming year you will notice the new logo and name on all fund
materials. SSgA is the investment management business of State Street Bank and
Trust Company, a 200 year old pioneer and leader in the world of financial
services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicolas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES INTERMEDIATE FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. John Kirby, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Intermediate Fund.
Prior to joining State Street Bank in 1995, Mr. Kirby was an account manager
with Lowell, Blake & Associates. Prior to that he was a portfolio manager with
One Federal Asset Management and at Cambridge Port Savings as an asset/liability
risk specialist. There are two other portfolio managers working with Mr. Kirby
in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES INTERMEDIATE FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: High level of current income while preserving
principal.
INVESTS IN: High quality, investment grade, debt instruments; including US
Government Treasuries, and Agencies, corporate bonds, asset-backed securities,
and mortgage-backed securities with a dollar-weighted average maturity of three
to ten years.
STRATEGY: Fund Managers seek to match or exceed the return of the Lehman
Brothers Intermediate Government/Corporate Bond Index. The Fund's duration seeks
to match to the Index at all times while adding value through issue and sector
selection.
[Graph]
LEHMAN BROTHERS INTERMEDIATE
DATES INTERMEDIATE FUND GOVERNMENT/CORPORATE BOND
Inception* $10,000 $10,000
1994 $9,658 $9,967
1995 $10,629 $10,911
1996 $11,066 $11,395
SEVEN SEAS SERIES INTERMEDIATE FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- --------------- ------------ -----------
1 Year $ 10,412 4.12%
Inception $ 11,066 3.43%
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- --------------- ------------ -----------
1 Year $ 10,444 4.44%
Inception $ 11,395 4.45%
SEE RELATED NOTES ON PAGE 7.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1996, the Seven Seas Series Intermediate
Fund returned 4.12% versus 4.44% for its benchmark, the Lehman Brothers
Intermediate Government/Corporate Bond Index. Deviation from the benchmark was
principally due to the payment by the Fund of operating expenses, whereas Index
results do not include expenses of any kind.
In November 1995, the Fund adopted a policy to use the Lehman Brothers
Intermediate Government/Corporate Bond Index as its benchmark versus reporting
performance and risk against both the Lehman Brothers Intermediate
Government/Corporate Bond Index and the Lehman Brothers Government/Corporate
Bond Index. By narrowing the risk/return parameters like this, tracking error
and performance measurement volatility is reduced.
The year was dominated by two distinct interest rate trends. Beginning in
September 1995, the Federal Reserve faced with recessionary concerns, cut the
Fed Funds target rate by 50 basis points. Over the following four months,
two-year
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES INTERMEDIATE FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Treasury yields fell from 5.78% to 4.80% and ten-year Treasury yields fell from
6.22% to 5.53%.
During the period growth was moderate and inflation was steadily declining. This
provided a good backdrop for rates to fall. As the economy heated up in early
1996 and was verified by strong non-farm payroll job market gains, sentiment
changed. The market assumed that the Fed had completed its easing mode and as a
result interest rates would move higher. Yields peaked at a high of 7.06% for
the ten-year Treasury on July 5, 1996. Rates fell from there only to rise back
to just under 7.00% by August 31, 1996.
PORTFOLIO HIGHLIGHTS
The Seven Seas Series Intermediate Fund is invested primarily in a diversified
portfolio of debt securities with a dollar-weighted average maturity between
three and ten years. At August 31, 1996 the Fund had an average maturity of 4.12
years versus 4.22 years for the benchmark Index. The Fund's duration was matched
to the Lehman Brothers Intermediate Government/Corporate Bond Index with a
duration of 3.30 years. The Fund's sector weightings anticipate that the economy
will grow steadily and that rate spread will remain stable or have tighter yield
premiums over Treasuries.
Throughout the course of the year, the Fund was overweighted in corporate and
Yankee securities with an emphasis on bank and finance companies. The sustained
strong economic climate has narrowed the yield trade-off between high and
lower-rated investment grade debt so the Fund has gradually improved its credit
quality rating with little impact to yield. The portfolio tracking error has
averaged 35 basis points above the Lehman Brothers Intermediate
Government/Corporate Bond Index. The Fund did not accept active interest rate
exposure, so the primary source of incremental return is sector allocation
decisions.
The Fund's ten largest issuers comprised 45.2% of the portfolio, with
25.9% being held in US Government Agency and Treasury instruments.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31,1996
United States Treasury Notes 20.5%
Quebec, Province of 3.3
Associates Corp. of North America 3.2
General Motors Acceptance Corp. 3.1
Federal National Mortgage Association 3.0
Manitoba, Province of 2.7
CIT Group Holdings, Inc. 2.4
MBNA Master Credit Card Trust 2.4
Student Loan Marketing Association 2.4
Premier Auto Trust 2.2
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 ON THE PRECEDING
PAGE.
*The Intermediate Fund commenced operations on September 1, 1993. Index
comparisons also began on September 1, 1993.
**The Lehman Brothers Intermediate Government/ Corporate Bond Index is
composed of all bonds covered by the Lehman Brothers Government/Corporate
Bond Index with maturities between one and 9.99 years.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Intermediate Fund (the "Fund"),
as of August 31, 1996, and the related statement of operations for the fiscal
year then ended, the statements of changes in net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the two fiscal years in the period then ended and for the period September 1,
1993 (commencement of operations) to August 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period September 1, 1993
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
LONG-TERM INVESTMENT - 96.2%
ASSET-BACKED SECURITIES - 7.3%
CIT RV Trust
6.400% due 02/15/07 $ 300 $ 297
Citibank Credit Card Master Trust I
Series 1993-3 Class A
5.500% due 02/07/00 500 487
Ford Credit Auto Loan Master Trust
Series 1996-1 Class A
5.500% due 02/15/03 370 349
MBNA Master Credit Card Trust
Series 1993-3 Class A
5.400% due 09/15/00 1,000 976
Premier Auto Trust
Series 1994-4 Class A-5
6.650% due 11/02/98 500 502
Series 1996-2 Class A3
6.350% due 01/06/00 400 399
---------
3,010
---------
CORPORATE BONDS AND
NOTES - 46.7%
Associates Corp. of North America
6.375% due 08/15/98 800 796
7.500% due 05/15/99 500 508
Banc One, Milwaukee, N.A.
6.625% due 04/15/03 500 479
Beneficial Corp. (MTN)
6.790% due 11/21/97 200 201
Branch Banking & Trust Co.
5.700% due 02/01/01 250 237
Burlington Northern Santa Fe Corp.
6.375% due 12/15/05 200 183
Caterpillar Financial Services Corp.
6.410% due 06/11/98 500 499
Chase Manhattan Corp. New
6.625% due 01/15/98 500 501
CIT Group Holdings, Inc.
6.500% due 07/13/98 500 499
6.350% due 07/31/98 500 497
Commercial Credit Group, Inc.
5.700% due 03/01/98 755 743
Dean Witter, Discover & Co.
6.000% due 03/01/98 500 496
Enron Corp.
9.650% due 05/15/01 150 163
Exxon Capital Corp.
6.500% due 07/15/99 500 497
First Union Corp.
6.750% due 01/15/98 700 700
Fleet Financial Group
7.250% due 09/01/99 500 504
Florida Power & Light Co.
6.625% due 02/01/03 500 477
Ford Motor Company
7.500% due 11/15/99 555 563
Ford Motor Credit Co.
6.250% due 02/26/98 675 672
General Electric Capital Corp.
5.500% due 11/01/01 450 418
General Motors Acceptance Corp.
5.375% due 03/09/98 400 394
5.500% due 12/15/01 450 415
General Motors Acceptance Corp.
(MTN)
5.950% due 12/28/98 500 491
Georgia Power Co.
6.875% due 09/01/02 500 487
Harris Corp.
6.650% due 08/01/06 425 417
Household Finance, Co.
8.950% due 09/15/99 200 211
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
Integra Bank (MTN)
6.550% due 06/15/00 $ 500 $ 491
International Bank for
Reconstruction & Development
10.030% due 09/15/97 500 520
International Business Machines Corp.
6.375% due 06/15/00 750 736
International Lease Finance Corp.
6.625% due 08/15/00 500 493
KFW International
Finance, Inc. (MTN)
8.200% due 06/01/06 500 529
Lockheed Martin Corp.
6.550% due 05/15/99 475 471
Merrill Lynch & Co., Inc. (MTN)
6.510% due 03/19/01 300 293
NationsBank Corp.
6.625% due 01/15/98 500 501
News America Holdings, Inc.
7.450% due 06/01/00 200 201
Old Kent Bank (MTN)
6.875% due 04/15/98 500 503
Sears Roebuck Acceptance Corp.
Series II (MTN)
6.540% due 05/06/99 500 496
Societe Generale - New York
7.400% due 06/01/06 500 491
Southwestern Bell Telephone Co.
5.875% due 06/01/03 450 414
Transamerica Financial Corp.
6.800% due 03/15/99 500 500
Union Oil Company
of California (MTN)
5.940% due 02/18/03 200 184
Wal-Mart Stores, Inc.
7.500% due 05/15/04 500 504
---------
19,375
---------
MORTGAGE-BACKED SECURITIES - 0.9%
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # L7-3986
4.500% due 04/01/01 414 381
---------
381
---------
NON-US BONDS - 0.7%
Finland, Republic of
7.875% due 07/28/04 215 225
Korea Development Bank
7.250% due 05/15/06 85 83
---------
308
---------
UNITED STATES GOVERNMENT
AGENCIES - 6.3%
Federal National Mortgage
Association
9.050% due 04/10/00 200 214
5.450% due 10/10/03 500 454
Federal National Mortgage
Association (MTN)
5.200% due 04/30/98 600 586
Student Loan Marketing Association
6.050% due 09/14/00 1,000 973
Tennessee Valley Authority
6.125% due 07/15/03 400 379
---------
2,606
---------
UNITED STATES GOVERNMENT
TREASURIES - 20.4%
United States Treasury Notes
5.875% due 08/15/98 200 198
6.125% due 08/31/98 550 548
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
5.500% due 11/15/98 $ 375 $ 368
6.375% due 01/15/99 450 450
6.000% due 08/15/99 700 690
8.000% due 08/15/99 100 104
7.125% due 09/30/99 400 406
7.750% due 01/31/00 900 931
6.750% due 04/30/00 625 627
5.750% due 10/31/00 640 619
6.250% due 04/30/01 500 491
7.875% due 08/15/01 175 183
5.750% due 08/15/03 775 728
7.250% due 08/15/04 500 510
6.500% due 08/15/05 650 631
7.000% due 07/15/06 995 999
---------
8,483
---------
YANKEE BONDS - 13.9%
ABN AMRO Bank
of North America, Inc. (Chicago)
7.550% due 06/28/06 500 501
Australia & New Zealand
Banking Group LTD.
6.250% due 02/01/04 300 279
Ireland, Republic of
7.125% due 07/15/02 500 496
Manitoba, Province of
6.000% due 10/15/97 625 624
6.875% due 09/15/02 500 490
New Zealand, Government of
8.750% due 12/15/06 500 550
Ontario, Province of
8.000% due 10/17/01 250 260
7.750% due 06/04/02 500 516
Quebec, Province of
9.375% due 04/01/99 500 526
9.125% due 03/01/00 775 823
Usinor Sacilor
7.250% due 08/01/06 200 192
Victorian Public Authority
Financial Agency
8.450% due 10/01/01 500 529
---------
5,786
---------
TOTAL LONG-TERM INVESTMENTS
(cost $40,621) 39,949
---------
SHORT-TERM INVESTMENTS - 3.3%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (a) 531 531
Franklin US Treasuries
Money Market Fund (a) 303 303
Valiant Money Market Fund
Class A (a) 516 516
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,350) 1,350
---------
TOTAL INVESTMENTS
(identified cost $41,971)(b) - 99.5% 41,299
OTHER ASSETS AND LIABILITIES,
NET - 0.5% 219
---------
NET ASSETS - 100.0% $ 41,518
---------
---------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt.
MTN - Medium Term Note.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $41,970,783)(Note 2). . . . . . . . . . . . . $ 41,298,829
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658,810
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010,605
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,713
Deferred organizational expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . 18,587
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,038,544
LIABILITIES
Payables (Note 4):
Investments purchased . . . . . . . . . . . . . . . . . . . . . . $ 1,486,839
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . 1,138
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 23,406
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 9,406
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,520,789
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,517,755
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 602,372
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . (266,313)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . (671,954)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,336
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,849,314
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,517,755
-------------
-------------
Net asset value, offering and redemption price per share
($41,517,755 divided by 4,336,129 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $9.57
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,509,889
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,464
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,565,353
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 332,599
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 12,048
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 36,367
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 22,007
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 16,242
Regisration fees. . . . . . . . . . . . . . . . . . . . . . . . . 21,850
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 10,699
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . 99,512
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 1,820
Amortization of deferred organization expenses. . . . . . . . . . 9,318
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 9,486
-------------
Expenses before reimbursement . . . . . . . . . . . . . . . . . . 571,948
Expense reimbursement from Adviser. . . . . . . . . . . . . . . . (322,501)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,447
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,315,906
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . 156,084
Net change in unrealized appreciation or depreciation of investments . . . . . . . . (882,679)
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (726,595)
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . $ 1,589,311
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 2,315,906 $ 1,557,497
Net realized gain (loss) from investments . . . . . . . . . . . . . 156,084 (358,690)
Net change in unrealized appreciation
or depreciation of investments. . . . . . . . . . . . . . . . . . (882,679) 1,406,588
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . 1,589,311 2,605,395
Distributions to shareholders from net investment income . . . . . . . (2,233,116) (1,340,239)
Increase (decrease) in net assets from Fund share transactions . . . . 8,268,562 12,664,979
------------ ------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 7,624,757 13,930,135
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . 33,892,998 19,962,863
------------ ------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income of
$602,372 and $512,121, respectively). . . . . . . . . . . . . . . . $ 41,517,755 $ 33,892,998
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
1996 1995
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . . 3,900,705 $ 37,719,166 2,311,647 $ 21,578,927
Fund shares issued to shareholders
in reinvestments of distributions . . 196,508 1,896,146 135,007 1,248,108
Fund shares redeemed . . . . . . . . . . (3,247,621) (31,346,750) (1,090,932) (10,162,056)
------------ ------------ ------------ ------------
Net increase (decrease). . . . . . . . . 849,592 $ 8,268,562 1,355,722 $ 12,664,979
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . $ 9.72 $ 9.37 $ 10.00
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .53 .56 .42
Net realized and unrealized gain (loss) on investments. . . . (.14) .34 (.76)
------------ ------------ ------------
Total Income From Investment Operations . . . . . . . . . . . .39 .90 (.34)
------------ ------------ ------------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.54) (.55) (.29)
------------ ------------ ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . $ 9.57 $ 9.72 $ 9.37
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . 4.12 10.05 (3.42)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c) . . . . .60 .60 .60
Operating expenses, gross, to average net assets (b)(c) . . . 1.38 1.67 1.51
Net investment income to average net assets (b) . . . . . . . 5.57 6.29 5.11
Portfolio turnover (b). . . . . . . . . . . . . . . . . . . . 221.73 26.31 15.70
Net assets, end of year ($000 omitted). . . . . . . . . . . . 41,518 33,893 19,963
Per share amount of fees waived ($ omitted) . . . . . . . . . -- -- .0002
Per share amount of fees reimbursed ($ omitted)(c). . . . . . .0743 .0946 .0753
</TABLE>
* For the period September 1, 1993 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios, which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Intermediate Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement, to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short-and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
Federal income taxes: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required. At August
31, 1996, the Fund had net tax basis capital loss carryovers of $103,195
and $155,968 which may be applied against any realized net taxable gains in
each succeeding year or until their expiration dates of August 31, 2003 and
August 31, 2004, respectively, whichever occurs first.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 41,977,932 $ 52,377 $ (731,480) $ (679,103)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in mortgage-backed
securities and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1996:
UNDISTRIBUTED ADDITIONAL
NET INVESTMENT PAID-IN
INCOME CAPITAL
-------------- --------------
$ 7,461 $ (7,461)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $34,050,747, and
$19,722,016, respectively.
For the year ended August 31, 1996, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$60,433,714 and $66,959,679, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .80% of its average daily net assets. For the year ended August 31,
1996, the Adviser voluntarily agreed to reimburse the Fund for all expenses
in excess of .60% of average daily net assets on an annual basis. As of
August 31, 1996, the receivable due from the
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
Adviser for expenses in excess of the expense cap has been netted against
the Adviser fee payable. The Investment Company also has contracts with the
Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $10,396 and $303 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 938
Administration fees 1,003
Custodian fees 3,036
Distribution fees 728
Shareholder servicing fees 911
Transfer agent fees 16,285
Trustees' fees 505
----------
$ 23,406
----------
----------
5. DIVIDENDS
On September 3, 1996, the Board of Trustees declared a dividend of $.1374
from net investment income, payable on September 11, 1996 to shareholders
of record September 4, 1996.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES INTERMEDIATE FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
21 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
EMERGING MARKETS FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 29
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INTERNATIONAL MARKETS
ENTAIL DIFFERENT RISKS THAN THOSE TYPICALLY ASSOCIATED WITH DOMESTIC MARKETS,
INCLUDING CURRENCY FLUCTUATIONS, POLITICAL AND ECONOMIC INSTABILITY, ACCOUNTING
CHANGES AND FOREIGN TAXATION. SECURITIES MAY BE LESS LIQUID AND MORE VOLATILE.
INVESTMENTS IN EMERGING OR DEVELOPING MARKETS INVOLVE EXPOSURE TO ECONOMIC
STRUCTURES THAT ARE GENERALLY LESS DIVERSE AND MATURE, AND TO POLITICAL SYSTEMS
WHICH CAN BE EXPECTED TO HAVE LESS STABILITY THAN THOSE OF MORE DEVELOPED
COUNTRIES. PLEASE SEE THE PROSPECTUS FOR FURTHER DETAILS. RUSSELL FUND
DISTRIBUTORS, INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES EMERGING MARKETS FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Emerging Markets Fund. I hope you
find this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA Funds.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES EMERGING MARKETS FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Robert Furdak, CFA, Managing Director, has been the portfolio manager
primarily responsible for investment decisions regarding the Emerging Markets
Fund since its inception in March 1994. Mr. Furdak has been with State Street
since 1989, working on the non-US active equity team. There are seven other
portfolio managers working with Mr. Furdak in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return primarily through capital appreciation.
INVESTS IN: Equity securities of foreign issuers, domiciled, or doing a
substantial portion of their business in countries having a developing economy
or securities market.
STRATEGY: Fund Managers invest in foreign emerging market countries with
prospects for continued growth. Through the use of proprietary models, the Fund
will invest in the International Finance Corporation Investable ("IFCI") Index
countries. As the IFCI Index expands, the Fund will expand to capture new
emerging countries.
[Graph]
DATES EMERGING MARKETS FUND I F C INVESTABLE COMPOSITE INDEX**
Inception* $10,000 $10,000
1994 $11,450 $10,529
1995 $10,387 $8,357
1996 $11,201 $8,881
PERFORMANCE REVIEW
The Seven Seas Series Emerging Markets Fund had a net asset value per share of
$10.87 for the fiscal year ended August 31, 1996. This resulted in a one year
total return of 7.83%. The Fund outperformed its benchmark, the International
Finance Corporation Investable (IFCI) Index (an unmanaged index of broadly
diversified emerging market equities) which was up 6.27% for the same one year
period.
The emerging markets returned to positive territory after two difficult years
caused by ramifications from the Mexican peso devaluation. Most of the strong
performance came in calendar year 1996 as the Fund gained 12.1% during the first
eight months of 1996.
The Fund's overweight position in Latin America proved beneficial as returns in
the region rose 8.0% for the fiscal year. The portfolio's largest country
position Brazil, led the way with a positive return of 15% for the year ending
August 31, 1996. Brazil continues to benefit from the economic reforms
instituted in July of 1994. Inflation is manageable at about 1.1% per month
(versus over 40% per month prior to the reforms), the currency is stable,
SEVEN SEAS SERIES EMERGING MARKETS FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
----------------- ----------------- ----------------
1 Year $ 10,783 7.83%
Inception $ 11,201 4.64%+
INTERNATIONAL FINANCE CORPORATION INVESTABLE COMPOSITE INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
----------------- ----------------- ----------------
1 Year $ 10,627 6.27%
Inception $ 8,881 (4.64%)+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
foreign reserves are high and the government is privatizing state-owned
companies, greatly improving efficiency. The positive economic environment has
translated into very strong corporate earnings growth. Brazilian securities
continue to have some of the lowest price multiples (price-to-earnings,
price-to-book value) in the world. The Fund also benefited from its overweight
position in Argentina which rose 14.5% during the fiscal year. However
Argentina's economy has slowed significantly and price multiples are high for
the region. After being underweighted since the inception of the Fund, Mexican
securities now represents the Fund's second largest country position, although
the weighting remains neutral to the benchmark. The austerity measures
instituted after the peso devaluation appears to be working and the market has
rebounded, rising 20.5% so far this year.
PORTFOLIO HIGHLIGHTS
The Seven Seas Series Emerging Markets Fund's management turned very positive on
Eastern Europe towards the end of 1995. The bet has paid handsome returns as all
three markets in the region significantly outperformed the benchmark in 1996.
Hungary rocketed 86.0%, the Czech Republic soared 26.4% and Poland rose 77.4%.
These markets were excellent values in late 1995 after posting dismal returns
earlier that year. We feel that the countries in this region can become the
"tigers" of the late 1990's with their combination of cheap, highly-skilled
labor and governments that allow corporations the freedom to pursue profitable
opportunities. Our underweighted position in the Asian region, the worst
performing of the three IFCI regions, proved beneficial during the fiscal year.
While the region has a track record of very strong economic growth we are
pessimistic about these markets because of the high price multiples, the
increasing trade deficits and growing political instability especially in
Indonesia, Sri Lanka, and the continuing conflicts between Taiwan and China. The
one bright spot in the region is Korea where our position is overweighted
relative to the benchmark. While price multiples are low and growth robust, the
market has languished (down 23.7% during the fiscal year) due to a political
crisis that has embroiled the last two presidents. Fund management believes that
the reaction to this crisis is overblown and the market will rebound based on
the strong fundamentals we see in this market.
The strong performance of the emerging markets in 1996 is a positive sign that
these markets are pulling out of their two year downturn. Fund management
believes that the themes supporting investment in the emerging markets remain
sound: growth potential, attractive valuations, diversification benefits, and
large human/natural resources, which should continue to fuel these markets going
forward.
The Fund's ten largest equity holdings represented 20.0% of the portfolio.
Brazil was the largest country concentration which accounted for seven of the
top holdings.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Telecomunicacoes Brasileiras NPV 5.2%
Eletrobras (centrais) NPV 1.9
Telefonos de Mexico SA Series L - ADR 1.9
Vale Rio Doce (Cia) NPV 1.8
Petroleo Brasileiro SA NPV 1.7
CEMIG SA 1.6
Sider Nacional Cia NPV 1.6
Egis Gyogyszergyar 1.5
Naviera Perez Companc Class B 1.4
Banco Bradesco SA NPV 1.4
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLES ON
THE PRECEDING PAGE.
*The Fund commenced operations on March 1, 1994. Index comparison also
began on March 1, 1994.
**The IFC Investable Composite Index is a market capitalization-weighted
index of the performance of securities listed on the stock exchanges of
emerging equity market countries.
+Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers, the Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Emerging Markets Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the two fiscal years in the period then ended and for the period March 1,
1994 (commencement of operations) to August 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period March 1, 1994 (commencement of
operations) to August 31, 1994 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand LLP
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
COMMON STOCKS - 83.0%
ARGENTINA - 6.9%
Acindar Industria Argentina
de Aceros SA Class B (a) 718,702 $ 507
Alpargatas (a) 728,007 390
Astra Cia Argentina de Petro 329,720 472
Banco de Galicia Class B 136,935 712
Buenos Aires Embotelladora SA
Class B - ADR 92 23
Celulosa Argentina Class B (a) 930,877 163
Cementera Argentina Class B (a) 36,398 153
Dalmine Siderca SA 847,298 1,064
Garovaglio Zorraq (a) 11,548 40
Juan Minetti SA Class B 78,590 193
Ledesma 356,302 414
Naviera Perez Companc Class B 295,358 1,690
Polledo SA Class A 32,863 30
Telecom Argentina Class B 114,329 438
Telefonica de Argentina Class B 296,816 698
YPF SA Class D 59,969 1,259
---------
8,246
---------
BRAZIL - 9.2%
Banco do Brasil SA
Series A 2001 Warrants (a) 3,031,340 6
Series B 2006 Warrants (a) 4,547,010 9
Series C 2011 Warrants (a) 7,578,350 14
Companhia Siderurgica
de Tubarao NPV 13,300,000 255
Eletrobras (centrais) NPV 8,458,900 2,247
Sider Nacional Cia NPV 82,954,000 1,914
Telecomunicacoes
Brasileiras NPV 102,480,496 6,199
TELESP NPV (a) 2,660,871 447
---------
11,091
---------
CHILE - 0.6%
Chile Fund, Inc. 10,200 235
Compania de Telefonos (Chile)
SA - ADR 2,400 235
Enersis SA - ADR 6,200 193
Madeco SA - ADR 1,400 32
---------
695
---------
CHINA - 1.5%
Beiren Printing Class H 60,000 13
Dong Fang Electric Machinery, Ltd.
Class H (a) 64,000 19
Guangshen Railway Co., Ltd.
- ADR (a) 6,000 115
Guangzhou Shipyard Class H 122,000 29
Harbin Power Equipment Class H 316,000 53
Huaneng Power International, Inc.
- ADR Class N (a) 23,900 421
Jilin Chemical Industrial
Company, Ltd. Class H (a) 166,000 25
Luoyang Glasswork Class H 268,000 46
Maanshan Iron & Steel Class H 590,000 107
Quingling Motors Class H 591,000 227
Shandong Huaneng Power Co., Ltd.
Series N - ADR 16,500 155
Shanghai Hai Xing Shipping Co.
Class H 1,484,000 107
Shanghai Petrochemical Corp.
- ADR 7,500 195
Tsingtao Brewery Class H 151,000 54
Yizheng Chemical Fibre Class H 946,000 222
Zhenhai Refining & Chemical Co.,
Ltd. Class H 110,000 33
---------
1,821
---------
COLOMBIA - 1.5%
Banco Ganadero SA
Class B - ADR 39,900 1,022
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Banco Industrial Colombiano SA
- ADR 14,500 $ 272
Cementos Diamante SA - GDR 49,300 499
---------
1,793
---------
CZECH REPUBLIC - 2.4%
CEZ (a) 24,630 978
Chemopetrol Group AS 3,400 173
Cokoladovny AS (a) 700 96
Inzenyrske a Prumyslove
Stavby AS (a) 300 38
Skoda Koncern Plzen AG (a) 1,452 59
SPT Telecom AS (a) 11,325 1,486
---------
2,830
---------
GREECE - 2.3%
Alcatel Cables Hellas SA (Regd)(a) 6,500 41
Alpha Leasing SA (Regd) 1,200 25
Aluminum Co. of Greece
Industrial and Commercial (Regd) 3,420 137
Commercial Bank of Greece (Regd) 13,640 416
Credit Bank (Regd) 6,420 376
Elais Oleaginous 1,800 56
Ergo Bank (Regd) 2,420 144
ETBA Leasing SA (Regd) 6,300 87
Hellenic Bottling 7,720 269
Hellenic Telecommunication
Organization SA (a) 7,200 123
Heracles General Cement Co. 17,700 215
Klonatex 1,800 42
Loulis Flour Mills SA (Regd)(a) 25,120 111
National Bank of Greece (Regd) 6,150 375
National Mortgage Bank (a) 6,810 260
Petzetakis SA (a) 22,281 98
Shelman SA 6,680 43
---------
2,818
---------
HUNGARY - 4.0%
Agrimpex Series A (a) 300 32
Danubius Hotel (Regd)(a) 24,831 454
Domus Kereskedilmi (a) 6,294 12
Egis Gyogyszergyar (a) 26,501 1,795
Fotex (Regd)(a) 384,108 289
Magyar Olaj Es Gas (a) 35,000 359
Martfu Brewery (Regd)(a) 387 5
Mol Magyar Olay-Es Gazipari
- GDR (a) 16,700 171
Mol Magyar Olay-Es Gazipari
- GDS (a) 65,000 666
Pick Szeged Rt (a) 6,848 325
Richter Gedeon, Ltd. - GDR 10,500 589
Skala Coop (a) 9,554 112
---------
4,809
---------
INDIA - 2.2%
Bombay Fund NPV (a) 147,223 1,362
Morgan Stanley India
Investment Fund, Inc. (a) 72,700 663
The India Fund, Inc. (a) 77,200 608
---------
2,633
---------
INDONESIA - 1.4%
Bank International Indonesia
(Alien Market) 36,900 85
Barito Pacific Timber (Alien Market) 70,000 43
Dharmala Intiland (Alien Market) 98,500 104
Gadjah Tunggal (Alien Market) 65,000 28
Gudang Garam (Alien Market)(a) 20,000 73
HM Sampoerna (Alien Market) 27,500 265
Indosat (Alien Market) 53,500 169
Inti Indorayon Utama
(Alien Market) 20,000 17
Jakarta International Hotel
& Development (Alien Market) 217,750 172
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Japfa Comfeed Indonesia
(Alien Market) 82,500 $ 48
Mayora Indah (Alien Market)(a) 171,600 75
PT Telekomunikasi Indonesia
Series B (Alien Market) 295,500 416
Semen Cibinong (Alien Market) 29,000 58
Semen Gresik (Alien Market) 35,000 98
---------
1,651
---------
MALAYSIA - 7.1%
Amalgamated Industrial Steel 276,000 196
Arab-Malaysian Development
Berhad 333,000 247
Berjaya Leisure Berhad 182,000 172
Cement Industries 56,000 176
Cold Storage 24,000 32
DCB Holdings Berhad 61,000 186
Faber Group Berhad (a) 273,600 261
Federal Flour Mills Berhad 30,000 75
Golden Hope Plantation 268,000 432
Highlands & Lowlands 122,000 207
IGB Corp. Berhad 219,000 227
IND Oxygen, Inc. 165,000 242
Jasa Megah Industries (a) 31,000 43
Kuala Lumpur Kepong 216,000 537
Kumpulan Guthrie 192,000 308
Malayan Banking Berhad 30,000 285
Malaysia Mining Corp. 290,000 326
Malaysian Airline System 175,000 523
Malaysian International
Shipping Corp. 50,000 152
Malaysian International
Shipping Corp. (Alien Market) 24,000 73
MBF Capital Berhad 184,000 263
Oriental Holdings Berhad 56,000 452
Perlis Plantations 81,250 285
Public Bank Berhad 117,333 149
Public Bank Berhad
(Alien Market) 77,333 148
Rashid Hussain Berhad 93,000 334
Renong Berhad 253,000 369
Sime Darby Berhad
(Resident Shares) 109,800 372
Tan Chong Motor Holdings 171,000 303
Tenaga Nasional 171,000 621
Tractors Malaysia Holdings Berhad 37,000 80
UMW Holdings Berhad 34,000 135
UMW Holdings Berhad
2000 Warrants (a) 4,000 6
United Engineers Berhad 7,308 52
Wembley Industries Holdings (a) 129,000 270
---------
8,539
---------
MEXICO - 9.1%
Alfa SA de CV Class A NPV 148,662 652
Carso Global Telecom
Series A1 NPV (a) 51,000 145
Celanese Mexicana
Series B NPV 124,000 229
Cemex SA de CV Class B NPV 135,737 562
Cifra SA de CV Class B NPV (a) 167,000 261
Controladora Commercial
Mexicana Series B NPV (a) 462,000 455
Cydsa SA Series A NPV (a) 96,000 210
Desc SA de CV Series B NPV (a) 30,000 157
Desc SA de CV Series C NPV (a) 625 3
Empresa Nacional
de Electric - ADR 18,600 365
Fomento Economico Mexicano
SA de CV Series B NPV 167,000 499
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Grupo Carso Series A NPV (a) 51,000 $ 234
Grupo Cementos Chihuahua
Series B NPV 200,000 256
Grupo Continental NPV 19,000 75
Grupo Finance Serfin
Series B NPV (a) 20,000 11
Grupo Financiero Bancomer
Series B NPV (a) 1,574,000 766
Grupo Gigante SA Series B NPV (a) 750,000 266
Grupo Mexico SA Series B NPV (a) 43,108 128
Grupo Posadas SA Series A NPV 100,000 41
Grupo Sidek Series B NPV (a) 400,000 79
Grupo Simec SA de CV
Series B NPV (a) 620,000 143
Grupo Tribasa SA de CV - ADR (a) 65,000 333
Ingenieros Civiles NPV (a) 34,000 502
Invercorporacion SA de CV
Series A1 51,000 7
Kimberly-Clark, Mexico
Class A NPV 36,000 661
Sears Roebuck de Mexico
Series B NPV (a) 110,000 313
Telefonos de Mexico SA
Series L - ADR 67,800 2,229
Telefonos de Mexico SA
Series L NPV 192,900 313
Transportacion Maritima Mexicana
SA de CV Series A - ADR 8,000 55
Tubos de Acero de Mexico NPV (a) 47,000 508
Vitro SA NPV 231,000 451
---------
10,909
---------
PAKISTAN - 0.7%
Bank of Punjab (a) 68,120 30
Crescent Textile Mills (a) 43,050 14
Dandot Cement Co. (a) 35,000 5
Dewan Salmon Fibre 8,640 6
Engro Chemical (a) 23,640 93
Fauji Fertilizer (a) 31,200 64
Hub Power Co., Ltd. - GDR (a) 257,000 214
Karachi Electric (a) 80,520 58
Muslim Commercial (a) 30,360 28
Pakistan International Air (a) 228,000 58
Pakistan State Oil (a) 16,120 150
Pioneer Cement (a) 61,300 12
Sui Northern Gas Pipeline (a) 30,720 31
Sui Southern Gas Pipeline (a) 31,625 26
---------
789
---------
POLAND - 2.9%
Bank Inicjatyw Gospodarczych 382,080 446
Bank Slaski SA 7,625 695
Bre Bank Rozwoju Eks (a) 18,310 561
Elektrim 55,995 552
Exbud SA (a) 12,205 116
Exbud SA Series C (a) 3,051 26
Jelfa (a) 11,865 193
Mostostal Export SA (a) 9,430 27
Okocimskie Zaklady
Piwowarskie SA (a) 31,688 255
Polifarb 39,555 173
Sokolowskie Zaklady
Miesne SA (a) 84,840 74
Universal SA (a) 48,640 140
WBK (a) 21,500 133
Wolczanka SA 2,850 19
Zywiec 1,875 107
---------
3,517
---------
PORTUGAL - 6.5%
Banco Chemical SA 26,000 278
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Banco Comercial Portuguese
(Regd) 108,145 $ 1,291
Banco Internacional
do Funchal SA (a) 2,900 24
Banco Internacional
do Funchal SA Rights (a) 30,500 35
Banco Portugues de Investimento
(Regd) 35,930 446
Banco Totta e Acores (Regd) 13,236 250
Banif Banco International
do Funchal (a) 30,500 250
Cimpor Cimentos de Portugal 9,800 220
Companhia de Celulose
do Caima SA (a) 13,900 290
Corticeira Amorim SGPS 34,700 398
Empresa Fabril de Maquinas
Electricas - Efacec (a) 34,400 374
Jeronimo Martins SGPS 7,500 697
Lusotur Societe Finance
de Turismo (a) 11,800 214
Mague Gestao e Partipacoes 15,200 271
Modelo Continente SGPS SA 14,700 424
Portucel Industrial SA (a) 42,900 291
Portugal Telecom SA (a) 29,200 781
Portugal Telecom SA - ADR 7,200 192
Salvador Caetano Industrias 2,464 32
Soja de Portugal 21,900 221
Sonae Investimento 15,600 449
Soporcel SA (a) 15,600 369
---------
7,797
---------
RUSSIA - 0.7%
AO Mosenergo - ADR (a) 11,000 293
Chernogorneft - ADR (a) 5,000 36
Lukoil Oil Co. - ADR 12,000 465
---------
794
---------
SOUTH AFRICA - 5.1%
AECI, Ltd. 28,602 144
Amalgamated Banks
of South Africa 88,561 409
Anglo American Corp. SA 7,773 472
Anglo American Industrial Corp. 6,200 229
Barlow, Ltd. 27,839 256
De Beers Centenary AG 22,244 693
Del Monte Royal Food, Ltd. 202,039 212
Free State Consolidated
Gold Mines, Ltd. 21,668 240
Gencor, Ltd. 96,950 341
ISCOR 458,398 275
Liberty Life Association of Africa 13,000 381
Liberty Life Strategic 84,559 288
Malbak, Ltd. NPV (a) 59,600 270
Polifin, Ltd. 4,500 7
Rembrandt Group, Ltd. 43,894 369
Sappi, Ltd. 27,688 267
Sasol NPV 30,046 335
South African Breweries 4,300 114
Standard Bank Investment Corp., Ltd. 1,850 71
Tongaat-Hulett Group, Ltd. 13,141 157
Vaal Reefs Exploration & Mining, Ltd. 5,978 501
Western Deep Levels, Ltd. 4,191 158
---------
6,189
---------
SOUTH KOREA - 7.5%
Anam Electronics Co. (a) 5,170 59
Bank of Seoul (a) 64,180 414
Cheil Industrial, Inc. 3,000 48
Daelim Industrial Co. 2,300 31
Daewoo Corp. (a) 61,260 576
Daewoo Electronics Co. 31,630 251
Daewoo Heavy Industries (a) 11,496 90
Daewoo Telecom Co. (a) 24,887 274
Daewoo Telecom Co. New (a) 1,241 12
Dong Shin Housing
& Construction Co. 38,780 241
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Dongkuk Steel Mill (a) 16,638 $ 333
Haitai Confectionery Co., Ltd. (a) 2,990 31
Hana Bank 8,632 144
Hana Bank New 1,494 23
Hanil Bank 21,680 198
Hanshin Construction Co. (a) 48,120 290
Hanshin Securities 8,851 149
Hanwha Machinery Co., Ltd. (a) 21,284 286
Hanwha Machinery Co., Ltd.
Rights (a) 21,284 10
Hyundai Motor Co., Ltd. 710 27
Inkel Corp. (a) 18,870 198
Kia Steel Co., Ltd. (a) 9,684 47
Kia Steel Co., Ltd. New (a) 2,116 10
Korea Electric Power Corp. 29,380 897
Korea First Bank Securities 1,080 14
Korea First Securities Co. (a) 2,472 26
Korea Fund, Inc. 10,252 196
Korea Housing Bank New (a) 2,460 53
Korea Mobile
Telecommunications Corp. 290 198
Kumho Construction
& Engineering Co. (a) 23,100 217
Kwang Ju Bank 39,682 315
Kyong Nam Bank (a) 17,110 219
Kyong Nam Bank New (a) 3,810 49
Kyungki Bank 20,402 169
L.G. Information &
Communication 400 50
L.G. Information &
Communication New (a) 91 11
L.G. Merchant Banking Corp. (a) 4,346 91
L.G. Merchant Banking Corp. New (a) 3,679 68
Orion Electric Co. 18,780 314
Pohang Iron & Steel 4,230 252
Samhee Investment & Finance (a) 11,478 186
Samsung Electronics, Ltd. (a) 2,834 221
Samsung Electronics, Ltd. New (a) 854 63
Seoul Access Trust - IDR (a) 12* 165
Seoul Horizon Trust (a) 5,000 75
Seoul Securities (a) 2,678 31
Ssangyong Cement Co., Ltd. 14,970 311
STC Corp. 4,600 83
Sung Bo Chemicals Co. 3,240 79
Sung Bo Chemicals Co. Rights (a) 2,700 2
Tongyang Cement 6,000 161
Tongyang Investment
& Finance Corp. (a) 15,865 242
Tong Yang Nylon Co. (a) 9,310 257
Yukong, Ltd. 9,627 251
---------
9,008
---------
SRI LANKA - 1.3%
Aitken Spence & Co. (a) 10,900 25
Asian Hotel Corp. (a) 176,200 25
Blue Diamond Jewel NPV (a) 225,105 52
Central Finance Co. (a) 12,800 56
Ceylon Grain Elevator (a) 22,100 6
Colombo Drydocks (a) 114,700 22
Commercial Bank of Ceylon (a) 10,560 20
Development Finance Corp. 112,200 525
Hayleys (a) 62,732 203
John Keells Holdings, Ltd. (a) 140,171 396
Lanka Ceramic (a) 88,200 40
Lanka Milk Food (a) 21,600 3
Merchant Bank of Sri Lanka (a) 162,800 42
National Development Bank (a) 24,000 83
Richard Pieris & Co. (a) 9,900 12
United Motor (a) 32,160 17
---------
1,527
---------
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
TAIWAN - 4.3%
Acer, Inc. (a) 105,468 $ 137
Ambassador Hotel 185,000 241
Cathay Life Insurance 115,460 706
Chang Hwa Bank 13,000 75
Cheng Loong (a) 14,388 10
Chia Hsin Flour (a) 25,889 15
China Development Corp. 195,000 525
China Petrochemical
Development Corp. (a) 289,000 292
China Rebar (a) 23,658 12
China Steel Corp. 498,000 486
Ensure Co., Ltd. (a) 88,000 111
Far Eastern Textile 306,290 342
Hua Nan Bank 161,900 790
Hualon Teijran (a) 26,059 23
Kao Hsing Chang Iron & Steel (a) 15,000 14
Kwong Fong Industries (a) 14,950 10
Lealea Enterprise (a) 14,981 15
Pacific Construction (a) 316,857 292
Pacific Electrical Wire & Cable (a) 370,700 297
Prince Housing Development (a) 13,860 13
Taipei Business Bank (a) 54,500 134
Tuntex Distinct (a) 410,550 294
Walsin Lihwa Wire (a) 301,233 238
Wan Yu Paper (a) 20,160 9
Yieh Loong Co. (a) 22,143 14
Yue Loong Motor (a) 19,000 16
Yuen Foong Yu Manufacturing (a) 15,939 13
---------
5,124
---------
THAILAND - 2.3%
Advanced Information Services
(Alien Market) 9,000 119
Bangkok Bank (Alien Market) 29,400 372
Bangkok Land Co. (Alien Market) 50,900 64
Bangkok Rubber PLC (Alien Market) 24,400 7
Bank of Ayudhya (Alien Market) 35,750 161
First Bangkok City Bank PLC
(Alien Market) 108,200 166
Industrial Finance Corp.
of Thailand (Alien Market) 69,600 278
International Cosmetics PLC
(Alien Market) 9,800 74
Karat Sanitaryware PLC
(Alien Market) 26,100 71
MDX Public Co., Ltd.
(Alien Market)(a) 66,600 88
National Petrochemical PLC
(Alien Market) 103,900 96
Nava Finance & Securities PLC 30,600 74
NEP Realty & Industry Co. PLC
(Alien Market)(a) 14,700 5
Padaeng Industry Co., Ltd. PLC
(Alien Market)(a) 88,400 37
Saha Pathana Inter-Holding
Public Co., Ltd. (Alien Market) 44,200 120
Saha Union Corp. PLC
(Alien Market) 52,500 76
Siam Cement Co. (Alien Market) 4,900 188
Siam City Bank PLC
(Alien Market)(a) 64,600 128
Siam Commercial Bank PLC
(Alien Market) 3,500 44
Tanayong (Alien Market)(a) 70,300 108
TelecomAsia (Alien Market)(a) 173,400 319
Unicord Public Co., Ltd.
(Alien Market)(a) 348,600 37
United Communications Industries
(Alien Market) 17,100 168
---------
2,800
---------
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
TURKEY - 2.3%
Akbank 2,958,000 $ 296
Eczacibasi Ilac Sanayii ve
Ticaret AS (a) 4,126,000 173
Erciyas Biracilik Ve Malt Sanayii 364,000 184
Eregli Demir Ve Celik Fabrikalari 2,951,000 262
Izmir Demir Celik Sanayii AS 11,171,636 89
Kartonsan 1,635,000 115
Petrokimya Holdings 805,000 348
Raks Elektronik Sanayi ve
Ticaret AS 510,000 123
T Sise Cam 3,428,173 411
Tofas Turk Otomobil Fabrikasi 4,098,500 168
Turk Hava Yollari A.O. (a) 1,430,000 453
Yapi Kredi Bankasi 8,044,500 167
---------
2,789
---------
VENEZUELA - 0.2%
Ceramicas Carabobo CA
Class B - ADR 26,400 26
Corimon CA SA Class B - ADR (a) 8,000 10
Mantex CA SA - ADR (a) 8,901 36
Mavesa SA - ADR 17,681 89
Siderurgica Venezolana Sivensa
- ADR 40,300 128
---------
289
---------
ZIMBABWE - 1.0%
Art Corp. (a) 393,428 3
Barclays Bank (Zimbabwe) PLC 88,605 161
Delta Corp. (a) 271,180 708
Hunyani (a) 163,927 41
Kadoma (a) 337,224 11
Mashoaland Holdings (a) 266,434 28
National Food Holdings (a) 33,965 19
TA Holdings 442,603 62
Wankie Colliery Co., Ltd. 127,598 39
Whitehead (a) 754,815 40
Zimbabwe Finance Holdings 85,044 51
Zimbabwe Spinners & Weavers 452,419 51
Zimbabwe Sun (a) 99,825 34
---------
1,248
---------
TOTAL COMMON STOCKS
(cost $92,209) 99,706
---------
PREFERRED STOCKS - 14.1%
BRAZIL - 13.9%
Acos Villares SA NPV 1,100,000 271
Banco Bradesco SA NPV 192,927,056 1,632
Banco do Estado de Sao Paulo
NPV (a) 66,086,600 202
Banco Itau SA (Regd) 1,990,000 818
Banco Nacional SA NPV 19,600,000 359
Brahma (Cia Cervej) NPV 330,000 209
Caemi Mineracao e Metal
(BR)(a) 6,992,000 334
CEMIG SA 63,904,856 1,924
Ceval Alimentos SA NPV 61,288,800 482
Companhia Energetica
de Sao Paulo NPV (a) 12,983,800 383
Companhia Siderurgica
Belgo-Mineira NPV 10,270,000 687
Copene Petroquimica
do Nordestse Series A (Regd) 1,580,341 673
Electrobras (centr) Series B NPV 5,223,000 1,434
Hering SA (Cia) NPV 30,450,000 150
Hering Textile (a) 2,490,000 1
Metal Barbara (Cia) NPV (a) 37,000,000 15
Papel Simao NPV 15,500,000 276
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31 1996
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
Petroleo Brasileiro SA NPV 16,656,000 $ 1,991
Ripasa SA Celulose
Papel NPV 47,200 21
Sider Riograndense NPV 47,506,668 692
Siderurgica Tubarao
Series B NPV 56,938,928 907
Telecomunicacoes
Brasileiras NPV 8,769,400 651
TELESP NPV 487,020 93
UNIPAR SA Class B 580,226 308
Usiminas Uni Sd Mg NPV 100,000,000 104
Vale Rio Doce (Cia) NPV 110,765 2,148
---------
16,765
---------
GREECE - 0.1%
Delta Dairy 11,924 99
---------
99
---------
SOUTH KOREA - 0.1%
Tong Yang Securities Co. (a) 18,540 120
---------
120
---------
TOTAL PREFERRED STOCKS
(cost $17,051) 16,984
---------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 2.6%
UNITED STATES - 2.6%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 1,294 1,294
Student Loan Marketing Association
Discount Notes
5.160% due 09/03/96 (b)(c) 1,830 1,829
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,123) 3,123
---------
TOTAL INVESTMENTS
(identified cost $112,383)(d) - 99.7% 119,813
OTHER ASSETS AND LIABILITIES,
NET - 0.3% 403
---------
NET ASSETS - 100.0% $ 120,216
---------
---------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity. (Unaudited)
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
IDR - International Depositary Receipt
* Reflected in units. 1 IDR unit = 1,000 Shares.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31 1996
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------------ --------- ---------
Basic Industries 13.1% $ 15,749
Capital Goods 8.9 10,724
Consumer Basics 5.7 6,911
Consumer Durable Goods 4.3 5,132
Consumer Non-Durables 3.7 4,489
Consumer Services 1.6 1,947
Energy 8.5 10,171
Finance 21.2 25,431
General Business 8.8 10,548
Miscellaneous 4.5 5,415
Shelter 1.5 1,843
Technology 3.1 3,672
Transportation 0.7 828
Utilities 11.5 13,830
Short-Term Investments 2.6 3,123
--------- ---------
Total Investments 99.7 119,813
Other Assets and Liabilities, Net 0.3 403
--------- ---------
NET ASSETS 100.0% $ 120,216
--------- ---------
--------- ---------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ------------------------------------ --------- ---------
Latin America 41.4% $ 49,788
Pacific Basin 28.3 34,012
Europe 21.2 25,453
Africa 6.2 7,437
Short-Term Investments - U.S. 2.6 3,123
--------- ---------
Total Investments 99.7 119,813
Other Assets and Liabilities, Net 0.3 403
--------- ---------
NET ASSETS 100.0% $120,216
--------- ---------
--------- ---------
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $112,383,268)(Note 2) . . . . . . . . . . . . $ 119,812,798
Foreign currency holdings (identified cost $3,121,719) . . . . . . . . . . . . . . . 3,126,807
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,414
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,634
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 17,452
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,468,105
LIABILITIES
Payables (Note 4):
Investments purchased . . . . . . . . . . . . . . . . . . . . . . $ 3,017,103
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . 114,754
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 92,930
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 27,248
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,252,035
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,216,070
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 593,954
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . 274,944
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,429,530
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . (11,715)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,058
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,918,299
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,216,070
-------------
-------------
Net asset value, offering and redemption price per share
($120,216,070 divided by 11,058,133 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $10.87
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $185,698) . . . . . . . . . . . . . . $ 2,092,220
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,149
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,369
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 709,651
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 57,122
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 445,058
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 210,030
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 29,786
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . 46,639
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 26,521
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . 17,570
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 4,104
Amortization of deferred organization expenses. . . . . . . . . . 7,012
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 25,295
-------------
Expenses before reimbursements. . . . . . . . . . . . . . . . . . 1,578,788
Expenses reimbursed by Adviser. . . . . . . . . . . . . . . . . . (366,588)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,200
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038,169
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,499
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . (206,705)
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,122
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . (1,561)
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,304,355
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . $ 7,342,524
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . $ 1,038,169 $ 743,326
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 343,499 686,174
Foreign currency-related transactions . . . . . . . . . . . . . (206,705) (78,780)
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 6,169,122 (2,620,901)
Foreign currency-related transactions . . . . . . . . . . . . . (1,561) (9,528)
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . 7,342,524 (1,279,709)
Distributions to shareholders:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . (831,930) (258,975)
Net realized gain on investments . . . . . . . . . . . . . . . . . (700,132) --
Increase (decrease) in net assets from Fund share transactions . . . 46,020,504 42,444,718
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 51,830,966 40,906,034
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . 68,385,104 27,479,070
------------- -------------
NET ASSETS AT END OF YEAR
(including undistributed net investment income
of $593,954 and $522,449, respectively). . . . . . . . . . . . . . $ 120,216,070 68,385,104
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1996 1995
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fund shares sold . . . . . . . . . . . 5,782,417 $ 60,428,666 4,945,295 $ 49,529,291
Fund shares issued to shareholders
in reinvestments of distributions. . 144,489 1,456,365 19,275 220,287
Fund shares redeemed . . . . . . . . . (1,506,029) (15,864,527) (726,403) (7,304,860)
------------- ------------- ------------- -------------
Net increase (decrease). . . . . . . . 4,420,877 $ 46,020,504 4,238,167 $ 42,444,718
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . $ 10.30 $ 11.45 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . .11 .14 .05
Net realized and unrealized gain (loss) on investments . . . . . . .68 (1.19) 1.40
------------ ------------ ------------
Total Income From Investment Operations. . . . . . . . . . . . . . .79 (1.05) 1.45
------------ ------------ ------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . (.12) (.10) --
Net realized gain on investments . . . . . . . . . . . . . . . . . (.10) -- --
------------ ------------ ------------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . (.22) (.10) --
------------ ------------ ------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . $ 10.87 $ 10.30 $ 11.45
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . 7.83 (9.28) 14.50
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c). . . . . . . 1.28 1.50 1.50
Operating expenses, gross, to average net assets (b)(c). . . . . . 1.67 1.90 2.45
Net investment income to average net assets (b). . . . . . . . . . 1.10 1.74 1.31
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . 4.36 19.77 --
Net assets, end of year ($000 omitted) . . . . . . . . . . . . . . 120,216 68,385 27,479
Per share amount of fees waived ($ omitted). . . . . . . . . . . . -- -- .0130
Per share amount of fees reimbursed ($ omitted)(c) . . . . . . . . .0376 .0320 .0204
Average commission rate paid per share
of security ($ omitted)(d) . . . . . . . . . . . . . . . . . . . .0006 N/A N/A
</TABLE>
* For the period March 1, 1994 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share of security and commission paid per share of
security may vary from that of domestic markets.
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Emerging Markets Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement, to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
fair market value of such securities.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUTED
August 31, 1996
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required. As permitted
by tax regulations, the Fund intends to defer a net realized capital loss
of $113,558 incurred from November 1, 1995 to August 31, 1996, and treat it
as arising in fiscal year 1997.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 112,945,939 $ 18,350,927 $ (11,484,068) $ 6,866,859
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts passive foreign
investment companies, foreign denominated investments and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1996:
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
------------ ----------- -----------
$ (134,734) $ 152,239 $ (17,505)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has estimated expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUTED
August 31, 1996
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books; and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations not typically associated with investing in
the United States. These risks include revaluation of currencies, future
adverse political and economic developments and liquidity concerns
resulting from thinner markets. Moreover, securities issued in these
markets may be less liquid and their prices more volatile than those of
comparable securities in the United States. The Prospectus contains further
information and details regarding these risks.
Annual Report 25
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUTED
August 31, 1996
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996 purchases and
sales of investment securities, excluding short-term investments,
aggregated to $50,073,101 and $3,905,899, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the period September 1, 1995
to October 31, 1995, the Adviser voluntarily agreed to reimburse the Fund
for all expenses in excess of 1.50% of average daily net assets on an
annual basis. Effective November 1, 1995, the Adviser voluntarily agreed to
reimburse the Fund for all expenses in excess of 1.25% of average daily net
assets on an annual basis. As of August 31, 1996, the receivable due from
the Adviser for expenses in excess of the expense cap has been netted
against the Adviser fee payable. The Investment Company also has contracts
with the Adviser to provide custody, shareholder services and transfer
agent servicing to the Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all international funds; $0 up to and
including $500 million - .07%, over $500 million to and including $1
billion - .06%, over $1 billion to and including $1.5 billion - .04%, over
$1.5 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
26 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUTED
August 31, 1996
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $23,655 and $2,866 from the Adviser and SSBSI,
respectively. The Fund did not incur any expenses from Commercial Banking
during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. The amount of
carryover expenses outstanding as of August 31, 1996, for which the
Distributor intends to seek repayment is approximately $208,551.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $2,276 for the year ended August 31,
1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory fees $ 44,218
Administration fees 5,963
Custodian fees 37,421
Shareholder servicing fees 1,040
Transfer agent fees 2,864
Trustees' fees 1,424
---------
$ 92,930
---------
---------
Annual Report 27
<PAGE>
THE SEVEN SEAS SERIES
EMERGING MARKETS FUND
TAX INFORMATION
August 31, 1996
The Fund paid foreign taxes of $185,698 and recognized $2,076,863 of foreign
source income during the taxable year ended August 31, 1996. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0168 per share of
foreign taxes paid and $.1878 of gross income earned from foreign sources in the
taxable year ended August 31, 1996.
Please consult a tax advisor for questions about federal or state income tax
laws.
28 Annual Report
<PAGE>
THE SEVEN SEAS SERIES EMERGING MARKETS FUND
Two International Place, 35th Floor
Boston, Massachusetts, 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 29
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
TAX FREE MONEY MARKET FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 19
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 24
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. INCOME FROM TAX-FREE FUNDS MAY BE SUBJECT TO AN
ALTERNATIVE MINIMUM TAX OR STATE AND LOCAL TAXES. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets. This report contains summaries on the market environment,
performance and financial statements for the Tax Free Money Market Fund. I hope
you find this information to be a useful tool as you review your overall
investment strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA FUNDS.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
The Seven Seas Series of Funds opened an additional fund in fiscal 1996. The
Seven Seas Series Bond Market Fund was opened on February 7, 1996. Its
investment objective seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James Donahue, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Tax Free Money
Market Fund since its inception in December 1994. Mr. Donahue has been with
State Street's Capital Markets Division since 1991. Prior to that he was a
municipal bond trader with the investment firm of Jesup Josephthal. There are
two other portfolio managers who work with Mr. Donahue in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income exempt from federal income taxes;
preservation of capital and liquidity.
INVESTS IN: High quality, short-term municipal securities.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[Graph]
DATES TAX FREE MONEY MARKET FUND
Inception* $10,000
1995 $10,254
1996 $10,568
PERFORMANCE REVIEW
The one year return of the Seven Seas Series Tax Free Money Market Fund at
August 31, 1996 was 3.07%. The annualized return was 3.21% since its inception
in December 1994.
In December the Fund applied for and received a AAm rating from Standards &
Poor's Corporation. Standard & Poor's assigns a AAm rating to funds where safety
of principal value is high and exposure to loss is limited. This rating
corresponds with the underlying investments and the management style of the
Fund. From the Fund's inception, the investment objective has been preservation
of principal and a stable net asset value of $1.00 per share, with a competitive
rate of return. The rating of mutual funds are opinions of the investment
quality of shares of the mutual fund which invest in short-term fixed income
obligations. The Standard & Poor's Corporation assigns ratings across a wide
spectrum of comparable funds. In order to maintain the Fund's rating, S&P
requires investment guidelines that may, in certain instances, be more
conservative than otherwise allowed a fund under applicable law.
SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------------- ------------ ---------
1 Year $ 10,307 3.07%
Inception $ 10,568 3.21%+
*The Fund commenced operations on December 1, 1994.
+Annualized.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PORTFOLIO HIGHLIGHTS
In 1995 the municipal securities market continued to be cautious because of the
bankruptcy of Orange County, California. As a result of the bankruptcy, the
regulators and municipal securities industry have developed monitoring controls
and oversight procedures. These procedures are intended to avoid unforeseen
bankruptcies and improve confidence in the municipal securities markets.
In the early months of 1996 the tax-exempt market kept a close eye on the
presidential primaries because cuts in federal income tax could have an adverse
effect on the value of long-term municipal bonds. The resulting uncertainty in
the long-term municipal market sent investors to the shorter, more stable money
market funds. With this increase in demand the yields decreased during the
period.
Although the flat-tax idea proved politically untenable, politics has continued
to play an important role in the tax-exempt market. State and local governments
are trimming budgets and are becoming very cost conscious. Issuance of new
tax-exempt vehicles has decreased and the low supply of notes has caused the
spread between yields on municipal notes and US Treasury securities to widen on
an absolute basis.
For the past year the Federal Reserve has kept Fed Fund rates steady. In January
the Fed eased rates by 25 basis points.
During the summer months the market anticipated a Fed tightening, causing a
little uncertainty in the debt markets. The Fund responded by investing in
securities with daily and weekly resets providing a high level of liquidity. The
Fund will continue to maintain a high level of liquidity for the near future.
The Fund's ten largest issuers represented 42.9% of the portfolio. Of the top
ten, securities issues from the state of Texas were 12.0% of the portfolio,
followed by California at 9.0%.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
Harris County, Texas Industrial Development Corp.
Pollution Control Revenue 8.6%
Los Angeles County, California Public Works Financing
Authority Lease Revenue Series B, 4.5
Arkansas, State of, Development Financial Authority
Health Care Facilities Revenue Series B, 4.5
California, State of, Revenue Anticipation Notes
Series C-3 4.5
Sikeston, Missouri Electricity Revenue 4.2
Mashantucket (Western) Pequot Tribe Tax-Exempt
Commercial Paper Series 1996 4.1
Panhandle Plains, Texas Higher Education Authority
Revenue Series A 3.4
Georgia Municipal Gas Authority Revenue Series D 3.2
Kentucky Housing Corp. Housing Authority Series B 3.0
Georgia Municipal Electric Authority Power Revenue
Series L 2.9
----------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Tax Free Money Market Fund (the
"Fund"), as of August 31, 1996, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets and the
financial highlights for the fiscal year then ended and for the period
December 1, 1994 (commencement of operations) to August 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations for the fiscal year
then ended, the changes in its net assets and the financial highlights for the
fiscal year then ended and for the period December 1, 1994 (commencement of
operations) to August 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA - 1.1%
Parrish, Alabama Industrial Development Board Pollution
Control Revenue, daily demand . . . . . . . . . . . . . . . . $ 500 3.750%(1) 06/01/15 $ 500
--------
500
--------
ARKANSAS - 4.4%
Arkansas, State of, Development Financial Authority Health
Care Facilities Revenue Series B, weekly demand. . . . . . . . 2,000 3.450(2) 06/01/12 2,000
--------
2,000
--------
CALIFORNIA - 10.4%
California, State of, Revenue Anticipation Notes
Series C-3, weekly demand. . . . . . . . . . . . . . . . . . . 2,000 3.400(2) 06/30/97 2,000
Los Angeles County, California Public Works Financing
Authority Lease Revenue Series B (a) . . . . . . . . . . . . . 2,000 4.250 03/01/97 2,006
Orange County, California Sanitation District Certificates
Participation Series C, daily demand (a) . . . . . . . . . . . 700 3.650(1) 08/01/17 700
--------
4,706
--------
CONNECTICUT - 4.0%
Mashantucket (Western) Pequot Tribe Tax-Exempt
Commercial Paper, Series 1996. . . . . . . . . . . . . . . . . 1,800 3.650 11/05/96 1,800
--------
1,800
--------
FLORIDA - 10.0%
Dade County, Florida Aviation Revenue Series A (a) . . . . . . . 500 4.850 10/01/96 501
Dade County, Florida Industrial Development Authority Revenue
Series B, weekly demand. . . . . . . . . . . . . . . . . . . . 1,000 3.500(2) 01/01/16 1,000
Dade County, Florida Industrial Development Authority Revenue
Series C, weekly demand . . . . . . . . . . . . . . . . . . . 500 3.500(2) 01/01/16 500
Jacksonville, Florida Electric Authority Revenue Series 3-A
(pre-refunded 10/01/96)(b) . . . . . . . . . . . . . . . . . . 500 7.625 10/01/15 509
</TABLE>
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
Manatee County, Florida Pollution Control Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 3.750%(1) 09/01/24 $ 1,000
Putnam County, Florida Development Authority Pollution
Control Revenue, daily demand. . . . . . . . . . . . . . . . . 480 3.750(1) 09/01/24 480
St. Lucie County, Florida Pollution Control Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . 500 3.750(1) 01/01/26 500
-------
4,490
-------
GEORGIA - 10.1%
Burke County, Georgia Development Authority Pollution Control
Revenue 2nd Series, daily demand . . . . . . . . . . . . . . . 800 3.750(1) 04/01/25 800
Georgia Municipal Electric Authority Power Revenue
Series L (pre-refunded 01/01/97)(b). . . . . . . . . . . . . . 1,250 7.750 01/01/18 1,291
Georgia Municipal Gas Authority Revenue Series D . . . . . . . . 1,400 3.450 10/07/96 1,400
Savannah, Georgia Water & Sewer Revenue
(pre-refunded 12/01/96)(b) . . . . . . . . . . . . . . . . . . 1,055 10.125 12/01/02 1,072
-------
4,563
-------
IDAHO - 2.7%
Idaho Health Facilities Hospital Authority Revenue,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . 1,200 3.450(2) 12/01/23 1,200
-------
1,200
-------
ILLINOIS - 1.2%
Chicago, Illinois Waterworks Revenue (pre-refunded 11/01/96)(b). 550 6.750 11/01/01 558
-------
558
-------
KENTUCKY - 4.1%
Kentucky Housing Corp. Housing Revenue Series B, semiannual
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325 3.650(3) 07/01/11 1,325
Owensboro, Kentucky Water Revenue (a). . . . . . . . . . . . . . 515 8.000 09/15/96 516
-------
1,841
-------
LOUISIANA - 5.1%
Ascension Parish, Louisiana Pollution Control Revenue, weekly
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 3.500(2) 12/01/09 700
East Baton Rouge, Lousiana Pollution Control Revenue, daily
demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 3.750(1) 03/01/22 200
</TABLE>
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana, State of, Gas & Fuels Tax Revenue Series A (a). . . . $ 500 6.750% 11/15/96 $ 503
New Orleans, Louisiana Aviation Board Revenue,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . 900 4.150(2) 12/01/19 900
-------
2,303
-------
MASSACHUSETTS - 3.5%
Massachusetts Municipal Wholesale Electric Company
Power Supply Systems Revenue Series C, weekly demand . . . . . 600 3.350(2) 07/01/19 600
Massachusetts, State of, General Obligation Series A
(pre-refunded 10/01/96)(a)(b). . . . . . . . . . . . . . . . . 250 7.400 10/01/01 256
Massachusetts, State of, Port Authority Revenue Series B,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . 700 3.850(1) 07/01/18 700
-------
1,556
-------
MISSOURI - 4.6%
Missouri, State of, Health & Educational Facilities
Authority Revenue, daily demand (a). . . . . . . . . . . . . . 200 3.850(1) 12/01/05 200
Sikeston, Missouri Electricity Revenue (a) . . . . . . . . . . . 1,865 5.100 06/01/97 1,883
-------
2,083
-------
NEW MEXICO - 0.7%
Farmington, New Mexico Pollution Control Revenue
Series A, daily demand . . . . . . . . . . . . . . . . . . . . 300 3.750(1) 05/01/24 300
-------
300
-------
NORTH CAROLINA - 3.1%
Charlotte, North Carolina Airport Revenue
Series A, weekly demand (a). . . . . . . . . . . . . . . . . . 800 3.350(2) 07/01/16 800
North Carolina Medical Care Community Hospital Revenue
Series A, daily demand . . . . . . . . . . . . . . . . . . . . 600 3.850(1) 10/01/20 600
-------
1,400
-------
</TABLE>
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
OREGON - 2.6%
Oregon, State of, General Obligation
(pre-refunded 09/01/96)(b) . . . . . . . . . . . . . . . . . . $ 1,150 12.500% 09/01/01 $ 1,173
-------
1,173
-------
PENNSYLVANIA - 1.8%
Delaware County, Pennsylvania Industrial Development Authority
Pollution Control Revenue, daily demand. . . . . . . . . . . . 600 3.750(1) 10/01/19 600
Pennsylvania, State of, Higher Education Authority Revenue
Series D, daily demand . . . . . . . . . . . . . . . . . . . . 200 3.750(1) 11/01/30 200
-------
800
-------
TENNESSEE - 2.7%
Memphis, Tennessee General Obligation Series B,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . 1,200 3.600(2) 08/01/02 1,200
-------
1,200
-------
TEXAS - 24.1%
Austin, Texas General Obligation (pre-refunded 09/01/96)(b). . . 250 7.900 09/01/01 250
Dallas, Texas Waterworks & Sewer System Revenue Series A . . . . 500 9.500 10/01/96 502
Deer Park, Texas General Obligation. . . . . . . . . . . . . . . 975 8.000 02/15/97 994
Harris County, Texas General Obligation (a). . . . . . . . . . . 500 8.500 11/01/96 504
Harris County, Texas Health Facilities Development Corp.
Hospital Revenue, daily demand . . . . . . . . . . . . . . . . 1,000 3.750(1) 12/01/25 1,000
Harris County, Texas Industrial Development Corp. Pollution
Control Revenue, daily demand. . . . . . . . . . . . . . . . . 3,800 3.750(1) 03/01/24 3,800
Houston, Texas Water Systems Revenue . . . . . . . . . . . . . . 500 7.000 12/01/96 505
Panhandle Plains, Texas Higher Education Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . 1,500 3.450(2) 06/01/21 1,500
South Texas Higher Education Student Loan Revenue,
weekly demand . . . . . . . . . . . . . . . . . . . . . . . . 1,000 3.450(2) 06/01/25 1,000
Texas, State of, Tax and Revenue Anticipation Notes
Series A, daily demand . . . . . . . . . . . . . . . . . . . . 800 3.850(1) 03/01/15 800
-------
10,855
-------
</TABLE>
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
WASHINGTON - 1.2%
Washington, State of, General Obligation Motor Vehicle
Fuel Tax (pre-refunded 09/01/96)(b). . . . . . . . . . . . . . $ 550 7.500% 09/01/98 $ 550
-------
550
-------
WISCONSIN - 1.1%
Milwaukee County, Wisconsin General Obligation
(pre-refunded 10/01/96)(b) . . . . . . . . . . . . . . . . . . 500 6.100 10/01/01 501
-------
501
-------
TOTAL INVESTMENTS (amortized cost $44,379)(c) - 98.5%. . . . . . 44,379
OTHER ASSETS AND LIABILITIES, NET - 1.5% . . . . . . . . . . . . 682
-------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . $45,061
-------
-------
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Pre-refunded: These bonds are collateralized by U.S. Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date. The rate noted is for descriptive purposes;
effective yield may vary.
(c) The identified cost for federal income tax purposes is the same as shown
above.
* All securities with a maturity greater than 13 months have a demand
feature, or an optional or mandatory put, resulting in an effective
maturity of 13 months or less. Additionally, all daily and weekly demand
securities are backed by direct payment letters of credit.
Variable Rate:
(1) Daily
(2) Weekly
(3) Semiannual
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
QUALITY RATINGS AS A % OF MARKET VALUE
VMIG1, SP-1 or equivalent ++ 100%
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
Pollution Control Revenue 20%
Refunded and Special Obligation Revenue 18
Healthcare Revenue 11
Education Revenue 9
Utility Revenue 9
Airport Revenue 7
Water and Sewer Revenue 5
Commercial Paper 4
General Obligation 4
Public Works Revenue 4
Housing Revenue 3
Industrial Revenue 3
Solid Waste Revenue 2
Highway Revenue 1
--------
100%
--------
--------
++ VMIG1: The highest short-term municipal note credit rating given by Moody's
Investors Services to notes with a demand feature which are of the
"best quality."
SP-1: The highest short-term municipal note credit rating given by
Standard & Poor's Corporation to notes with a "very strong or strong
capacity to pay principal & interest."
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . $ 44,378,723
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366,609
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,163
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,561
Deferred organizational expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . 33,392
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,204,448
LIABILITIES
Payables (Note 4):
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,945
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 16,366
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 7,649
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,960
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,061,488
-------------
-------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (16,500)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,083
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,032,905
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,061,488
-------------
-------------
Net asset value, offering and redemption price per share
($45,061,488 divided by 45,082,880 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $1.00
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,762,586
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,174
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 14,213
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 27,993
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 13,211
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 11,659
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . 23,766
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 28,584
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . 1,484
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 2,145
Amortization of deferred organization expenses. . . . . . . . . . 10,303
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 22,791
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,323
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,483,263
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investment transactions (Notes 2 and 3). . . . . . . . (12,977)
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . $ 1,470,286
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
1996 1995*
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . $ 1,483,263 $ 862,550
Net realized gain (loss) from investments . . . . . . . . . . . . (12,977) (3,523)
------------- -------------
Net increase (decrease) in net assets resulting from operations. . . 1,470,286 859,027
Distributions to shareholders from net investment income . . . . . . (1,488,155) (862,550)
Increase (decrease) in net assets from Fund share transactions . . . 2,472,138 42,610,742
------------- -------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 2,454,269 42,607,219
Net assets at beginning of year. . . . . . . . . . . . . . . . . . . 42,607,219 --
------------- -------------
NET ASSETS AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . $ 45,061,488 $ 42,607,219
------------- -------------
------------- -------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 231,934,323 79,000,157
Fund shares issued to shareholders in reinvestments
of distributions. . . . . . . . . . . . . . . . . . . . . . . . . 574,273 608,107
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . (230,036,458) (36,997,522)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . 2,472,138 42,610,742
------------- -------------
------------- -------------
</TABLE>
*For the period December 1, 1994 (commencement of operations) to
August 31, 1995.
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal year or
period ended August 31 and other performance information derived from the financial statements.
1996 1995*
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . .0302 .0251
------------- -------------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . (.0302) (.0251)
------------- -------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000
------------- -------------
------------- -------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . 3.07 2.54
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b). . . . . . . . .57 .59
Operating expenses, gross, to average net assets (b). . . . . . . .57 .60
Net investment income to average net assets (b) . . . . . . . . . 3.01 3.40
Net assets, end of year ($000 omitted). . . . . . . . . . . . . . 45,061 42,607
Per share amount of fees waived ($ omitted) . . . . . . . . . . . -- .0001
</TABLE>
* For the period December 1, 1994 (commencement of operations) to
August 31, 1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1995 are annualized.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Tax Free Money Market Fund (the "Fund"). The
Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value. The Investment Company has available Class B and Class C
shares of the Fund as of September 22, 1994; however, shares have not been
offered on these classes as of the date of these financial statements.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded daily on the
trade date, which in most instances is the same as the settlement date.
Realized gains and losses from the securities transactions, if any, are
recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income tax and no federal income tax provision was required. At
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
August 31, 1996, the Fund had a net tax basis capital loss carryover of
$5,580, which may be applied against any realized net taxable gains in each
succeeding year or until its expiration date of August 31, 2004. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $10,919, incurred from November 1, 1995 to August 31, 1996
and treat it as arising in fiscal year 1997.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1996, purchases,
sales and maturities of short-term tax-exempt obligations were
$336,079,876, $261,189,060, and $52,405,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
Company's Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $12,317 and $16,267 from the Adviser and
Commercial Banking, respectively. The Fund did not incur any expenses from
SSBSI during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE AS
FOLLOWS:
Advisory fees $ 10,283
Administration fees 1,174
Custodian fees 2,304
Distribution fees 794
Shareholder servicing fees 1,014
Transfer agent fees 248
Trustees' fees 549
----------
$ 16,366
----------
----------
22 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
TAX FREE MONEY MARKET FUND
TAX INFORMATION
August 31, 1996
Of the dividends paid by the Tax Free Money Market Fund from net investment
income for the taxable year ended August 31, 1996, 100% were exempt interest
dividends which are tax exempt for purposes of regular federal income tax, and
for purposes of the federal alternative minimum tax.
Please consult a tax advisor for any questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
THE SEVEN SEAS SERIES TAX FREE MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
THE SEVEN SEAS SERIES FUND-Registered Trademark-
BOND MARKET FUND
August 31, 1996
Annual Report
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 22
"THE SEVEN SEAS SERIES FUND-Registered Trademark-" IS A REGISTERED TRADEMARK AND
SERVICE MARK OF THE SEVEN SEAS SERIES FUND.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SEVEN SEAS SERIES FUND PROSPECTUS CONTAINING MORE COMPLETE INFORMATION
CONCERNING THE INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND
EXPENSES. THE PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SEVEN SEAS SERIES FUND.
<PAGE>
THE SEVEN SEAS SERIES BOND MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with The Seven Seas Series Fund annual report for
the fiscal year ended August 31, 1996. Over the past year, the Series has grown
to include fourteen portfolios covering a broad range of investment strategies
from the far corners of the emerging markets countries to the domestic stock and
bond markets.
On February 7, 1996, The Seven Seas Series Bond Market Fund was opened. Its
investment objective seeks to maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers Aggregate Bond Index.
This report contains summaries on the market environment, performance and
financial statements for the recently opened Bond Market Fund. I hope you find
this information to be a useful tool as you review your overall investment
strategy.
Over the past fiscal year, the Board of Trustees of the Seven Seas Series of
Funds approved a name change from the Seven Seas Series Funds to the SSgA Funds.
In the coming year you will notice the new logo and name on all fund materials.
SSgA is the investment management business of State Street Bank and Trust
Company, a 200 year old pioneer and leader in the world of financial services.
Our entrepreneurial spirit, analytical talents and appetite for innovation
enables us to capitalize on investment opportunities on a global scale. Creative
thinking combined with quantitative tools distinguishes SSgA's investment
management style. These vital strengths are brought to life through our
proprietary global information network-a system of process, people and
technology that led us to become one of the most efficient, flexible and
responsive firms in the field of investment management.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the Fund, I would like to thank you for
choosing The Seven Seas Series Fund and look forward to continuing to serve your
investment needs as the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
THE SEVEN SEAS SERIES BOND MARKET FUND
MANAGEMENT OF THE FUNDS
[Photograph]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. John Kirby, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the Bond Market Fund.
Prior to joining State Street Bank in 1995, Mr. Kirby was an account manager
with Lowell, Blake & Associates. Prior to that he was a portfolio manager with
One Federal Asset Management and at Cambridge Port Savings as an asset/liability
risk specialist. There are three other portfolio managers working with Mr. Kirby
in managing the Fund.
Annual Report 5
<PAGE>
THE SEVEN SEAS SERIES BOND MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return by investing in fixed income securities.
INVESTS IN: High quality, investment grade, debt instruments; including US
Government Treasuries and Agencies, corporate bonds, asset-backed securities,
and mortgage-backed securities.
STRATEGY: Fund Managers make investment decisions to seek to match or exceed
the return of the Lehman Brothers Aggregate Bond Index. The Fund seeks to match
its duration to the Index at all times while adding value through issue and
sector selection.
[Graph]
DATES BOND MARKET FUND LEHMAN BROTHERS AGGREGATE BOND INDEX**
Inception* $10,000 $10,000
1996 $9,781 $9,824
PERFORMANCE REVIEW
Since inception on February 7, 1996 the Fund returned -2.19% versus -1.76% for
its benchmark, the Lehman Brothers Aggregate Bond Index for the period ended
August 31, 1996. The Fund's performance reflects operating expenses, whereas
Index results do not include expenses or fees of any kind.
Since inception the Fund has experienced a rising, volatile interest rate
environment. From February 7, 1996, through fiscal year-end 1996, ten-year
Treasury yields have moved from 5.66% to 6.96% and two-year Treasury yields have
risen from 4.92% to 6.34%. The increase in rates is due largely to the market's
anticipation of Federal Reserve actions in response to strong economic growth
indicators. The belief that the Fed's monetary policy would eventually result in
higher yields led market participants to build yield increases into their fixed
income pricing. Rising rates have hurt the fixed income market's total returns
but the positive growth environment has given stability to domestic and foreign
business outlooks.
SEVEN SEAS SERIES BOND MARKET FUND
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ------------
Inception $ 9,781 (2.19%)+
LEHMAN BROTHERS AGGREGATE BOND INDEX
Period Ended Growth of Total
08/31/96 $10,000 Return
- ----------------- -------------- ------------
Inception $ 9,824 (1.76%)+
SEE RELATED NOTES ON PAGE 7.
6 Annual Report
<PAGE>
THE SEVEN SEAS SERIES BOND MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PORTFOLIO HIGHLIGHTS
The Seven Seas Series Bond Market Fund commenced operation in February 1996 and
has invested the incoming funds to build a portfolio of holdings representative
of its chosen benchmark. The Fund was managed consistently with its objective of
maximizing total return by investing in fixed income securities, including, but
not limited to, those represented by the Lehman Brothers Aggregate Bond Index.
Investments included US Treasury and Agency securities, domestic
investment-grade corporate debt, Yankee securities, mortgage-backed securities
and asset-backed securities. The steady growth in the economy has given the Fund
an opportunity to overweight corporate debt and Yankee securities in a period
where spreads have been stable-to-tight as compared to Treasury yields.
Mortgage-backed securities were accumulated over the February to August period
and are now held at a full market weighting. In reaction to the market's bearish
sentiment, the Fund increased its exposure to higher coupon securities in the
mortgage-backed allocation. The Fund and the Index both have an identical
modified-adjusted duration of 4.77 years. As the Fund does not take active
interest rate exposure, the primary source of incremental return is sector
allocation decisions.
The Fund's ten largest issuers comprised 60.7% of the portfolio. The top six
issuers, which accounted for 53.7% of the portfolio, were in US Government
Treasury and Agency instruments.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1996
United States Treasury Notes 13.8%
Federal National Mortgage Association
Discount Notes 12.7
Federal Home Loan Mortgage Corp.
Participation Certificates 9.7
Government National Mortgage Association 8.2
United States Treasury Bonds 5.9
Federal Farm Credit Bank Discount Notes 3.4
General Motors Acceptance Corp. 2.2
Manitoba, Province of 1.6
NationsBank Corp. 1.6
Exxon Capital Corp. 1.6
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
PRECEDING PAGE.
*The Bond Market Fund commenced operations on February 7, 1996. Index
comparisons began February 1, 1996.
**The Lehman Brothers Aggregate Bond Index is composed of all bonds covered
by the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total returns
comprises price appreciation/depreciation and income as a percentage of
the original investment.
+Total returns for periods less than one year are not annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Seven Seas Series Fund:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of The Seven Seas Series Bond Market Fund (the "Fund"),
as of August 31, 1996, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the period February 7,
1996 (commencement of operations) to August 31, 1996. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of August 31, 1996, the results of its operations, the changes in its
net assets and the financial highlights for the period February 7, 1996
(commencement of operations) to August 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 7, 1996
8 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
LONG-TERM INVESTMENTS - 97.5%
ASSET-BACKED SECURITIES - 3.6%
Chase Manhattan Grantor Trust
Pass-thru Certificate
Series 1996-A Class A
5.200% due 02/15/02 $ 161 $ 158
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 200 181
Ford Credit Auto Loan Master Trust
Series 1995-1 Class A
6.500% due 08/15/02 200 196
Household Affinity Credit Card
Participation Certificate
Series 1994-2 Class A
7.000% due 12/15/99 200 201
Premier Auto Trust
Series 1996-2 Class A3
6.350% due 01/06/00 300 299
---------
1,035
---------
CORPORATE BONDS AND
NOTES - 30.4%
Aetna Services, Inc.
6.750% due 08/15/01 150 147
6.970% due 08/15/36 200 198
Alltel Corp.
6.750% due 09/15/05 150 143
Applied Materials, Inc. (MTN)
7.000% due 09/06/05 200 192
Associates Corp. of North America
6.375% due 08/15/98 150 149
7.500% due 05/15/99 200 203
Bayerische Landesbank (MTN)
7.500% due 06/15/04 150 153
Branch Banking & Trust Co.
5.700% due 02/01/01 250 237
Burlington Northern Santa Fe
7.290% due 06/01/36 300 295
Caterpillar Financial Services Corp.
6.410% due 06/11/98 200 200
Chase Manhattan Corp. New
5.500% due 02/15/01 500 471
CIT Group Holdings, Inc.
5.625% due 04/01/98 200 197
6.350% due 07/31/98 200 199
Commercial Credit Group, Inc.
6.000% due 06/15/00 350 338
Dean Witter, Discover & Co.
6.000% due 03/01/98 300 298
Exxon Capital Corp.
6.500% due 07/15/99 500 497
Ford Motor Credit Co.
5.625% due 01/15/99 300 292
General Motors Acceptance Corp.
5.375% due 03/09/98 200 197
General Motors Acceptance Corp.
(MTN)
8.250% due 01/20/98 300 307
5.950% due 12/28/98 200 196
Household Finance Corp. (MTN)
6.490% due 04/09/01 400 388
International Lease Finance Corp.
6.625% due 08/15/00 200 197
KFW International Finance, Inc.
7.000% due 03/01/13 250 236
Lockheed Martin Corp.
6.550% due 05/15/99 350 347
McDonalds Corp.
8.875% due 04/01/11 300 336
Merrill Lynch & Co., Inc.
9.000% due 05/01/98 300 311
NationsBank Corp.
6.625% due 01/15/98 500 500
Norwest Corporation Series G (MTN)
6.250% due 04/15/99 200 197
Annual Report 9
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
Norwest Financial, Inc.
8.500% due 08/15/98 $ 300 $ 310
Sears Roebuck & Co. (MTN)
7.820% due 02/23/98 250 255
Suntrust Banks, Inc.
6.000% due 02/15/26 300 272
Wells Fargo & Co. (MTN)
6.875% due 05/10/01 500 496
Wendy's International, Inc.
7.000% due 12/15/25 50 44
---------
8,798
---------
MORTGAGE-BACKED SECURITIES - 28.7%
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # G0-0458
8.000% due 11/01/25 981 982
Federal Home Loan Mortgage Corp.
8.000% 15 Year TBA (c) 300 305
7.000% 15 Year TBA (c) 500 490
6.500% 30 Year TBA (c) 600 555
7.000% Gold TBA due 12/01/99 (c) 225 225
Federal National Mortgage
Association Pools
# 050766 7.500% due 07/01/23 104 102
# 201543 8.000% due 02/01/23 12 12
# 221098 7.500% due 08/01/23 37 36
# 233081 7.500% due 09/01/23 43 42
# 237160 7.500% due 02/01/24 43 42
# 270782 7.500% due 02/01/24 94 92
# 292898 7.000% due 08/01/24 217 207
# 296351 8.500% due 12/01/24 49 50
# 303031 7.500% due 10/01/24 323 317
# 304928 8.500% due 03/01/25 96 98
# 316260 7.500% due 07/01/25 171 168
# 319059 6.500% due 08/01/25 303 280
# 345548 6.500% due 05/01/26 296 274
Federal National Mortgage Association
7.500% 15 Year TBA (c) 300 300
8.000% 15 Year TBA (c) 200 203
7.500% 30 Year TBA (c) 700 684
9.000% 30 Year TBA (c) 200 208
Government National Mortgage
Association Pools
# 104190 10.000% due 11/15/13 25 27
# 112115 10.000% due 04/15/14 16 17
# 328956 7.500% due 12/15/22 18 18
# 330416 7.500% due 01/15/23 41 40
# 344955 7.500% due 08/15/23 68 67
# 346374 7.500% due 01/15/23 112 110
# 348101 7.000% due 06/15/23 296 283
# 352079 7.000% due 09/15/23 268 255
# 352521 7.500% due 11/15/23 58 57
# 369662 7.500% due 10/15/23 80 78
# 371259 7.000% due 01/15/24 129 122
# 380248 7.500% due 02/15/24 282 277
# 381147 9.000% due 09/15/25 198 206
# 384568 7.000% due 04/15/24 221 211
# 415444 9.500% due 06/15/25 297 318
# 780424 8.000% due 01/15/99 198 198
Government National Mortgage
Association
8.500% 30 Year TBA (c) 370 378
---------
8,334
---------
NON-US BONDS - 0.1%
Korea Development Bank
7.250% due 05/15/06 35 34
---------
34
---------
10 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
UNITED STATES GOVERNMENT
TREASURIES - 22.0%
United States Treasury Bonds
8.875% due 08/15/17 $ 580 $ 679
8.750% due 08/15/20 100 117
7.875% due 02/15/21 350 374
7.625% due 02/15/25 550 576
6.875% due 08/15/25 180 173
United States Treasury Notes
6.000% due 08/15/99 800 789
7.750% due 11/30/99 450 465
7.750% due 01/31/00 350 362
6.250% due 05/31/00 725 715
6.500% due 05/31/01 250 248
6.250% due 02/15/03 535 519
7.250% due 05/15/04 450 460
7.250% due 08/15/04 215 219
5.875% due 11/15/05 150 139
7.000% due 07/15/06 555 557
---------
6,392
---------
YANKEE BONDS - 12.7%
Australia & New Zealand
Banking Group LTD.
6.250% due 02/01/04 300 279
British Columbia, Province of
6.500% due 01/15/26 200 176
Finland, Republic of
6.950% due 02/15/26 200 182
Hydro, Quebec
8.050% due 07/07/24 300 314
International Bank for Reconstruction
& Development
9.250% due 07/15/17 200 235
Manitoba, Province of
6.000% due 10/15/97 150 150
Manitoba, Province of,
Series C-J
9.500% due 10/01/00 351 381
Midland Bank PLC
6.950% due 03/15/11 240 222
National Australia Bank, Ltd.
9.700% due 10/15/98 250 265
New Zealand, Government of
8.750% due 12/15/06 300 330
Ontario, Province of
7.750% due 06/04/02 300 309
Quebec, Province of
6.500% due 01/17/06 300 278
Usinor Sacilor - ADR
7.250% due 08/01/06 100 96
Victorian Public Authority
Financial Agency
8.450% due 10/01/01 150 159
Westpac Banking, Ltd.
7.875% due 10/15/02 300 309
---------
3,685
---------
TOTAL LONG-TERM INVESTMENTS
(cost $28,977) 28,278
---------
SHORT-TERM INVESTMENTS - 14.1%
Federal Farm Credit Bank
Discount Notes
5.200% due 09/17/96 (a)(d) 1,100 1,097
Federal Home Loan Mortgage Corp.
Discount Notes
5.240% due 09/18/96 (a)(d) 600 599
Federal National Mortgage Association
Discount Notes
5.210% due 09/12/96 (a)(d) 1,000 998
Annual Report 11
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1996
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
--------- ---------
Franklin US Treasuries
Money Market Fund (a) $ 864 $ 864
Valiant Money Market Fund (a)
Class A Cash Equivalent 538 538
---------
4,096
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,096) 4,096
---------
TOTAL INVESTMENTS
(identified cost $33,073)(b) - 111.6% 32,374
OTHER ASSETS AND LIABILITIES,
NET - (11.6%) (3,359)
---------
NET ASSETS - 100.0% $ 29,015
---------
---------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Forward commitment. See Note 2.
(d) Rate noted is yield-to-maturity. (Unaudited)
ABBREVIATIONS:
ADR - American Depositary Receipt.
MTN - Medium Term Note.
TBA - To be announced security.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<S> <C> <C>
ASSETS
Investments at market (identified cost $33,073,441)(Note 2). . . . . . . . . . . . . $ 32,374,124
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,146
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,050
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . 48,821
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,840,141
LIABILITIES
Payables (Note 4):
Investments purchased (regular settlement). . . . . . . . . . . . $ 364,510
Investments purchased (delayed settlement). . . . . . . . . . . . 3,395,858
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . 4,800
Accrued fees to affiliates and trustees . . . . . . . . . . . . . 57,057
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 2,853
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,825,078
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,015,063
-------------
-------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 384,417
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . (391,184)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . (699,317)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,012
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,718,135
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,015,063
-------------
-------------
Net asset value, offering and redemption price per share
($29,015,063 divided by 3,011,781 shares of $.001
par value shares of beneficial interest outstanding). . . . . . . . . . . . . . . $9.63
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period February 7, 1996 (Commencement of Operations)
to August 31, 1996
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 787,080
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,809
-------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812,889
Expenses (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,564
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . 3,000
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 21,003
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . 2,738
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 8,472
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . 28,924
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . 3,214
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730
Amortization of deferred organization expenses. . . . . . . . . . 11,023
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 1,890
-------------
Expenses before waivers . . . . . . . . . . . . . . . . . . . . . 120,558
Expenses waived . . . . . . . . . . . . . . . . . . . . . . . . . (39,237)
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,321
-------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731,568
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . (391,184)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . (699,317)
-------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,090,501)
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . $ (358,933)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period February 7, 1996 (Commencement of Operations)
to August 31, 1996
1996
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 731,568
Net realized gain (loss) from investments . . . . . . . . . . . . . . . . . . . . (391,184)
Net change in unrealized appreciation
or depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . (699,317)
-------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . (358,933)
Distributions to shareholders from net investment income . . . . . . . . . . . . . . (352,842)
Increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . 29,726,838
-------------
INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 29,015,063
Net assets at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . --
-------------
NET ASSETS AT END OF PERIOD
(including undistributed net investment income ,
of $384,417). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,015,063
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS SHARES AMOUNT
------------- -------------
<S> <C> <C>
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 3,218,269 $ 31,720,510
Fund shares issued to shareholders
in reinvestments of distributions . . . . . . . . . . . . . . . . 292 2,778
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . (206,780) (1,996,450)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . 3,011,781 $ 29,726,838
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout the
period and other performance information derived from the financial statements.
1996*
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Net realized and unrealized gain (loss) on investments. . . . . . . . . . . . . . (.49)
-------------
Total From Investment Operations. . . . . . . . . . . . . . . . . . . . . . . . . (.22)
-------------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.15)
-------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.63
-------------
-------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.19)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c) . . . . . . . . . . . . . . .63
Operating expenses, gross, to average net assets (b)(c) . . . . . . . . . . . . . .93
Net investment income to average net assets (b) . . . . . . . . . . . . . . . . . 5.66
Portfolio turnover (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.85
Net assets, end of period ($000 omitted). . . . . . . . . . . . . . . . . . . . . 29,015
Per share amount of fees waived ($ omitted)(c). . . . . . . . . . . . . . . . . . .0148
</TABLE>
* For the period February 7, 1996 (commencement of operations) to
August 31, 1996.
(a) Periods less than one year are not annualized.
(b) Annualized.
(c) See Note 4 for current period amounts.
16 Annual Reports
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
1. ORGANIZATION
The Seven Seas Series Fund (the "Investment Company") is a series mutual
fund, currently comprising 14 investment portfolios, which are in operation
as of August 31, 1996. These financial statements report on one portfolio,
The Seven Seas Series Bond Market Fund (the "Fund"), which commenced
operations on February 7, 1996. The Investment Company is a registered and
diversified open-end investment company, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), that was organized as a
Massachusetts business trust on October 3, 1987 and operates under a First
Amended and Restated Master Trust Agreement, dated October 13, 1993, as
amended (the "Agreement"). The Investment Company's Agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.001 par value.
On July 17, 1996, the Board of Trustees of the Investment Company approved
an amendment to the Agreement to change the name of the Investment Company
from "The Seven Seas Series Fund" to the "SSgA Funds." This change will
become effective with the filing of the annual registration statement which
is anticipated to be filed in December of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies followed by the Fund in the preparation of its financial
statements.
SECURITY VALUATION: United States fixed-income securities listed and
traded principally on any national securities exchange are valued on the
basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter, fixed-income securities and options are valued on
the basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at "amortized cost," a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Annual Report 17
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short-and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As the Investment Company is a Massachusetts business
trust, each sub-trust is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income. Therefore, the Fund paid no federal
income taxes and no federal income tax provision was required. As permitted
by tax regulations, the Fund intends to defer a net realized capital loss
of $359,506 incurred from November 1, 1995 to August 31, 1996 and treat it
as arising in fiscal year 1997.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1996 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 33,105,119 $ 3,528 $ (734,523) $ (730,995)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in mortgage-backed
securities and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
18 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1996:
UNDISTRIBUTED ADDITIONAL
NET INVESTMENT PAID-IN
INCOME CAPITAL
-------------- --------------
$ 5,691 $ (5,691)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) at Fedwire closing time of the underlying securities
remains at least equal to 100% of the repurchase price. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
FORWARD COMMITMENTS: The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment" or "delayed settlement"
transaction, e.g., to be announced ("TBA")) consistent with a Fund's
ability to manage its investment portfolio and meet redemption requests.
The price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction is
negotiated. The Funds may dispose of a forward commitment transaction prior
to settlement if it is appropriate to do so and realize short-term gains
(or losses) upon such sale. When effecting such transactions, cash, or
liquid high-grade debt obligations of the Fund in 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. A forward commitment transaction involves
a risk of loss if the value of the security to be purchased declines prior
to the settlement date or the other party to the transaction fails to
complete the transaction.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the period February 7, 1996 (commencement of
operations) to August 31, 1996, purchases and sales of investment
securities, excluding US Government and Agency obligations and short-term
investments, aggregated to $17,421,975 and $3,403,999, respectively.
Included in this amount is $2,526,689 of securities received in exchange
for Fund shares.
Annual Report 19
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
For the period February 7, 1996 (commencement of operations) to August 31,
1996, purchases and sales of US Government and Agency obligations,
excluding short-term investments, aggregated to $52,779,494 and
$37,379,717, respectively. Included in these amounts are $13,382,000 of
securities received in exchange for Fund shares and consequently,
$5,130,944 of such securities were sold as a result of portfolio
realignment.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investment of the Fund in accordance with its investment
objective, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .30% of its average daily net assets. For the period February 7, 1996
(commencement of operations) to August 31, 1996, the Adviser voluntarily
agreed to waive one-half of its advisory fee to the Fund. Additionally, the
Adviser has agreed to waive up to the full amount of its remaining advisory
fee to the extent that total expenses exceed .50% of average daily net
assets on an annual basis. For this period, waivers by the Adviser amounted
to $38,564. The Investment Company also has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for the services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 15% of the
asset-based fee determined in (i); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds. For the period February 7, 1996 (commencement
of operations) to August 31, 1996, the Administrator voluntarily waived a
portion of its administrative fee to the Fund which amounted to $673.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company also has adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
20 Annual Report
<PAGE>
THE SEVEN SEAS SERIES
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1996
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as other
non-related party service providers. For these services, the Fund pays
.025%, .175%, and .175% to the Adviser, SSBSI, and Commercial Banking,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1996, the
Fund incurred expenses of $3,214 from the Adviser. The Fund did not incur
any expenses from SSBSI or Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1996.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees NOT
AFFILIATED with the Investment Company a retainer of $44,000 annually,
$1,000 for each of the board meetings attended, an additional $1,000 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. These expenses are allocated amongst the Funds
based upon their relative net assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1996 WERE
AS FOLLOWS:
Advisory, Custodian, Shareholder Servicing,
and Transfer agent $ 1,196
Administration and Distribution 521
Trustees' fees 340
Organization fees - (Reimbursement to Administrator
for costs paid prior to Fund commencement) 55,000
----------
$ 57,057
----------
----------
5. DIVIDENDS
On September 3, 1996, the Board of Trustees declared a dividend of $.1257
from net investment income, payable on September 11, 1996 to shareholders
of record September 4, 1996.
Annual Report 21
<PAGE>
THE SEVEN SEAS SERIES BOND MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President
and Treasurer
J. David Griswold, Vice President
and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 64-7SEAS (77327)
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(617) 654-6089
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
