RUSSELL FRANK INVESTMENT CO, 497, 1995-05-31

RUSSELL FRANK INVESTMENT CO
497, 1995-05-31

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<PAGE> 1
External Fee Funds

FRANK RUSSELL INVESTMENT COMPANY
SUPPLEMENT DATED MAY 31, 1995

(To Prospectus Dated April 1, 1995)
as revised April 27, May 15, 1995 and to Prospectus
Dated April 28, 1995 as revised May 15, 1995)

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Order Procedures," the first paragraph is amended and
restated to read as follows:

Close of the New York Equity I, Equity II, Equity III,
Stock Exchange (currently Equity Q, International, Emerging
4:00 p.m. Eastern time) Markets, Fixed Income I, Fixed
Income II, Fixed Income III

12:45 p.m. Eastern time Money Market*

* Shares of the Money Market Fund are not available for direct
investment until further notice.

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Payment Procedures" the first sentence is amended and
restated to read as follows:

PAYMENT PROCEDURES. Payment for the purchase of Fund shares must be
received by the Funds' Custodian or transfer agent, depending on the
method of payment, on the day the order is accepted (except for the
participants in the Three Day Settlement Program described below).

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Four Day Settlement Program, " the entire section is
amended and restated to read as follows:

THREE DAY SETTLEMENT PROGRAM. The Investment Company will accept orders
from financial institutions to purchase shares of the Fund(s) (other
than the Money Market Fund) for settlement on the third business day
following the receipt of an order to be paid by a federal wire if the
investor has agreed in writing to indemnify the Fund(s) against any
losses as a result of nonreceipt of payment. For further information on
this program, contact the Investment Company.
<PAGE> 2

FRANK RUSSELL INVESTMENT COMPANY
SUPPLEMENT DATED MAY 31, 1995

(To Prospectus Dated April 1, 1995
as revised April 27, May 15, 1995 and to Prospectus
Dated April 28, 1995 as revised May 15, 1995)

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Order Procedures," the first paragraph is amended and
restated to read as follows:

Close of the New York Diversified Equity, Special Growth,
Stock Exchange (currently Equity Income, Quantitative Equity,
4:00 p.m. Eastern time) International Securities, Real Estate
Securities, Diversified Bond, Volatility
Constrained Bond, Multistrategy Bond,
Limited Volatility Tax Free

11:45 a.m. Eastern time Tax Free Money Market

12:15 p.m. Eastern time U.S. Government Money Market

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Payment Procedures" the first sentence is amended and
restated to read as follows:

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Four Day Settlement Program," the entire section is
amended and restated to read as follows:

THREE DAY SETTLEMENT PROGRAM. The Investment Company will accept orders
from financial institutions to purchase shares of the Fund(s) (other
than the U.S. Government Money Market and Tax Free Money Market Funds)
for settlement on the third business day following the receipt of an
order to be paid by a federal wire if the investor has agreed in writing
to indemnify the Fund(s) against any losses as a result of nonreceipt
of payment. For further information on this program, contact the
Investment Company.
<PAGE> 3
Emerging Markets Fund

FRANK RUSSELL INVESTMENT COMPANY
SUPPLEMENT DATED MAY 31, 1995

(To Prospectus Dated April 28, 1995)

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Order Procedures," the first paragraph is amended and
restated to read as follows:

ORDER PROCEDURES. Orders by all investors (except for participants
in the Three Day Settlement Program described below) to purchase Frank
Russell Investment Company Fund shares must be received by the Fund's
transfer agent, either by telephone, mail or entry into the shareholder
recordkeeping system on a day when shares of the Fund are offered and
orders in proper form accepted prior to the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern time). Orders for shares of the
Fund which are not accepted before that time cannot be invested in the
Fund nor begin to earn income until the next day on which shares of the
Fund are offered.

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Payment Procedures" the first sentence is amended and
restated to read as follows:

PAYMENT PROCEDURES. Payment for the purchase of Fund shares must be
received by the Fund's Custodian or transfer agent, depending on the
method of payment, on the day the order is accepted (except for the
participants in the Three Day Settlement Program described below).

Effective June 1, 1995, under the heading "Purchase of Shares" in the
subsection entitled "Four Day Settlement Program, " the entire section is
amended and restated to read as follows:

THREE DAY SETTLEMENT PROGRAM. The Investment Company will accept orders
from financial institutions to purchase shares of the Fund for
settlement on the third business day following the receipt of an order
to be paid by a federal wire if the investor has agreed in writing to
indemnify the Fund against any losses as a result of nonreceipt of
payment. For further information on this program, contact the Investment
Company.
<PAGE> 4

PROSPECTUS

EMERGING MARKETS FUND

FRANK RUSSELL INVESTMENT COMPANY

909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON, (206) 627-7001

This Prospectus describes and offers shares of beneficial interest in the
Emerging Markets Fund (hereafter, the "Fund"), a series of the Frank Russell
Investment Company (the "Investment Company"). The Investment Company is a
"series mutual fund" with 22 different investment portfolios referred to as
"funds."

Frank Russell Investment Management Company (the "Management Company") operates
and administers all of the Funds which comprise the Investment Company. The
Management Company is a wholly owned subsidiary of Frank Russell Company, which
researches and recommends to the Management Company and to the Investment
Company one or more investment management organizations to manage the portfolio
of the Fund. There is no sales charge for investing in the Fund.

The Fund seeks to achieve maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from developed market international portfolios, by investing primarily
in the equity securities.

SHARES OF THE FUND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR BY ANY OTHER GOVERNMENT AGENCY; ARE NOT OBLIGATIONS OF THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK; ARE
NOT ENDORSED OR GUARANTEED BY ANY BANK; ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED; AND MAY FLUCTUATE IN
VALUE, SO THAT WHEN THEY ARE SOLD, THEY MAY BE WORTH MORE OR LESS THAN WHEN THEY
WERE PURCHASED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE INVESTMENT COMPANY IS ORGANIZED AND OPERATES AS A "MASSACHUSETTS BUSINESS
TRUST" UNDER A MASTER TRUST AGREEMENT DATED JULY 26, 1984. THE INVESTMENT
COMPANY IS AUTHORIZED TO ISSUE AN UNLIMITED NUMBER OF SHARES EVIDENCING
BENEFICIAL INTERESTS IN DIFFERENT INVESTMENT FUNDS. THE INVESTMENT COMPANY IS A
DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY, COMMONLY KNOWN AS A "MUTUAL
FUND."

THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE INVESTMENT COMPANY
AND THE FUND THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. THE
INVESTMENT COMPANY HAS FILED A STATEMENT OF ADDITIONAL INFORMATION DATED APRIL
1, 1995 WITH THE SECURITIES AND EXCHANGE COMMISSION. THE STATEMENT OF ADDITIONAL
INFORMATION IS INCORPORATED HEREIN BY REFERENCE AND MAY BE OBTAINED WITHOUT
CHARGE BY WRITING TO THE SECRETARY, FRANK RUSSELL INVESTMENT COMPANY, AT THE
ADDRESS SHOWN ABOVE OR BY TELEPHONING (800) 972-0700. THIS PROSPECTUS SHOULD BE
READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.

PROSPECTUS DATED APRIL 28, 1995

PROSPECTUS
1

<PAGE> 5

This Prospectus describes and offers shares of the Fund. Two other prospectuses,
respectively, describe and offer shares of (1) the ten External Fee funds of the
Investment Company (including the Fund), and (2) the Investment Company's twelve
Internal Fee funds. The principal distinction between the External and the
Internal Fee funds is that a shareholder of an External Fee fund pays a
quarterly shareholder investment services fee directly to the Management Company
for shareholder services. The shareholder fee is computed on the amount the
shareholder has invested in an External Fee fund. Each shareholder of the
Internal Fee funds pays no such fees. The Investment Company funds had aggregate
net assets of $6.3 billion on March 22, 1995. The net assets of the Fund on
March 22, 1995 were $123,908,516.

PROSPECTUS
2
<PAGE> 6

HIGHLIGHTS AND TABLE OF CONTENTS

ANNUAL FUND OPERATING EXPENSES summarizes the fees paid by shareholders and the
effect of these fees on a $1,000 investment over time. PAGE 4.

FINANCIAL HIGHLIGHTS summarizes significant financial information concerning the
Fund for the period stated herein. PAGE 5.

THE PURPOSE OF THE INVESTMENT COMPANY is to provide a means for Eligible
Investors to use Frank Russell Company's "multi-style, multi-manager
diversification" techniques and money manager evaluation services on an
economical and efficient basis. PAGE 6.

FRANK RUSSELL COMPANY -- CONSULTANT TO THE FUND has been primarily engaged since
1969 in providing asset management consulting services to large corporate
employee benefit funds. Major components of its consulting services are (i)
quantitative and qualitative research and evaluation aimed at identifying the
most appropriate investment management firms to invest large pools of assets in
accord with specific investment objectives and styles; and (ii) the development
of strategies for investing assets using a "multi-style, multi-manager
diversification." PAGE 6.

MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION is a method for investing large pools
of assets by dividing the assets into segments to be invested using different
investment styles, and selecting money managers for each segment based upon
their expertise in that style of investment. PAGE 6.

ELIGIBLE INVESTORS are principally those institutional investors which invest
for their own account or in a fiduciary capacity with discretionary investment
authority, and which have entered into an Asset Management Services Agreement
with the Management Company; or institutions or individuals who have acquired
shares through such institutions. PAGE 6.

GENERAL MANAGEMENT OF THE FUND is provided by the Management Company, which
employs the officers and staff required to manage and administer the Fund on a
day-to-day basis. Frank Russell Company provides to the Fund and the Management
Company comprehensive consulting and money manager evaluation services. PAGE 7.

EXPENSES OF THE FUND are borne by the Fund. The Fund pays a management fee to
the Management Company for conducting the Fund's general operations and for
providing investment supervision for the Fund, and pays to the Management
Company, as agent for the Fund, the investment advisory fee of the Fund's money
managers. Each shareholder pays the Management Company directly for other
services provided to that shareholder. The Management Company pays its expenses
of providing its services to the Fund, and transmits for the Fund the fees
payable to the money managers. PAGE 9.

THE MONEY MANAGERS are evaluated and recommended by Frank Russell Company. The
money managers have complete discretion to purchase and sell portfolios
securities for their segment of the Fund consistent with the Fund's investment
objectives policies and restrictions, and the specific strategies developed by
Frank Russell Company and the Management Company. PAGE 9.

INVESTMENT OBJECTIVES, RESTRICTIONS AND POLICIES apply to the Fund. Those
designated "fundamental" may not be changed without the approval of a majority
of the Fund's shareholders. PAGE 9.

PORTFOLIO TRANSACTION POLICIES do not give significant weight to realizing
long-term, rather than short-term, capital gains. PAGE 16.

DIVIDENDS AND DISTRIBUTIONS may be reinvested in additional shares or received
in cash. Dividends from net investment income are declared annually by the Fund.
The Fund declares annually any distributions from net realized capital gains.
PAGE 16.

TAXES of the Fund itself should be nominal. Taxable shareholders of the Fund
will be subject to federal tax on dividends and capital gains distributions and
may also be subject to state or local taxes or foreign withholding taxes. PAGE
16.

CALCULATION OF FUND PERFORMANCE, including yields and total return information,
is in accordance with formulas prescribe by the Securities and Exchange
Commission. PAGE 17.

VALUATION OF FUND SHARES occurs each business day. The value of a share is based
upon the next computed current market value of the assets, less liabilities, of
the Fund. PAGE 18.

PURCHASE OF FUND SHARES includes no sales charge. The purchase price is the next
computed net asset value. Shares are offered and orders to purchase accepted on
each business day. PAGE 18.

REDEMPTION OF FUND SHARES may be requested on any business day. There is no
redemption charge. The redemption price is the next computed net asset value.
The Fund reserves the right to redeem in kind any portion of a redemption
request of more than $250,000 and to redeem shares held by an investor whose
Asset Management Services Agreement with the Management Company is terminated.
PAGE 19.

ADDITIONAL INFORMATION is also included in this Prospectus concerning:
Distributor, Custodian, Accountants and Reports; Organization, Capitalization
and Voting; and Money Manager Profiles. PAGE 20.

PROSPECTUS
3
<PAGE> 7

ANNUAL FUND OPERATING EXPENSES

The purpose of the following table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The example provided in the table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases...................................................................... None
Sales Load Imposed on Reinvested Dividends........................................................... None
Deferred Sales Load.................................................................................. None
Redemption Fees...................................................................................... None
Exchange Fees........................................................................................ None
ANNUAL FUND OPERATING EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee1...................................................................................... 1.20%*
12b-1 Fees........................................................................................... None
Other Expenses:
Custodian Fees.............................................................................. .61%
Transfer Agent Fees......................................................................... .10
Other Fees.................................................................................. .10
----
Total Other Expenses................................................................................. .81%
-----
Total Fund Operating Expenses Before Reimbursement................................................... 2.01%
Reimbursement From Manager+.......................................................................... (.01)
-----
Total Fund Operating Expenses After Reimbursement**.................................................. 2.00%
-----
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EXAMPLE:
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the
end of each time period.................................................. $ 20 $ 63 $ 108 $ 233
======== ======== ======== ========
</TABLE>

1 Prior to April 1, 1995, the Management Fee was paid by each shareholder
directly to the Management Company, and was not deducted from the Fund's
assets. Effective April 1, 1995, the Management Fee will be deducted from
Fund assets on a daily basis and paid to the Management Company. The expense
information has been restated to reflect current fees.

* Each shareholder enters into a written Asset Management Services Agreement
with the Management Company, and agrees to pay an annual shareholder
investment services fee calculated as a specified percentage of the
shareholder's average net assets in the Fund. Currently, the Manager does not
intend to impose a shareholder investment services fee with respect to the
Fund. In addition, a shareholder may pay additional fees, expressed as fixed
dollar amounts for the other services or reports provided by the Management
Company to the shareholder. Accordingly, the expense information does not
reflect an amount for fees paid directly by an investor to the Management
Company.

+ Effective April 1, 1995, the Manager has voluntarily agreed to reimburse all
expenses of the Fund that exceed the annual rate of 2.00% of average net
assets. This agreement will continue until further notice.

** Investors purchasing Fund shares through a financial intermediary, such as
a bank or an investment adviser, may also be required to pay additional
fees for services provided by the intermediary. Such investors should
contact the intermediary for information concerning what additional fees,
if any, will be charged.

PROSPECTUS
4
<PAGE> 8

FINANCIAL HIGHLIGHTS*

The following table includes selected data for a share outstanding throughout
each year or period ended December 31, and other performance information derived
from the financial statements which have been audited by Coopers & Lybrand
L.L.P., the independent accountants for the Fund.

More detailed information concerning the Fund's performance, a completed
portfolio listing and audited financial statements are available in the External
Fee Funds' Annual Report dated December 31, 1994, which may be obtained without
charge by writing or calling the Investment Company.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1994 1993++
<S> <C> <C>
-------------------
NET ASSET VALUE, BEGINNING OF YEAR............................................................ $13.90 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................................................... .15 .07
Net realized and unrealized gain (loss) on investments...................................... (1.24) 4.09
------ ------
Total From Investment Operations............................................................ (1.09) 4.16
------ ------
LESS DISTRIBUTIONS:
Net investment income....................................................................... (.10) (.07)
In excess of net investment income.......................................................... (.10) (.01)
Net realized gain on investments............................................................ (.31) (.18)
In excess of net realized gain on investments............................................... (.05) --
------ ------
Total Distributions......................................................................... (.56) (.26)
------ ------
NET ASSET VALUE, END OF YEAR.................................................................. $12.25 $13.90
====== ======
TOTAL RETURN (%)(a)........................................................................... (5.83) 41.83
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c)(d)(e)................................. .80 .80
Net investment income to average net assets (c)............................................. 1.10 1.33
Portfolio turnover (c)...................................................................... 57.47 89.99
Net assets, end of year ($000 omitted)...................................................... 127,271 65,457
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

++ For the period January 29, 1993 (commencement of operations) to December
31, 1993.
(a) Periods less than one year are not annualized.
(b) For the period January 29, 1993 (commencement of operations) to December 31,
1993 and the year ended December 31, 1994, the Manager reimbursed a portion
of operating expenses amounting to $.0420 and $.0017 per share,
respectively. For the period January 29, 1993 (commencement of operations)
to April 28, 1993, the Custodian waived a portion of its custody fee
amounting to $.0007 per share.
(c) The ratios for the period ended December 31, 1993, are annualized.
(d) Expenses do not include any management fees paid to the Manager or money
managers.
(e) Operating expense ratio before any waivers and/or reimbursements amounted to
.82% on an annualized basis for the year ended December 31, 1994.

* See the notes to financial statements which appear in the External Fee
Funds' Annual Report to Shareholders and which are incorporated by reference
into the Statement of Additional Information.

PROSPECTUS
5
<PAGE> 9

THE PURPOSE OF THE INVESTMENT COMPANY

The Investment Company consists of a group of funds designed to provide a means
for Eligible Investors to access and use Frank Russell Company's "multi-style,
multi-manager diversification" method of investment, and to obtain Frank Russell
Company's money manager evaluation services, on a pooled and cost-effective
basis.

FRANK RUSSELL COMPANY -- CONSULTANT TO THE FUND

Frank Russell Company, founded in 1936, has been providing comprehensive asset
management consulting services since 1969 for institutional pools of investment
assets, principally those of large corporate employee benefit plans. The Frank
Russell Company and its affiliates have offices in Tacoma, New York, Toronto,
London, Zurich, Paris, Sydney, Auckland, and Tokyo and has approximately 1,000
associates.

Three functions are at the core of Frank Russell Company's consulting service:

OBJECTIVE SETTING: Defining appropriate investment objectives and desired
investment returns based upon the client's unique situation and tolerance for
risk.

ASSET ALLOCATION: Allocating a client's assets among different asset
classes -- such as common stocks, fixed-income securities, international
securities, temporary cash investments and real estate -- in the manner most
likely to achieve the client's objectives.

MONEY MANAGER RESEARCH: Evaluating and recommending professional investment
advisory and management organizations to make specific portfolio investments for
each asset class in accord with the specified objectives, investment styles and
strategies.

When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique with the objectives of
reducing risk and increasing returns.

MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

Frank Russell Company believes capital market history shows that no one
particular asset class provides consistent and/or above-average total return
results, either on an absolute or relative basis, over extended periods of time.
For example, there are periods of time when equity securities outperform
fixed-income securities, and vice versa. And, there are periods when securities
with particular characteristics -- investment styles -- outperform other types
of securities. For example, there are periods of time when equity securities
with growth characteristics outperform equities with income characteristics, and
vice versa. While these performance cycles tend to repeat themselves, they do so
with no regularity. The blending of asset classes and investment styles on a
complementary basis can obtain more consistent returns over longer time periods
with a reduction of risk (volatility), although a particular asset class or
investment style -- or particular Investment Company fund -- may not achieve
above-average performance at any given point in the market.

Similarly, Frank Russell Company believes financial markets generally are
efficient, and few money managers have shown the ability to time the major highs
and lows in the securities markets with any high degree of consistency. However,
some money managers have shown a consistent ability to achieve superior results
within selected asset classes and styles and have demonstrated expertise in
particular areas. Thus, by combining a mix of investment styles within each
asset class and then selecting money managers for their ability to invest in a
particular style, the expectation is the achievement of increased returns.

Substantial pools of investment assets are required to achieve the cost
effective and efficient allocation of assets among various asset classes and
investment styles, to use multiple money managers, and to support the research
and evaluation efforts required to select appropriate money managers. By pooling
the assets of institutions and individuals with smaller to medium-sized accounts
in a series of funds with different objectives and policies, Frank Russell
Company believes that it is able to provide its multi-style, multi-manager
diversification techniques and money manager evaluation services to Eligible
Investors on a basis which is efficient and cost effective for the investor and
Frank Russell Company.

ELIGIBLE INVESTORS

Shares of the Fund are currently offered only to Eligible Investors. These
investors are principally institutional investors which invest for their own
account or in a fiduciary capacity with discretionary investment authority and
which have entered into Asset Management Services Agreements (collectively, the
"Agreements," and each, an "Agreement") with the Management Company. There is no
specified minimum amount which must be invested. Institutions which particularly
may be interested in the Fund include:

o Bank trust departments managing discretionary institutional or personal trust
accounts

o Registered investment advisors

o Endowment funds and charitable foundations

o Broker-Dealers

o Employee welfare plans

o Pension or profit sharing plans

o Insurance companies

PROSPECTUS
6
<PAGE> 10

The Agreement provides, in general, for the officers and staff of the Management
Company, using the facilities and resources of Frank Russell Company, to consult
with the client to define its investment objectives, desired returns and
tolerance for risk, and to develop a plan for the allocation of assets among
different asset classes. Once these decisions have been made by a client, the
client's assets are then invested in one or more of the Funds. A client may
change the allocation of its assets among the funds, or withdraw some or all of
its assets from the funds at any time by redeeming fund shares.

Shares of the Fund are not generally offered or "retailed" to individual
investors, although the Management Company may enter into Agreements with
individual investors. Bank trust departments, registered investment advisers,
broker-dealers and other eligible investors ("Financial Intermediaries") which
have entered into agreements with the Management Company may acquire shares of
the Fund for the benefit of individual customers for which they exercise
discretionary investment authority. The Management Company provides objective-
setting and asset-allocation assistance to such Financial Intermediaries, which
in turn provide the objective-setting and asset-allocation services to their
customers. These Financial Intermediaries receive no compensation from the
Management Company or the Fund; they may charge their customers a fee for
providing these and possibly other trust or investment-related services.

The Agreement sets forth the shareholder investment services fees to be paid to
the Management Company and is ordinarily expressed as a percentage of assets
invested in the Fund. The shareholder investment services fee may include a
fixed-dollar fee for certain specified services. The shareholder investment
services fee is negotiated by the client and the Management Company and is at a
rate which reflects the amount of assets expected to be invested in the Fund,
the nature and extent of individualized services to be provided by the
Management Company to the client, and other factors. Either the client or the
Management Company may terminate the Agreement upon the written notice provided
for in the Agreement. The Management Company does not expect to exercise its
right to terminate the Agreement unless a client does not (i) promptly pay fees
due to the Management Company; or (ii) invest sufficient assets in the Fund to
compensate the Management Company for providing services to the client and
operating the Fund. Upon termination of an Agreement by the client or the
Management Company, the Management Company will no longer provide
asset-allocation, objective-setting, or other services to the client. The client
may continue to hold its shares of the Fund as long as the client pays fees owed
to the Management Company.

GENERAL MANAGEMENT OF THE FUND

The Investment Company's Board of Trustees is responsible for overseeing
generally the operation of the Funds, including reviewing and approving the
Fund's contracts with the Management Company, Frank Russell Company and the
money managers. The Fund's officers, all of whom are employed by and are
officers of the Management Company or its affiliates, are responsible for the
day-to-day management and administration of the Fund's operations. The money
managers are responsible for individual portfolio securities selection for the
assets assigned to them.

The Management Company: (i) Provides or oversees the provision of all general
management and administration, investment advisory and portfolio management, and
distribution services for the Fund; (ii) provides the Fund with office space,
equipment, and personnel necessary to operate and administer the Fund's
business, and to supervise the provision of services by third parties such as
the money managers and Custodian; (iii) develops the investment programs,
selects money managers, allocates assets among money managers, and monitors the
money managers' investment programs and results; (iv) is authorized to select or
hire money managers to select individual portfolio securities held in the Fund's
Liquidity Portfolios (see "Investment Policies -- Liquidity Portfolios"); and
(v) provides the Fund with transfer agent and shareholder recordkeeping
services. The Management Company bears the expenses it incurs in providing these
services (other than transfer agent and shareholder recordkeeping) as well as
the costs of preparing and distributing explanatory materials concerning the
Fund.

The responsibility of overseeing the money managers rests upon the officers and
employees of the Management Company. These officers and employees, including
their business experience for the past five years, are identified below:

o Randall P. Lert, who has been Director-Investment, Frank Russell Investment
Management Company since 1989.

o Loran M. Kaufman, who has been Director-Fund Development, Frank Russell
Investment Management Company since 1990. From 1986 to 1990, Ms. Kaufman was
employed as a Senior Research Analyst with the Frank Russell Company.

PROSPECTUS
7
<PAGE> 11

o Jean E. Carter, who has been a Senior Investment Officer of Frank Russell
Investment Management Company since 1994. From 1990 to 1994, Ms. Carter was a
Client Executive in the Investment Group of Frank Russell Company.

o James M. Imhof, Investment Officer, Frank Russell Investment Management
Company, who has managed the day to day management of the Frank Russell
Investment Management Company funds and ongoing analysis and monitoring of
fund managers since 1989.

o Peter F. Apanovitch, who has been the Manager of Short-Term Investment Funds
for Frank Russell Investment Management Company and Frank Russell Trust
Company since 1991. From 1986 to 1989 Mr. Apanovitch was Assistant
Vice-President and Assistant Treasurer of CIGNA Corporation.

o James A. Jornlin, who has been a Senior Investment Officer of Frank Russell
Investment Management Company since April 1995. From 1991 to March 1995, Mr.
Jornlin was employed as a Senior Research Analyst with Frank Russell Company.

Frank Russell Company provides to the Fund and the Management Company the asset
management consulting services -- including the objective-setting and asset-
allocation technology, and the money manager research and evaluation
assistance -- which Frank Russell Company provides to its other consulting
clients. Frank Russell Company receives no compensation from the Fund and the
Management Company for its consulting services. Frank Russell Company and the
Management Company as affiliated companies may establish certain intercompany
cost allocations for budgeting and product profitability purposes which may
reflect Frank Russell Company's consulting services supplied to the Management
Company.

George F. Russell, Jr., Chairman of the Board of Trustees of the Investment
Company, is the Chairman of the Board and controlling shareholder of Frank
Russell Company. The Management Company is a wholly owned subsidiary of Frank
Russell Company.

The Management Company receives an annual management fee from the Fund. The
Management Company, acting as agent for the Investment Company, is responsible
for the payment of all fees to the money managers. The annual management fee,
payable monthly on a pro rata basis, is 1.20% of the average daily net assets of
the Fund. This fee may be higher than fees charged to some mutual funds with
similar objectives which use only a single money manager.

The Management Company has voluntarily agreed to reimburse certain Fund expenses
in excess of certain limits. In addition to these "voluntary limits," the
Management Company has agreed to reimburse the Fund the amount, if any, by which
the Fund's expenses exceed state law expense limitations. Currently, California
has an expense limitation of 2.5% of the Fund's first $30 million in average net
assets, 2.0% of the next $70 million in average net assets, and 1.5% of the
remaining average net assets for any fiscal year as determined under the state's
regulations. This arrangement is not part of the Management Agreement with the
Investment Company and may be changed or rescinded at any time.

Frank Russell Company provides its Portfolio Verification System ("PVS") to the
Fund pursuant to a written Service Agreement. The PVS computerized data base
system records detailed transaction data for the Fund necessary to prepare
various financial and IRS accounting reports. For these services, the Fund pays
the following annual fees:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TRANSACTION HOLDING ANALYSIS OF INTERNATIONAL
BASE FEE CHARGE CHARGE MANAGEMENT REPORT
- -------- ----------- ------- -------------------------
<S> <C> <C> <C>
$14,000 $3.00 $24.00 $2,500
- --------------------------------------------------------------------------------
</TABLE>

Annual minimum charges for the Investment Company's international portfolios
(including the Fund) are $290,000.

In order to reduce the impact of fees on the Fund, the Management Company has
volunteered to absorb a portion of these fees in consideration of certain
intercompany transfers between the Management Company and FRC (its parent). The
Management Company reserves the right to reduce or eliminate this voluntary
absorption of fees upon notification to the Fund's shareholders.

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<PAGE> 12

EXPENSES OF THE FUND

The Fund will pay all its expenses other than those expressly assumed by the
Management Company. The Fund's expenses for the year ended December 31, 1994, as
a percentage of average net assets, are shown in the Financial Highlights table.
The Fund's principal expenses are: the management, transfer agency and
recordkeeping fees payable to the Management Company; fees for custodial and
portfolio accounting payable to State Street Bank and Trust Company; bookkeeping
service fees for preparing tax records payable to Frank Russell Company; fees
for independent auditing and legal services; and fees for filing reports and
registering shares with regulatory bodies.

THE MONEY MANAGERS

The assets of the Fund currently are allocated among the money managers listed
in the section "Money Manager Profiles" ("Money Managers"). THE ALLOCATION OF
THE FUND'S ASSETS AMONG MONEY MANAGERS MAY BE CHANGED AT ANY TIME BY THE
MANAGEMENT COMPANY. MONEY MANAGERS MAY BE EMPLOYED OR THEIR SERVICES MAY BE
TERMINATED AT ANY TIME BY THE MANAGEMENT COMPANY, SUBJECT TO APPROVAL BY THE
BOARD OF TRUSTEES OF THE FUND. The Fund will notify shareholders promptly when a
Money Manager begins or stops providing services.

THE MANAGEMENT COMPANY, AS AGENT FOR THE INVESTMENT COMPANY, PAYS THE FEES OF
EACH MONEY MANAGER. Each Money Manager is paid an annual fee expressed as a
percentage of Fund assets under management; there are no performance or
incentive fees. Some Money Managers may receive investment research prepared by
Frank Russell Company as additional compensation, and/or may execute portfolio
transactions for the Fund through broker-dealer affiliates and receive brokerage
commissions for doing so. Each Money Manager agrees that once the Investment
Company has advanced fees to the Management Company for payment of the Money
Manager's fee, that Money Manager will look only to the Management Company for
the payment of its fee.

Money Managers are selected for the Fund based primarily upon the research and
recommendations of Frank Russell Company, which evaluates quantitatively and
qualitatively the Money Manager's skills and results in managing assets for
specific asset classes, investment styles and strategies. Short-Term investment
performance, by itself, is not a controlling factor in selecting or terminating
the Money Manager.

Each Money Manager has complete discretion to purchase and sell portfolio
securities for its segment of the Fund within the Fund's investment objectives,
restrictions and policies, and the more specific strategies developed by Frank
Russell Company and the Management Company. Although the Money Managers'
activities are subject to general oversight by the Board of Trustees and
officers of the Fund, NEITHER THE BOARD, THE OFFICERS, THE MANAGEMENT COMPANY
NOR FRANK RUSSELL COMPANY EVALUATE THE INVESTMENT MERITS OF THE MONEY MANAGERS'
INDIVIDUAL SECURITY SELECTIONS.

INVESTMENT OBJECTIVE, RESTRICTIONS AND POLICIES

The Fund has a "fundamental" investment objective, and "fundamental"
restrictions and policies which may be changed only with the approval of a
majority of the shareholders of the Fund. If there is a change in a fundamental
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Other policies reflect current practices of the Fund, and may be changed
by the Fund without the approval of shareholders. This section of the Prospectus
describes the Fund's principal objective, restrictions and policies. A more
detailed discussion appears in the Statement of Additional Information.

INVESTMENT OBJECTIVE.

The Fund's objective is "fundamental," as are certain of the Fund's policies
with respect to the types of securities in which it will invest. Ordinarily, the
Fund will invest more than 80% of its net assets in the types of securities
described below. However, the Fund may hold assets as cash reserves for
temporary and defensive purposes when its Money Managers deem that a more
conservative approach is desirable or when suitable purchase opportunities do
not exist. (See "Investment Policies -- Cash Reserves.")

The Fund's investment objective is to provide maximum total return, primarily
through capital appreciation and by assuming a higher level of volatility than
is ordinarily expected from developed market international portfolios, by
investing primarily in equity securities.

Under normal circumstances the Fund will invest at least 65% of its total assets
in equity securities of companies in countries having emerging markets. For
purposes of the Fund's operations, "emerging markets" will consist of all
countries determined by the Fund's Money Managers to have developing or emerging
economies and markets. These countries generally include every country in the
world except the United States, Canada, Japan, Australia and most countries
located in Western Europe. For purposes of the Fund's policy of normally
investing

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<PAGE> 13

primarily in equity securities of issuers in emerging markets, the Fund will
consider investment in the following emerging markets:

Argentina, Austria, Bangladesh, Bolivia, Botswana, Brazil, Chile, Colombia,
Costa Rica, Czech Republic, Ecuador, Egypt, Fiji, Ghana, Greece, Hong Kong,
Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan, Kenya, South
Korea, Malawi, Malaysia, Mauritius, Mexico, Morocco, Nepal, New Zealand,
Nigeria, Pakistan, Papua New Guinea, People's Republic of China, Peru,
Philippines, Poland, Portugal, Slovak Republic, Singapore, Sri Lanka, Swaziland,
Taiwan, Thailand, Trinidad, Tobago, Tunisia, Turkey, Uruguay, Venezuela and
Zimbabwe.

Although the Fund considers each of the above-listed countries eligible for
investment, the Fund will not be invested in all such markets at all times.
Investing in some of the listed markets may not be feasible, due to lack of
adequate custody arrangements or current legal requirements. In the future, the
Fund's Money Managers may determine, based on information then available, to
include additional emerging market countries in which the Fund may invest. The
assets of the Fund ordinarily will be invested in the securities of issuers in
at least three different emerging markets. The Fund does not currently
anticipate that it will invest more than 25% of its total assets in the
securities of any one emerging market country.

(i) a company whose securities are traded in the principal securities market of
an emerging market country; (ii) a company that (alone or on a consolidated
basis) derives 50% or more of its total revenue from either goods produced,
sales made or services performed in emerging market countries; or (iii) a
company organized under the laws of, and with a principal office in, an emerging
market country.

The Fund may invest in common and preferred stocks of emerging market companies,
including companies involved in real estate development and gold mining. The
Fund may also invest in other types of equity securities and equity derivative
securities such as convertible securities, rights, units, warrants, American
Depository Receipts (ADRs) and European Depository Receipts (EDRs). The Fund's
equity securities will primarily be denominated in foreign currencies and may be
held outside the United States.

The Fund may invest in fixed-income securities, including instruments issued by
emerging market companies, governments and their agencies, and in U.S. companies
that derive, or are expected to derive, a substantial portion of their revenues
from operation outside the United States. The Fund's fixed-income securities may
be denominated in other than U.S. dollars.

Certain emerging markets are closed in whole or in part to equity investments by
foreigners. The Fund may be able to invest in such markets solely or primarily
through governmentally authorized investment vehicles. To invest in these
markets, the Fund may invest up to 10% of its total assets in the shares of
other investment companies and up to 5% of its total assets in any one
investment company, as long as that investment does not represent more than 3%
of the voting stock of the acquired investment company at the time such shares
are purchased. The risks associated with investment in securities issued by
foreign governments and companies are described under "Investment
Policies -- Investment in Foreign Securities."

INVESTMENT RESTRICTIONS.

The Fund has fundamental investment restrictions which cannot be changed without
shareholder approval. The principal restrictions are the following, which,
unless otherwise noted, apply at the time an investment is being made. The Fund
will not:

1. Invest in any security if, as a result of such investment, less than 75% of
its assets would be represented by cash; cash items; securities of the U.S.
Government, its agencies, or instrumentalities; securities of other
investment companies; and other securities limited in respect of each issuer
to an amount not greater in value than 5% of the total assets of the Fund.
The Fund's investment in "cash reserves" (see next section) in shares of the
Investment Company's Money Market Fund are not subject to this restriction or
to restrictions 2 or 3.

2. Invest 25% or more of the value of the Fund's total assets in the securities
of companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities).

3. Acquire more than 5% of the outstanding voting securities, or 10% of all of
the securities, of any one issuer.

4. Borrow amounts in excess of 5% of its total assets taken at cost or at market
value, whichever is lower, and then only for temporary purposes; invest more
than 5% of its assets in securities of an issuer which, together with any
predecessor, has been in operation for less than three years; or invest more
than 5% of its assets in warrants.

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<PAGE> 14

INVESTMENT POLICIES.

The Fund uses certain investment instruments and techniques commonly used by
institutional investors. The principal policies are the following:

CASH RESERVES. The Fund is authorized to invest its cash reserves (i.e., funds
awaiting investment in the specific types of securities to be acquired by a
Fund) in money market instruments and in debt securities which are at least
comparable in quality to the Fund's permitted investments. In lieu of having the
Fund make separate, direct investments in money market instruments, the Fund and
its money managers may elect to invest the Fund's cash reserves in the
Investment Company's Money Market Fund. The Fund will invest in the Money Market
Fund only so long as doing so does not adversely affect the portfolio management
and operations of the Money Market Fund and the Investment Company's other
funds.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with a bank
or broker-dealer that agrees to repurchase the securities at the Fund's cost
plus interest within a specified time (normally next business day). If the party
agreeing to repurchase should default and if the value of the securities held by
the Fund (102% at the time of agreement) should fall below the repurchase price,
the Fund could incur a loss. Subject to the overall limitations described in
"Investment Policies -- Illiquid Securities," the Fund will not invest more than
15% of its total assets (taken at current market value) in repurchase agreements
maturing in more than seven days.

FORWARD COMMITMENTS. The Fund may contract to purchase securities for a fixed
price at a future date beyond customary settlement time (a "forward commitment"
or "when-issued" transaction), so long as such transactions are consistent with
the Fund's ability to manage its investment portfolio and honor redemption
requests. When effecting such transactions, cash or liquid high-grade debt
obligations of the Fund of a dollar amount sufficient to make payment for the
portfolio securities to be purchased will be segregated on the Fund's records at
the trade date and maintained until the transaction is settled.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of portfolio
securities is deemed by a Money Manager to be inconvenient or disadvantageous. A
reverse repurchase agreement is a transaction whereby a fund transfers
possession of a portfolio security to a bank or brokerdealer in return for a
percentage of the portfolio security's market value. The fund retains record
ownership of the security involved, including the right to receive interest and
principal payments. At an agreed upon future date, the fund repurchases the
security by paying an agreed upon purchase price plus interest. Cash or liquid
high-grade debt obligations of the Fund equal in value to the repurchase price
including any accrued interest will be segregated on the Fund's records while a
reverse repurchase agreement is in effect. Subject to the limitation described
in "Investment Policies -- Illiquid Securities."

LENDING PORTFOLIO SECURITIES. The Fund may lend portfolio securities with a
value of up to 50% of its total assets. Such loans may be terminated at any
time. The Fund will receive either cash (and agree to pay a "rebate" interest
rate), U.S. Government or U.S. Government agency securities as collateral in an
amount equal to at least 100% of the current market value of the loaned
securities plus accrued interest. The collateral is "marked-to-market" on a
daily basis, and the borrower will furnish additional collateral in the event
that the value of the collateral drops below 100% of the market value of the
loaned securities.

Cash collateral is invested in high-quality short-term instruments, short-term
bank collective investments and money market mutual funds (including funds
advised by State Street Bank, the Fund's Custodian, for which it may receive an
asset-based fee), and other investments meeting certain quality and maturity
requirements established by the Fund. Income generated from the investment of
the cash collateral is first used to pay the rebate interest cost to the
borrower of the securities and then the remainder is divided between the Fund
and the Fund's Custodian.

The Fund will retain most rights of beneficial ownership, including dividends,
interest or other distributions on the loaned securities. Voting rights may pass
with the lending. The Fund will call loans to vote proxies if the material issue
affecting the investment is to be voted upon.

Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities or loss of rights in the collateral. Consequently,
loans are made only to borrowers which are deemed to be of good financial
standing. The Investment Company may incur costs or possible losses in excess of
the interest and fees received in connection with securities lending
transactions. Some securities purchased with cash collateral are subject to
market fluctuations while a loan is outstanding. To the extent that the value of
the cash collateral as invested is insufficient to return the full amount of the
collateral plus rebate interest to the borrower upon termination of the

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<PAGE> 15

loan, the Fund must immediately pay the amount of the shortfall to the borrower.

ILLIQUID SECURITIES. The Fund will not purchase or otherwise acquire any
security if, as a result, more than 15% of its net assets (taken at current
value) would be invested in securities, including repurchase agreements of more
than seven days' duration, that are illiquid by virtue of the absence of a
readily available market or because of legal or contractual restrictions on
resale. In the use of the Money Market Fund (see "Cash Reserves," above), this
restriction is 10% of net assets. In addition, the Fund will not invest more
than 10% of its net assets (taken at current value) in securities of issuers
which may not be sold to the public without registration under the Securities
Act of 1933 (the "1933 Act"). These policies do not include (1) commercial paper
issued under Section 4(2) of the 1933 Act, or (2) restricted securities eligible
for resale to qualified institutional purchasers pursuant to Rule 144A under the
1933 Act that are determined to be liquid by the Money Managers in accordance
with Board approved guidelines. Such guidelines take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be
illiquid. There may be undesirable delays in selling illiquid securities at
prices representing their fair value.

INVESTMENT IN FOREIGN SECURITIES. The Fund may invest in foreign securities
traded on U.S. or foreign exchanges or on the over-the-counter market. Investing
in securities issued by foreign governments and corporations involves
considerations and possible risks not typically associated with investing in
obligations issued by the U.S. Government and domestic corporations. Less
information may be available about foreign companies than about domestic
companies, and foreign companies generally are not subject to the same uniform
accounting, auditing and financial reporting standards or other regulatory
practices and requirements comparable to those applicable to domestic companies.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are often incurred in connection with
conversions between various currencies. In addition, foreign brokerage
commissions are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United States,
including nationalization, expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards and potential difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods or
restrictions affecting the prompt return of capital to the United States.

The risks associated with investing in foreign securities are often heightened
for investments in developing or emerging markets. 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. Moreover, the economies
of individual emerging market countries may differ favorably or unfavorably from
the U.S. economy in such respects as the rate of growth in gross domestic
product, the rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payments position. Because the Fund's foreign securities will
generally be denominated in foreign currencies, the value of such securities to
the Fund will be affected by changes in currency exchange rates and in exchange
control regulations. A change in the value of a foreign currency against the
U.S. dollar will result in a corresponding change in the U.S. dollar value of
the Fund's foreign securities. In addition, some emerging market countries may
have fixed or managed currencies which are not free-floating against the U.S.
dollar. Further, certain emerging market currencies may not be internationally
traded. Certain of these currencies have experienced a steady devaluation
relative to the U.S. dollar. Many emerging markets countries have experienced
substantial, and in some periods extremely high rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had, and may
continue to have negative effects on the economies and securities markets of
certain emerging market counties.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS ("FORWARD CURRENCY CONTRACTS"). The
Fund may enter into forward currency contracts, which are agreements to exchange
one currency for another -- for example, to exchange a certain amount of U.S.
Dollars for a certain amount of Japanese Yen -- at a future date. The date
(which may be any agreed upon fixed number of days in the future), the amount of
currency to be exchanged and the price at which the exchange will take place
will be negotiated and fixed for the term of the contract at the time that the
Fund enters into the contract. The Fund may engage in forward contracts that
involve transacting in a currency whose changes in value are considered to be

PROSPECTUS
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<PAGE> 16

linked (a proxy) to a currency or currencies of which some or all of the Fund's
portfolio securities are or are expected to be denominated. Forward currency
contracts are (a) traded in an interbank market conducted directly between
currency traders (typically, commercial banks or other financial institutions)
and their customers, (b) generally have no deposit requirements, and (c) are
consummated without payment of any commissions. The Fund may, however, enter
into forward currency contracts containing either or both deposit requirements
and commissions. In order to assure that the Fund's forward currency contracts
are not used to achieve investment leverage, the Fund will segregate cash or
readily marketable high-quality securities in an amount at all times equal to or
exceeding the Fund's commitment with respect to these contracts.

Upon maturity of a forward currency contract, the Fund may (a) pay for and
receive the underlying currency, (b) negotiate with the dealer to roll over the
contract into a new forward currency contract with a new future settlement date,
or (c) negotiate with the dealer to terminate the forward contract by entering
into an offset with the currency trader whereby the Fund pays for and receives
the difference between the exchange rate fixed in the contract and the then
current exchange rate. The Fund also may be able to negotiate such an offset
prior to maturity of the original forward contract. There can be no assurance
that new forward contracts or offsets will always be available to the Fund.

Forward currency contracts will be used only to hedge against anticipated future
changes in exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the price of
securities which the Fund intends to purchase at a later date. The amount the
Fund may invest in forward currency contracts is limited to the amount of the
Fund's aggregate investments in foreign currencies.

The market for forward currency contracts may be limited with respect to certain
currencies. These factors will restrict the Fund's ability to hedge against the
risk of devaluation of currencies in which the Fund holds a substantial quantity
of securities and are unrelated to the qualitative rating that may be assigned
to any particular portfolio security. Where available, the successful use of
forward contracts draws upon a Money Manager's special skills and experience
with respect to such instruments and usually depends on the Money Manager's
ability to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, the
Fund may not achieve the anticipated benefits of forward contracts or may
realize losses and thus be in a worse position than if such strategies had not
been used. Unlike many exchange-traded futures contracts and options on futures
contracts, there are no daily price fluctuation limits with respect to forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of such instruments and movements in the price of the securities and
currencies hedged or used for cover will not be perfect. In the case of proxy
hedging, there is also a risk that the perceived linkage between various
currencies may not be present or may not be present during the particular time
the funds are engaged in that strategy.

The Fund's ability to dispose of its positions in forward contracts will depend
on the availability of active markets in such instruments. It is impossible to
predict the amount of trading interest that may exist in various types of
forward contracts. Forward foreign currency contracts may be closed out only by
the parties entering into an offsetting contract. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively for
the purposes set forth above.

OPTIONS. The Fund may purchase and sell (write) call and put options on
securities and securities indexes 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.

The Fund may invest up to 5% of its assets, represented by the premium paid, in
call and put options. The Fund may write a call or put option to the extent that
the aggregate value of all securities or other assets used to cover all such
outstanding options does not exceed 25% of the value of its net assets.

CALL AND PUT OPTIONS ON SECURITIES. A call option on a specific security gives
the purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security at the exercise price at any time during the option
period. Conversely, a put option on a specific security gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security at the exercise price at any time during the option period.

The Fund may purchase a call option on securities to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability or desire to purchase such securities in an orderly manner. The Fund may
purchase a put option on securities to protect holdings in an underlying or
related security against a substantial decline in market value. Securities are

PROSPECTUS
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<PAGE> 17

considered related if their price movements generally correlate to one another.

The Fund may write a call or a put option only if the option is covered by the
Fund by holding a position in the underlying securities or by other means which
would permit immediate satisfaction of the Fund's obligations as the writer of
the option.

To close out a position when writing covered options, the Fund may make a
"closing purchase transaction," which involves purchasing an option on the same
security with the same exercise price and expiration date as the option which it
previously wrote on the security. To close out a position as a purchaser of an
option, the Fund may make a "closing sale transaction," which involves
liquidating the Fund's position by selling the option previously purchased. The
Fund will realize a profit or loss from a closing purchase or sale transaction
depending upon the difference between the amount paid to purchase an option and
the amount received from the sale thereof.

The Fund intends to treat options in respect of specific securities that are not
traded on a national securities exchange and the securities underlying covered
call options as not readily marketable and therefore subject to the limitations
on the Fund's ability to hold illiquid securities.

The Fund intends to purchase and write call and put options on specific
securities. The Fund will purchase and write options only to the extent
permitted by the policies of state securities authorities in states where the
shares of the Fund are qualified for offer and sale.

SECURITIES INDEX OPTIONS. The Fund currently intends to purchase and write call
and put options on securities indexes. An option on a securities index is a
contract which gives the purchaser of the option, in return for the premium
paid, the right to receive from the writer of the option cash equal to the
difference between the closing price of the index and the exercise price of the
option times a multiplier established by the exchange on which the stock index
is traded. It is similar to an option on a specific security except that
settlement is in cash and gains and losses depend on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in the specific security.

OPTIONS ON FOREIGN CURRENCY. The Fund may purchase and write call and put
options on foreign currencies for the purpose of hedging against changes in
future currency exchange rates. Call options convey the right to buy the
underlying currency at a price which is expected to be lower than the spot price
of the currency at the time the option expires. Put options convey the right to
sell the underlying currency at a price which is anticipated to be higher than
the spot price of the currency at the time the option expires. Currency options
traded on U.S. or other exchanges may be subject to position limits which may
limit the ability of the Fund to reduce foreign currency risk using such
options. Over-the-counter options differ from traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller and generally do not have as much market liquidity as exchange-traded
options. See also "Call and Put Options on Specific Securities," above. The Fund
currently does not intend to write or purchase such options.

RISK FACTORS. The purchase and writing of options involves certain risks. If a
put or call option purchased by the Fund is not sold when it has remaining
value, and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment (i.e., the premium paid) on the option. Also, where a put or call
option on a particular security is purchased to hedge against price movements in
a related security, the price of the put or call option may move more or less
than the price of the related security.

Where the Fund writes a call option, it has, in return for the premium it
receives, given up the opportunity to profit from a price increase in the
underlying security above the exercise price, but, as long as its obligation as
a writer continues, has retained the risk of loss should the price of the
underlying security decline. Where the Fund writes a put option, it is exposed
during the term of the option to a decline in the price of the underlying
security.

There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, the Fund may be unable to close
out a position.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may invest in
interest rate futures contracts, stock index futures contracts and foreign
currency futures contracts and options thereon that are traded on a United
States or foreign exchange or board of trade.

An interest rate or foreign currency futures contract is an agreement between
two parties (buyer and seller) to take or make delivery of a specified quantity
of financial instruments (such as GNMA certificates or Treasury bonds) or
foreign currency at a specified price at a future date. A futures contract on an
index (such as the S&P

PROSPECTUS
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500) is an agreement between two parties (buyer and seller) to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the index contract was originally written. In the case of futures
contracts traded on U.S. exchanges, the exchange itself or an affiliated
clearing corporation assumes the opposite side of each transaction (i.e., as
buyer or seller). A futures contract may be satisfied or closed out by delivery
or purchase, as the case may be, of the financial instrument or by payment of
the change in the cash value of the index. Frequently, using futures to effect a
particular strategy instead of using the underlying or related security or index
will result in lower transaction costs being incurred.

The Fund may also purchase and write call options and put options on futures
contracts. An option on a futures contract gives the holder the right, in return
for the premium paid, to assume a long position (in the case of a call) or a
short position (in the case of a put) in a futures contract at a specified
exercise price prior to the expiration of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option, the
opposite is true. An option on a futures contract may be closed out (before
exercise or expiration) by an offsetting purchase or sale of an option on a
futures contract of the same series.

There are several risks associated with the use of futures and options on
futures contracts for hedging purposes. There can be no guarantee that there
will be a correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in the Fund and the hedging vehicle so that
the portfolio return might have been greater had hedging not been attempted.

There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.

The Fund will only enter into futures contracts or options on futures contracts
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. The Fund
will enter into a futures contract only if the contract is "covered" or if the
Fund at all times maintains with its Custodian cash or cash equivalents equal to
or greater than the fluctuating value of the contract (less any margin or
deposit). The Fund will write a call or put option on a futures contract only if
the option is "covered." For a discussion of how to cover a written call or put
option, see "Options" above.

The Fund may enter into contracts and options on futures contracts for "bona
fide hedging" purposes, as defined under the rules of the Commodity Futures
Trading Commission. The Fund may also enter into futures contracts and options
on futures contracts for non-hedging purposes, provided the aggregate initial
margin and premiums required to establish these positions will not exceed 5% of
the Fund's net assets.

HIGH RISK BONDS. The Fund will invest in "investment grade" securities and may
invest up to 5% of its total assets in debt securities rated less than BBB by
S&P or Baa by Moody's, or in unrated securities judged by the Fund's Money
Managers to be of comparable quality.

Lower rated debt securities generally offer a higher yield than that available
from higher grade issues. However, lower rated debt securities involve higher
risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
changes in the financial condition of the issuers and to price fluctuation in
response to changes in interest rates. During periods of economic downturn or
rising interest rates, highly leveraged issuers may experience financial stress
which could adversely affect their ability to make payments of principal and
interest and increase the possibility of default. In addition, the market for
lower rated debt securities has expanded rapidly in recent years, and its growth
paralleled a long economic expansion. The market for lower rated debt securities
is generally thinner and less active than that for higher quality securities,
which would limit the Fund's ability to sell such securities at fair value in
response to changes in the economy or the financial markets. While such debt may
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposure to adverse conditions. The Fund's Money
Managers will seek to reduce their risks associated with investing in such
securities by

PROSPECTUS
15
<PAGE> 19

limiting the Fund's holding in such securities and by the depth of their own
credit analysis. For additional information, please refer to the Fund's
Statement of Additional Information.

PORTFOLIO TRANSACTION POLICIES

Decisions to buy and sell securities are made by the Money Managers for the
assets assigned to them. THE FUND DOES NOT GIVE SIGNIFICANT WEIGHT TO ATTEMPTING
TO REALIZE LONG-TERM, RATHER THAN SHORT-TERM, CAPITAL GAINS WHEN MAKING
PORTFOLIO MANAGEMENT DECISIONS. Money Managers make decisions to buy or sell
securities independently from other managers. Thus, one Money Manager for the
Fund could be selling a security when another Money Manager for the Fund (or for
another series of the Investment Company) is purchasing the same security. In
addition, when a Money Manager's services are terminated and another retained,
the new manager may significantly restructure the portfolio. These practices may
increase the Fund's portfolio turnover rates, realization of gains or losses,
brokerage commissions and other transactions based costs. The annual portfolio
turnover rates for the Fund is shown in the Financial Highlights table.

The Fund may effect portfolio transaction with or through Frank Russell
Securities, Inc., an affiliate of the Management Company, when the manager
determines that the Fund will receive competitive execution, price and
commissions. Frank Russell Securities, Inc. refunds up to 70% of the commission
paid to the Fund when it effects such transactions, after reimbursement for
research services provided to the Management Company. The Fund may also effect
portfolio transactions through and pay brokerage commissions to Money Managers
(or their affiliates).

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS.

The Board of Trustees presently intends to declare dividends from ordinary
income for payment annually in mid-December.

CAPITAL GAINS DISTRIBUTIONS.

The Board intends to declare distributions from net capital gains through
October 31 (excess of net long-term capital gain over net short-term capital
losses) annually, generally in mid-December. In addition, in order to satisfy
certain distribution requirements, the Fund may declare special year-end
dividend and capital gains distributions during October, November or December
to shareholders of record in such month. Such distributions, if received by
shareholders by January 31, are deemed to have been paid by the Fund and
received by shareholders on December 31 of the prior year. Net gains realized
during November and December will be distributed during the month of February
of the following year.

Investors should be aware that by purchasing shares shortly before the record
date of a dividend or capital gains distribution, they will pay the full price
for the shares and then receive some portion of the price back as a taxable
dividend or capital gains distribution.

AUTOMATIC REINVESTMENT.

All dividends and distributions will be automatically reinvested (at the net
asset value per share at the close of business on the record date) in additional
shares of the Fund, unless a shareholder elects to have dividends or
distributions paid in cash or invested in another fund. Any election may be
changed by delivering written notice no later than ten days prior to the payment
date to Frank Russell Investment Management Company, the Investment Company's
transfer and dividend paying agent, at Operations Department, P.O. Box 1591,
Tacoma, WA 98401.

TAXES

The Fund is treated as a separate taxable entity for federal income tax
purposes, and shareholders of the Fund will be entitled to the amount of
ordinary income and realized capital gains earned by the Fund. The Board intends
to distribute each year substantially all of the Fund's net investment income
and realized capital gains, thereby eliminating virtually all federal income
taxes. The Fund may be subject to nominal, if any, state and local taxes.

For TAXABLE shareholders: Dividends and capital gains distributions are taxable
income under federal tax laws, whether paid in cash or reinvested in additional
shares. Long-term capital gains distributions declared by the Fund's Board are
taxed as long-term gains regardless of the length of time a shareholder has held
such shares. Dividends and distributions may otherwise also be subject to state
or local taxes.

The sale of shares of the Fund is a taxable event and may result in capital gain
or loss. A capital gain or loss may be realized from an ordinary redemption of
shares or an exchange of shares between two mutual funds (or two series or
portfolios of a mutual fund). Any loss incurred on sale or exchange of the
Fund's shares, held for six months or less, will be treated as a long-term
capital loss to the extent of capital gain dividends received with respect to
such shares.

PROSPECTUS
16
<PAGE> 20

The Fund will receive dividends and interest paid by non-U.S. issuers which will
frequently be subject to withholding taxes by non-U.S. governments. The
Management Company expects the Fund to invest more than 50% of its total assets
in non-U.S. securities and to file specified elections with the Internal Revenue
Service which will permit shareholders either to deduct (as an itemized
deduction in the case of an individual) such foreign taxes in computing taxable
income, or to use these withheld foreign taxes as credits against U.S. income
taxes. The Fund's taxable shareholders must include their pro rata portion of
the taxes withheld in their gross income for federal income tax purposes.

The Fund may invest up to 10% of its total assets in the stock of foreign
investment companies that may be treated as "passive foreign investment
companies" ("PFICs") under the Code. Certain other foreign corporations not
operated as investment companies, may nevertheless satisfy the PFIC definition.
A portion of the income and gains that the Fund derives may be subject to a
non-deductible federal income tax at the Fund level. In some cases, the Fund may
be able to avoid this tax by electing to be taxed currently on its share of
PFIC's income, whether or not such income is actually distributed by the PFIC.
The Fund will endeavor to limit its exposure to the PFIC tax by investing in
PFICs only where the election to be taxed currently will be made. Because it is
not always possible to identify a foreign issuer as a PFIC in advance of making
the investment, the Fund may incur the PFIC tax in some instances.

Shareholders will be notified after each calendar year of the amounts: of
ordinary income dividends and long-term capital gains distributions, including
any amounts which are deemed paid on December 31 of the prior year; of the
dividends which qualify for the 70% dividends-received deduction available to
corporations; and of the foreign taxes withheld.

The Fund is required to withhold 31% of all taxable dividends, distributions,
and redemption proceeds payable to any noncorporate shareholder which does not
provide the Fund with the shareholder's certified taxpayer identification number
or required certifications or which is subject to backup withholding.

Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding and other taxes to distributions received by them from the
Fund and the application of foreign tax laws to these distributions.

Shareholders should consult their tax advisors with respect to the applicability
of any state and local intangible property or income taxes to their shares of
the Fund and distributions and redemption proceeds received from the Fund.

Additional information on tax matters relating to the Fund and its shareholders
is included in the section entitled "Taxes" in the Statement of Additional
Information.

CALCULATION OF FUND PERFORMANCE

From time to time, the Fund may advertise its performance in terms of average
annual total return, which is computed by finding the average annual compounded
rates of return over a period that would equate the initial amount invested to
the ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested on the reinvestment dates during the relevant time
period, and includes all recurring fees that are charged to all shareholder
accounts. The average annual total returns for the Fund is as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1 Year Ended December 31, 1994: (5.83%)
Inception to December 31, 1994 (Annualized): 16.29
Inception Date: 01/29/93
- --------------------------------------------------------------------------------
</TABLE>

PROSPECTUS
17
<PAGE> 21
The Fund may also advertise non-standardized performance information which is
for periods in addition to those required to be presented.

VALUATION OF FUND SHARES

NET ASSET VALUE PER SHARE.

The net asset value per share is calculated for the Fund on each business day on
which shares are offered or orders to redeem are tendered. A business day is one
on which the New York Stock Exchange is open for trading. Net asset value per
share is computed for the Fund by dividing the current value of the Fund's
assets, less its liabilities, by the number of shares of the Fund outstanding,
and rounding to the nearest cent. The Fund determines net asset value as of the
close of the regular session of the New York Stock Exchange (currently 4:00 p.m.
Eastern time).

VALUATION OF PORTFOLIO SECURITIES.

With the exceptions noted below, the Fund values portfolio securities at "fair
market value." This generally means that equity securities and 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 equity and fixed-income securities and options are
valued on the basis of the closing bid price and futures contracts are valued on
the basis of last sell price.

Because many fixed-income securities do not trade each day, last sale or bid
prices are frequently not available. Fixed-income securities therefore may be
valued using prices provided by a pricing service when such prices are believed
to reflect the fair market value of such securities.

International equity 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 values securities for which market quotations are not readily available
at "fair value," as determined in good faith pursuant to procedures established
by the Board of Trustees.

PURCHASE OF FUND SHARES

Shares of the Fund are sold directly to Eligible Investors at the net asset
value next determined after an order is received in proper form, and the order
has been accepted. All purchases must be made in U.S. dollars. The Fund reserves
the right to reject any purchase order.

ORDER PROCEDURES.

Orders by all investors (except for participants in the Four Day Settlement
Program described below) to purchase Frank Russell Investment Company Fund
shares must be received by the Fund's transfer agent, either by telephone, mail,
or entry into the shareholder recordkeeping system on a day when shares of the
Fund are offered and orders in proper form accepted prior to the close of the
New York Stock Exchange (currently 4:00 p.m. Eastern time). Orders for shares of
the Fund which are not accepted before that time cannot be invested in the Fund
nor begin to earn income until the next day on which shares of the Fund are
offered.

PAYMENT PROCEDURES: Payment for the purchase of Fund shares must be received by
the Fund's Custodian or transfer agent, depending on the method of payment, on
the day the order is accepted (except for participants in the Four Day
Settlement Program described below). There are several ways to pay for orders
received for the Fund:

FEDERAL FUNDS WIRE. Payment for orders may be made by wiring federal funds to
the Fund's Custodian, State Street Bank and Trust Company.

AUTOMATED CLEARING HOUSE ("ACH"). Payment for orders may be made through the ACH
to the Fund's Custodian, State Street Bank and Trust Company. However, funds
transferred by ACH may or may not be converted into federal funds the same day
depending on the time the funds are received and the bank wiring the funds. If
the funds are not converted the same day, they will be converted the next
business day. Therefore, the order would be placed the next business day.

CHECK. Payment for orders may be made by check or other negotiable bank draft
payable to "Frank Russell Investment Company" and mailed to the Fund's transfer
agent, P.O. Box 1591, Tacoma, WA 98401-1591. Certified checks are not necessary,
but checks are accepted subject to collection at full face value in U.S. funds
and must be drawn in U.S. dollars on a U.S. bank. Investments will be effected
upon receipt of the check or draft by the Transfer Agent when the check or draft
is received prior to the close of the New York Stock Exchange (currently 4:00
p.m. Eastern time). When the check or draft is received by the Transfer Agent
after the close of the New York Stock Exchange, the order will be effected on
the following business day.
PROSPECTUS
18
<PAGE> 22
IN-KIND EXCHANGE OF SECURITIES.

The Transfer Agent may, at its discretion, permit investors to purchase shares
through the exchange of securities they hold. Any securities exchanged must meet
the investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least $100,000. Shares purchased in exchange for securities
generally may not be redeemed or exchanged until the transfer has
settled -- usually within 15 days following the purchase by exchange.

The basis of the exchange will depend upon the relative net asset value of the
shares purchased and securities exchanged. Securities accepted by the Fund will
be valued in the same manner as the Fund values its assets. Any interest earned
on the securities following their delivery to the Transfer Agent and prior to
the exchange will be considered in valuing the securities. All interest,
dividends, subscription or other rights attached to the securities become the
property of the Fund, along with the securities.

FOUR DAY SETTLEMENT PROGRAM.

The Investment Company will accept orders from financial institutions to
purchase shares of the Fund for settlement on the fourth business day following
the receipt of an order to be paid by a federal wire if the investor has agreed
in writing to indemnify the Fund against any losses as a result of nonreceipt of
payment. For further information on this program, contact the Investment
Company.

THIRD PARTY TRANSACTIONS.

Investors purchasing Fund shares through a program of services offered by a
financial intermediary, such as a bank, broker-dealer, investment adviser or
others, may be required to pay additional fees by such intermediary. Investors
should contact such intermediary for information concerning what additional
fees, if any, may be charged.

EXCHANGE PRIVILEGE.

Shareholders may exchange shares of the Fund offered by this Prospectus for
shares of any other fund included in the Investment Company's other Prospectuses
on the basis of current net asset value per share at the time of the exchange,
subject to certain conditions and only in states where the exchange may legally
be made. For additional information, including Prospectuses of other Investment
Company funds, contact the Investment Company. Exchanges may be made (i) by
telephone if the registration of the two accounts are identical; or (ii) in
writing addressed to the Investment Company.

An exchange is a redemption of the shares and is treated as a sale for income
tax purposes, and a short or long-term capital gain or loss may be realized. The
fund shares to be acquired will be purchased when the proceeds from the
redemption become available (up to seven days from the receipt of the request).
Each investor is encouraged to consult with their tax adviser.

REDEMPTION OF FUND SHARES

SHAREHOLDERS UNCERTAIN OF REQUIREMENTS FOR REDEMPTION SHOULD TELEPHONE THE FUNDS
AT (800) 972-0700; IN WASHINGTON (206) 627-7001.

Fund shares may be redeemed on any business day at the net asset value next
determined after the receipt of a redemption request in proper form as described
below.

Payment will ordinarily be made in seven days. Generally, redemption proceeds
will be wire-transferred to the shareholder's account or to an alternate account
provided such request is given to the transfer agent in proper form, at a
domestic commercial bank which is a member of the Federal Reserve System.
Although the Fund currently does not charge such a fee, the Fund reserves the
right to charge a fee for the cost of wire-transferred redemptions of less than
$1,000. Payment for redemption requests of investments made by check may be
withheld for up to 15 days after the date of purchase to assure that checks in
payment for orders to purchase shares are collected by the Fund. Upon request,
redemption proceeds will be mailed to the shareholder's address of record or to
an alternate address provided such request is sent to the transfer agent in
proper form.

REQUEST PROCEDURES. Request by all investors to redeem Frank Russell Investment
Company fund shares must be received by the Fund's transfer agent, either by
telephone, mail, entry into the shareholder recordkeeping system, or through the
Systematic Withdrawal Payment Program on the days requests to redeem are
tendered, prior to the close of the New York Stock Exchange (currently 4:00 p.m.
Eastern time).

Requests for redemption by telephone or entry into the shareholder recordkeeping
system must follow the procedures set forth in the Account Registration and
Investment Instruction Form, or alternate procedures may be followed provided
such requests are given to the transfer agent in proper form. In the unexpected
event telephone lines are unavailable, shareholders should use the mail
redemption procedures described below.

PROSPECTUS 19
<PAGE> 23

MAIL. Redemption requests may be made in writing directly to Frank Russell
Investment Management Company, Attention: Frank Russell Investment Company,
Operations Department, P.O Box 1591, Tacoma, WA 98401. The redemption price will
be the net asset value next determined after receipt by the Management Company
of all required documents in good order. "Good order" means that the request
must include the following:

A. A letter of instruction or a stock assignment designating specifically the
number of shares or dollar amount to be redeemed, signed by all owners of
the shares in the exact names in which they appear on the account;
together with a guarantee of the signature of each owner by a
bank, trust company or member of a recognized stock exchange; and

B. Such other supporting legal documents, if required by applicable law, in
the case of estates, trusts, guardianships, custodianships, corporations
and pension and profit sharing plans.

SYSTEMATIC WITHDRAWAL PAYMENT. The Systematic Withdrawal Payment ("SWP") program
is an automated method for redeeming a predetermined dollar amount from a fund
shareholder account to meet a standing request. The program can be used to meet
any request for periodic distributions of assets from fund shareholder accounts.

SWP OFFERING DATE AND PAYMENT PROCEDURES. SWP distributions occur once a month
and are paid by wire or check, according to the instructions provided on the SWP
form. If a client has more than one fund from which a SWP is to be received, the
client will receive one wire or check for each SWP fund. SWP transactions are
recorded on the twenty-fifth day of each month. If the twenty-fifth day falls on
a weekend or holiday, the transaction will be recorded on the preceding business
day. SWP payment dates are the first business day after the trade date.

DISTRIBUTION FREQUENCY. Payments can be scheduled as monthly, quarterly,
semiannual, or annual distributions.

SWP DISTRIBUTION BY WIRE. Federal Funds Wire payments will be sent to designated
bank on the payment date.

SWP DISTRIBUTION BY CHECK. Checks will be sent by U.S. Postal Service first
class mail, from Boston, Massachusetts, to the requested address on the payment
date.

A Systematic Withdrawal Payment form must be completed and mailed to Frank
Russell Investment Management Company, Attention: Frank Russell Investment
Company, Operations Department, P.O. Box 1591, Tacoma, WA 98401-1591. The
Systematic Withdrawal Payment form must be received by Frank Russell Investment
Management Company five business days before the initial distribution date.

REDEMPTION IN KIND. The Fund may pay any portion of the redemption amount in
excess of $250,000 by a distribution in kind of securities from the portfolio of
the Fund, in lieu of cash. Investors will incur brokerage charges on the sale of
these portfolio securities. The Fund reserves the right to suspend the right of
redemption or postpone the date of payment if any unlikely emergency conditions
(as specified in the Investment Company Act of 1940, as amended or determined by
the SEC) should develop.

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, ACCOUNTANTS AND REPORTS. Russell Fund Distributors,
Inc., a wholly owned subsidiary of the Management Company, is the principal
Distributor for Investment Company shares. The Distributor receives no
compensation from the Investment Company for its services.

State Street Bank and Trust Company, Boston, Massachusetts, holds all portfolio
securities and cash assets of the Fund and provides portfolio recordkeeping
services. State Street is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street has no
responsibility for the supervision and management of the Fund.

Coopers & Lybrand L.L.P., Boston, Massachusetts, are the Fund's independent
accountants. Shareholders will receive unaudited semiannual financial statements
and audited annual financial statements from Coopers & Lybrand L.L.P.
Shareholders may also receive additional reports concerning the Fund, or their
accounts, from the Management Company.

ORGANIZATION, CAPITALIZATION, AND VOTING. The Investment Company was organized
as a Maryland corporation on March 6, 1981, and commenced offering shares on
October 15, 1981. On January 2, 1985, the Investment Company reorganized as a
Massachusetts business trust and now operates under an amended Master Trust
Agreement dated July 26, 1984. Frank Russell Company has the right to grant the
nonexclusive use of the name "Frank Russell" or any derivation thereof to any
other investment company or other business enterprise, and to withdraw from the
Investment Company the use of the name "Frank Russell."

PROSPECTUS
20
<PAGE> 24

The Investment Company issues a single class of shares divisible into an
unlimited number of funds, each of which is a separate trust under Massachusetts
law. Each fund share represents an equal proportionate interest in that fund,
has a par value of $0.01 per share, and is entitled to such dividends and
distributions earned on the assets belonging to such fund as may be declared by
the Board of Trustees. Shares of the Fund are fully paid and nonassessable and
have no preemptive or conversion rights.

Each fund share has one vote; there are no cumulative voting rights. There is no
Annual Meeting of shareholders, but Special Meetings may be held. On any matter
which affects only a particular fund, only shareholders of that fund vote unless
otherwise required by the Investment Company Act or the amended Master Trust
Agreement. The Trustees hold office for the life of the Trust. A Trustee may
resign or retire, and a Trustee may be removed at any time by, in substance, a
vote of two-thirds of Investment Company shares. A vacancy in the Board of
Trustees shall be filled by the vote of a majority of the remaining Trustees so
long as, in substance, two-thirds of the Trustees have been elected by
shareholders.

At March 22, 1995, U.S. National Bank of Oregon may be deemed by the Investment
Company Act of 1940 to "control" the Fund because it owns more than 25% of the
voting shares of the Fund.

MONEY MANAGER PROFILES. The Money Managers identified below have no affiliations
with the Fund or with Frank Russell Company. Each manager has been in business
for at least three years and is principally engaged in managing institutional
investment accounts. These managers may also serve as managers or advisers to
other Investment Company funds, or to other clients of Frank Russell Company,
including its wholly owned subsidiary, Frank Russell Trust Company.

BARING INTERNATIONAL INVESTMENT, LTD., 155 Bishopsgate, London, England EC2M
3XY, a UK company, manages the North American clients for Baring International
Investment Limited ("BII"). BII is wholly owned by Baring Asset Management
Limited which is a wholly-owned subsidiary ultimately of International Nederland
Groep N.V.

GENESIS ASSET MANAGERS, LTD. Bermuda House, St. Julian's Ave., St. Peter Port,
Guernsey, Channel Islands, is a limited liability company organized under the
laws of the state of Guernsey, the Channel Islands, and has been engaged in the
investment advisory business since 1990. Genesis Asset Managers, Ltd., is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. Genesis Asset Managers Ltd., is affiliated with and has common
investment executives with the Genesis Group of fund management companies. The
Genesis Group, whose holding company is Genesis Holdings Ltd., is controlled
32.58% by management and 67.42% by 12 outside shareholders, with the largest
single holding being 19.68%.

MONTGOMERY ASSET MANAGEMENT L.P., 600 Montgomery Street, 17th Floor, San
Francisco, CA 94111, is a California limited partnership and a registered
investment advisor. Montgomery Asset Management, Inc., is the general partner of
Montgomery Asset Management, L.P. and Montgomery Securities is the sole limited
partner. Montgomery Asset Management, Inc., and Montgomery Securities may be
deemed control persons of Montgomery Asset Management, L.P.

PROSPECTUS
21
<PAGE> 25

EMERGING MARKETS FUND

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON, (206) 627-7001

MONEY MANAGERS
Baring International Investment, Ltd.
Genesis Asset Managers, Ltd.
Montgomery Asset Management L.P.

MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment Management Co.
909 A Street
Tacoma, Washington 98402

CONSULTANT
Frank Russell Company
909 A Street
Tacoma, Washington 98402

DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, Washington 98402

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 - One Commerce Square
Philadelphia, PA 19103-7098

OFFICE OF SHAREHOLDER INQUIRIES
Office of Shareholders Inquiries
909 A Street
Tacoma, Washington 98402
(800) 972-0700
In Washington, (206) 627-7001

PROSPECTUS
22