RUSSELL FRANK INVESTMENT CO, 497, 1998-06-11

RUSSELL FRANK INVESTMENT CO
497, 1998-06-11

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<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

Frank Russell Investment Company (the "Trust") is an open-end, management
investment company with 28 different investment series or portfolios
("Funds"). This Prospectus describes and offers interests in the Class S
Shares of eight Funds:

Equity I Fund International Fund
Equity II Fund Fixed Income I Fund
Equity III Fund Fixed Income II Fund
Equity Q Fund Fixed Income III Fund

Each Fund has its own investment objective and policies designed to meet
different investment goals. As with all mutual funds, attainment of each
Fund's investment objective cannot be assured.

SHARES OF THE FUNDS ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH STATE OR OTHER JURISDICTION.

This Prospectus sets forth concisely the information about the Funds that
you should know before investing. Please read it before investing and retain
it for future reference. A Statement of Additional Information ("SAI"), dated
May 1, 1998, and supplemented June 15, 1998, has been filed with the
Securities and Exchange Commission ("SEC"). The SAI is incorporated into this
Prospectus by reference and is available without charge by writing to the
address listed above or by telephoning (800) 972-0700.

This Prospectus relates only to the Class S Shares of the Funds. The Funds
listed do not currently offer interests in any other classes of shares.

The SAI, material incorporated by reference into this Prospectus, and
further information regarding the Trust and the Funds is maintained
electronically with the SEC at its Internet Web site (http://www.sec.gov).

PROSPECTUS DATED MAY 1, 1998 AS SUPPLEMENTED THROUGH JUNE 15, 1998
<PAGE>

TABLE OF CONTENTS

CERTAIN TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE
GLOSSARY, WHICH BEGINS ON PAGE 43 OF THIS PROSPECTUS.

<TABLE>
<S> <C>
Summary..................................................................... 3
Annual Fund Operating Expenses.............................................. 4
Financial Highlights........................................................ 6
The Purpose of the Funds--Multi-Style, Multi-Manager Diversification........ 14
Eligible Investors.......................................................... 15
General Management of the Funds............................................. 16
Expenses of the Funds....................................................... 18
The Money Managers.......................................................... 18
Investment Objectives, Policies and Practices............................... 19
Portfolio Transaction Policies.............................................. 29
Dividends and Distributions................................................. 30
Taxes....................................................................... 30
Performance Information..................................................... 32
How Net Asset Value Is Determined........................................... 33
How to Purchase Shares...................................................... 34
How to Redeem Shares........................................................ 36
Additional Information...................................................... 38
Money Manager Profiles...................................................... 39
Glossary.................................................................... 43
</TABLE>

2
<PAGE>

SUMMARY

The Funds are designed to provide a means for Eligible Investors to use
FRIMCo's and Frank Russell Company's ("Russell") "multi-style, multi-manager
diversification" techniques and money manager evaluation services. Unlike most
investment companies that have a single organization that acts as both
administrator and investment adviser, the Trust divides responsibility for
corporate management and investment advice between FRIMCo and a number of
different money managers. See "The Purpose of the Funds--Multi-Style, Multi-
Manager Diversification."

Each Fund seeks to achieve a specific investment objective by using distinct
investment strategies:

EQUITY I FUND -- Income and capital growth by investing principally in
equity securities.

EQUITY II FUND -- Maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from Equity I Fund, by investing in equity securities.

EQUITY III FUND -- A high level of current income, while maintaining the
potential for capital appreciation by investing in income-producing equity
securities.

EQUITY Q FUND -- Total return greater than the total return of the US stock
market as measured by the Russell 1000(R) Index over a market cycle of four to
six years, while maintaining volatility and diversification similar to the
Index by investing in equity securities.

INTERNATIONAL FUND -- Favorable total return and additional diversification
for US investors by investing primarily in equity and fixed-income securities
of non-US companies, and securities issued by non-US governments.

FIXED INCOME I FUND -- Effective diversification against equities and a
stable level of cash flow by investing in fixed-income securities.

FIXED INCOME II FUND -- Preservation of capital and generation of current
income consistent with the preservation of capital by investing primarily in
fixed-income securities with low-volatility characteristics.

FIXED INCOME III FUND -- Maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from broad fixed-income market portfolios, by investing in fixed-
income securities.

The Trust's Funds had aggregate net assets of approximately $13.6 billion on
April 1, 1998. The net assets of the Funds described in this Prospectus on
April 1, 1998 were:

<TABLE>
<S> <C>
Equity I........... $1,342,186,760.20
Equity II.......... $ 565,197,418.13
Equity III......... $ 268,588,956.64
Equity Q........... $1,137,119,684.51
</TABLE>
<TABLE>
<S> <C>
International
Fund.............. $1,108,581,403.76
Fixed Income I..... $ 871,239,142.81
Fixed Income II.... $ 240,672,356.85
Fixed Income III... $ 430,057,483.03
</TABLE>

You may buy and sell Class S Shares of the Fund through an authorized
Financial Intermediary. All Class S Shares are sold without a sales charge,
commission, or Rule 12b-1 fee. Except as indicated below, Class S Shares are
redeemed at net asset value. You may also exchange shares of one Fund for
shares of another Fund. See "How to Purchase Shares" and "How to Redeem
Shares."

3
<PAGE>

You should be aware of the general risks associated with investments in
mutual funds. One or more Funds may make investments and engage in investment
practices and techniques that involve risks, including entering into
repurchase agreements, lending portfolio securities and entering into hedging
transactions. Also, foreign securities in which International Fund may invest
may be subject to certain risks in addition to those inherent in US
investments. These risks are described in "Risk Considerations" in "Investment
Objectives, Policies and Practices" and in the Glossary.

SHAREHOLDER TRANSACTION EXPENSES

You would pay the following charges when buying or redeeming Class S Shares
of a Fund:

<TABLE>
<CAPTION>
MAXIMUM SALES MAXIMUM SALES
LOAD IMPOSED LOAD IMPOSED ON DEFERRED REDEMPTION EXCHANGE
ON PURCHASES REINVESTED DIVIDENDS SALES LOAD* FEES FEES
------------- -------------------- ----------- ---------- --------
<S> <C> <C> <C> <C>
None None None None None
</TABLE>
- ---------------------
* If you purchase shares of any of the Funds, you may pay a quarterly
shareholder investment services fee ("Services Fee") directly to FRIMCo
pursuant to a separate asset management agreement between you and FRIMCo.
The fee is calculated as a percentage of the amount you have invested in the
Funds.

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):

<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEE EXPENSES* EXPENSES*+
---------- --------- ----------
<S> <C> <C> <C>
Equity I Fund................................... 0.60% 0.10% 0.70%
Equity II Fund.................................. 0.75% 0.18% 0.93%
Equity III Fund................................. 0.60% 0.15% 0.75%
Equity Q Fund................................... 0.60% 0.08% 0.68%
International Fund.............................. 0.75% 0.26% 1.01%
Fixed Income I Fund............................. 0.30% 0.11% 0.41%
Fixed Income II Fund............................ 0.50% 0.17% 0.67%
Fixed Income III Fund........................... 0.55% 0.16% 0.71%
</TABLE>
- ---------------------
+ Investors purchasing Class S Shares of the Fund through a financial
intermediary, such as a bank or an investment adviser, may also pay
additional fees to the intermediary for services provided by the
intermediary. Such investors should contact the intermediary for information
concerning what additional fees, if any, will be charged.
* Restated to reflect changes to the Trust's Transfer and Dividend Paying
Agent agreement, which became effective June 8, 1998.

Because the Funds described in this Prospectus are designed for investors
with an aggregate investment of at least $5 million, as described in the
"Eligible Investors" section, beginning January 1, 1999, any shareholder
account with respect to any Fund described in this Prospectus with a balance
of less than $10,000 will be subject to an account maintenance fee equal to
$12.50 per year. The fee will be deducted from dividends payable to each
applicable account or by liquidating shares in the account, or both. The fees
will be waived for: (i) accounts held by retirement plans representing
multiple participants; (ii) accounts of trustees, officers, employees, and
certain third-party contractors of the Trust and its affiliates; and (iii)
classes of accounts for which maintenance costs are absorbed by a third-party.

These tables are intended to assist you in understanding the various
expenses of each Fund. Operating expenses are paid out of a Fund's assets and
are factored into the Fund's share price. Each Fund estimates that it will
have the expenses listed (expressed as a percentage of average net assets) for
the current fiscal year.

4
<PAGE>

EXAMPLE OF EXPENSES FOR THE FUNDS

Assume that each Fund's annual return is 5% and that its operating expenses
are as described above, and that you sell your shares after the number of
years shown. These are projected expenses for each $1000 that you invest:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity I Fund................................... $ 7 $22 $39 $ 88
Equity II Fund.................................. $ 9 $29 $51 $117
Equity III Fund................................. $ 8 $24 $41 $ 94
Equity Q Fund................................... $ 7 $21 $38 $ 86
International Fund.............................. $10 $32 $56 $ 27
Fixed Income I Fund............................. $ 4 $13 $23 $ 52
Fixed Income II Fund............................ $ 7 $21 $37 $ 84
Fixed Income III Fund........................... $ 7 $22 $39 $ 89
</TABLE>

5
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY I FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class S Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

EQUITY I FUND
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $ 30.34 $ 28.00 $ 23.32 $ 24.91 $ 25.00 $ 25.17 $ 21.13 $ 25.39 $ 22.20 $ 20.18
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .34 .42 .52 .62 .60 .61 .75 .91 .88 .81
Net realized and
unrealized gain (loss)
on investments........ 8.89 5.96 7.71 (.41) 2.18 1.54 5.61 (2.37) 5.79 2.46
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations .......... 9.23 6.38 8.23 .21 2.78 2.15 6.36 (1.46) 6.67 3.27
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income.. (.34) (.42) (.52) (.62) (.60) (.62) (.75) (.90) (1.01) (.77)
Net realized gain on
investments........... (8.72) (3.62) (3.03) (.94) (2.11) (1.70) (1.57) (1.90) (2.47) (.48)
In excess of net
realized gain on
investments........... -- -- -- (.24) (.16) -- -- -- -- --
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions... (9.06) (4.04) (3.55) (1.80) (2.87) (2.32) (2.32) (2.80) (3.48) (1.25)
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $ 30.51 $ 30.34 $ 28.00 $ 23.32 $ 24.91 $ 25.00 $ 25.17 $ 21.13 $ 25.39 $ 22.20
========= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%)(a)..... 32.02 23.58 35.94 .79 11.61 9.02 31.22 (5.64) 30.79 16.42
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net
assets (a)............ .70 .71 .59 .12 .14 .15 .19 .23 .18 .17
Net investment income
to average net
assets (a) ........... .96 1.38 1.91 2.52 2.36 2.53 3.14 3.66 3.41 3.68
Portfolio turnover..... 110.75 99.51 92.04 75.02 91.87 71.14 119.55 101.30 61.27 67.59
Net assets, end of year
($000 omitted)........ 1,136,373 961,953 751,497 547,242 514,356 410,170 330,507 221,543 300,814 243,691
Average commission rate
paid per share of se-
curity ($ omitted).... .0511 .0464 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
(a) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

6
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY II FUND*

EQUITY II FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 30.05 $ 28.88 $ 25.00 $ 26.58 $ 27.71 $ 26.32 $ 19.24 $ 23.32 $22.50 $19.99
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .11 .16 .27 .36 .32 .30 .41 .51 .61 .52
Net realized and
unrealized gain (loss)
on investments........ 8.11 4.96 6.80 (.86) 3.97 3.13 7.65 (3.91) 4.74 2.51
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total From Investment
Operations........... 8.22 5.12 7.07 (.50) 4.29 3.43 8.06 (3.40) 5.35 3.03
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Net investment income.. (.11) (.16) (.29) (.31) (.31) (.30) (.41) (.50) (.71) (.52)
Net realized gain on
investments........... (5.20) (3.79) (2.90) (.21) (4.72) (1.74) (.57) (.18) (3.82) --
In excess of net real-
ized gain on invest-
ments ................ -- -- -- (.56) (.39) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total Distributions... (5.31) (3.95) (3.19) (1.08) (5.42) (2.04) (.98) (.68) (4.53) (.52)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
NET ASSET VALUE, END
OF YEAR................ $ 32.96 $ 30.05 $ 28.88 $ 25.00 $ 26.58 $ 27.71 $ 26.32 $ 19.24 $23.32 $22.50
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
TOTAL RETURN (%)(a)..... 28.66 18.51 28.67 (2.60) 16.70 13.31 42.40 (14.76) 24.63 15.22
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets
(a)................... .92 .95 .83 .23 .34 .32 .37 .48 .41 .35
Net investment income
to average net assets
(a)................... .35 .52 .97 1.46 1.14 1.10 1.79 2.40 2.45 2.40
Portfolio turnover..... 103.00 120.78 89.31 58.04 87.25 43.33 42.16 80.27 77.55 56.38
Net assets, end of year
($000 omitted)........ 482,159 365,955 279,566 202,977 171,421 120,789 101,206 60,668 70,588 63,903
Average commission rate
paid per share of
security ($ omitted).. .0390 .0381 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
(a) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

7
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY III FUND*

EQUITY III FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $ 29.68 $ 29.11 $ 24.18 $ 27.05 $ 26.75 $ 27.08 $ 23.30 $26.49 $ 24.03 $ 20.74
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .60 .70 .82 .93 .89 .98 1.08 1.33 1.26 1.15
Net realized and
unrealized gain (loss)
on investments........ 8.69 5.10 7.73 (.85) 2.99 2.24 5.21 (2.85) 5.35 3.40
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
Total From Investment
Operations........... 9.29 5.80 8.55 .08 3.88 3.22 6.29 (1.52) 6.61 4.55
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
LESS DISTRIBUTIONS:
Net investment income.. (.60) (.71) (.83) (.91) (.90) (.99) (1.07) (1.30) (1.40) (1.14)
In excess of net
investment income..... (.01) -- -- -- -- -- -- -- -- --
Net realized gain on
investments........... (8.56) (4.52) (2.79) (1.94) (2.68) (2.56) (1.44) (.37) (2.75) (.12)
In excess of net
realized gain on
investments........... -- -- -- (.10) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
Total Distributions... (9.17) (5.23) (3.62) (2.95) (3.58) (3.55) (2.51) (1.67) (4.15) (1.26)
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
NET ASSET VALUE, END OF
YEAR................... $ 29.80 $ 29.68 $ 29.11 $ 24.18 $ 27.05 $ 26.75 $ 27.08 $23.30 $ 26.49 $ 24.03
======= ======= ======= ======= ======= ======= ======= ====== ======= =======
TOTAL RETURN (%)(a)..... 33.13 20.90 35.96 1.16 14.95 12.30 27.86 (5.73) 28.07 22.19
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets
(a)................... .78 .79 .65 .17 .16 .20 .25 .27 .23 .20
Net investment income
to average net assets
(a)................... 1.77 2.23 2.90 3.39 3.09 3.57 4.05 4.91 4.58 4.96
Portfolio turnover..... 128.86 100.78 103.40 85.92 76.77 84.56 56.99 65.74 83.13 57.28
Net assets, end of year
($000 omitted)........ 242,112 221,778 222,541 177,807 181,630 166,782 138,076 94,087 135,245 106,695
Average commission rate
paid per share of
security ($ omitted).. .0415 .0447 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
(a) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

8
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY Q FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

EQUITY Q FUND
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 32.94 $ 30.40 $ 24.43 $ 26.03 $ 25.23 $ 24.90 $ 20.20 $ 22.45 $ 18.85 $16.67
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .44 .58 .59 .69 .66 .67 .75 .81 .78 .69
INCOME
Net realized and
unrealized gain (loss)
on investments........ 10.01 6.33 8.52 (.41) 2.71 1.73 5.58 (1.89) 4.26 2.15
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total income from
Investment
Operations........... 10.45 6.91 9.11 .28 3.37 2.40 6.33 (1.08) 5.04 2.84
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Net investment income.. (.44) (.58) (.61) (.69) (.66) (.68) (.75) (.79) (.86) (.66)
In excess of net in-
vestment income....... -- (.01) -- -- -- -- -- -- -- --
Net realized gain on
investments........... (7.05) (3.78) (2.53) (.97) (1.85) (1.39) (.88) (.38) (.58) --
In excess of net
realized gain on
investments........... -- -- -- (.22) (.06) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions... (7.49) (4.37) (3.14) (1.88) (2.57) (2.07) (1.63) (1.17) (1.44) (.66)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
YEAR................... $ 35.90 $ 32.94 $ 30.40 $ 24.43 $ 26.03 $ 25.23 24.90 $ 20.20 $ 22.45 $18.85
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN (%)(a)(b).. 33.07 23.67 37.91 .99 13.80 9.97 32.14 (4.81) 27.10 17.16
RATIOS (%) SUPPLEMENTAL
DATA:
Operating expenses to
average net assets
(b)(c)................ .68 .71 .58 .11 .15 .18 .23 .31 .33 .33
Net investment income
to average net
assets (b)(c)......... 1.17 1.80 2.07 2.74 2.50 2.80 3.23 3.70 3.68 3.82
Portfolio turnover
(c)................... 94.89 74.59 74.00 45.87 54.69 58.35 51.37 66.51 88.03 52.21
Net assets, end of year
($000 omitted)........ 987,760 818,281 620,259 430,661 382,939 290,357 215,779 133,869 129,680 89,320
Average commission rate
paid per share of
security ($ omitted).. .0350 .0332 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
(a) Periods less than one year are not annualized.
(b) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
(c) The ratios for the period ended December 31, 1987 are annualized.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

9
<PAGE>

FINANCIAL HIGHLIGHTS OF THE INTERNATIONAL FUND*

INTERNATIONAL FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $ 37.39 $ 36.26 $ 34.28 $ 37.34 $ 28.92 $ 31.96 $ 29.18 $ 38.52 $ 35.44 $ 35.50
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .46 .44 .48 .61 .58 .67 .73 1.23 .85 .95
Net realized and
unrealized gain (loss)
on investments (a).... (.28) 2.41 3.16 .65 9.63 (2.62) 3.16 (7.27) 7.46 5.77
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Income From
Investment
Operations........... .18 2.85 3.64 1.26 10.21 (1.95) 3.89 (6.04) 8.31 6.72
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income.. (.37) (.35) (.64) (.36) (.57) (.67) (.80) (1.19) (1.02) (1.11)
In excess of net
investment income..... (.18) -- (.08) -- (.16) -- -- -- -- --
Net realized gain on
investments........... (1.95) (1.37) (.94) (3.73) (1.06) (.42) (.31) (2.11) (4.21) (5.67)
In excess of net
realized gain on
investments........... (.47) -- -- (.23) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions... (2.97) (1.72) (1.66) (4.32) (1.79) (1.09) (1.11) (3.30) (5.23) (6.78)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $ 34.60 $ 37.39 $ 36.26 $ 34.28 $ 37.34 $ 28.92 $ 31.96 $ 29.18 $ 38.52 $ 35.44
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%)(b)..... .58 7.98 10.71 5.38 35.56 (6.11) 13.47 (15.94) 24.06 20.13
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses,
net, to average net
assets (b)............ 1.00 1.04 .88 .32 .39 .45 .48 .50 .44 .45
Operating expenses,
gross, to average net
assets (b)............ 1.00 1.05 .89 .34 .41 .46 .48 .50 .44 .45
Net investment income
to average net assets
(b)................... 1.14 1.20 1.41 1.63 1.83 2.46 2.61 3.14 2.38 2.52
Portfolio turnover..... 79.45 42.69 36.78 71.09 62.04 48.99 53.13 78.30 53.49 51.17
Net assets, end of year
($000 omitted)........ 972,735 944,380 796,777 674,180 562,497 348,869 252,828 171,613 186,742 149,064
</TABLE>
- ---------------------
(a) Provision for federal income tax for the year ended December 31, 1991
amounted to $.024 per share.
(b) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
(c) In certain foreign markets the relationship between the translated US
dollar price per share and commission paid per share may vary from that of
domestic markets.
* See the notes to financial statements which appear in Trust's Annual Report
to Shareholders and which are incorporated by reference into the Statement
of Additional Information.

10
<PAGE>

FINANCIAL HIGHLIGHTS OF THE FIXED INCOME I FUND*

FIXED INCOME I FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 20.99 $ 21.59 $ 19.59 $ 21.74 $ 21.61 $ 22.29 $ 20.86 $ 20.91 $ 20.50 $ 20.48
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 1.37 1.38 1.42 1.46 1.50 1.63 1.71 1.77 1.93 1.73
Net realized and
unrealized gain (loss)
on investments........ .54 (.62) 2.02 (2.06) .72 (.07) 1.49 (.05) .71 .01
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations .......... 1.91 .76 3.44 (.60) 2.22 1.56 3.20 1.72 2.64 1.74
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income.. (1.39) (1.36) (1.44) (1.44) (1.50) (1.62) (1.69) (1.77) (1.92) (1.72)
In excess of net
investment income..... -- -- -- -- (.01) -- -- -- -- --
Net realized gain on
investments........... -- -- -- -- (.58) (.62) (.08) -- (.31) --
In excess of net real-
ized gain on invest-
ments ................ -- -- -- (.11) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions... (1.39) (1.36) (1.44) (1.55) (2.09) (2.24) (1.77) (1.77) (2.23) (1.72)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $ 21.51 $ 20.99 $ 21.59 $ 19.59 $ 21.74 $ 21.61 $ 22.29 $ 20.86 $ 20.91 $ 20.50
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%)(a)..... 9.42 3.75 18.03 (2.97) 10.46 7.26 16.01 8.60 13.35 8.76
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets
(a)................... .42 .42 .35 .10 .09 .10 .10 .11 .12 .13
Net investment income
to average net assets
(a)................... 6.54 6.57 6.82 7.06 6.71 7.45 8.08 8.70 8.96 8.28
Portfolio turnover..... 165.81 147.31 138.05 173.97 173.27 211.26 121.91 114.15 196.18 186.54
Net assets, end of year
($000 omitted)........ 798,252 662,899 638,317 496,038 533,696 530,857 458,201 329,091 297,721 223,216
</TABLE>
- ---------------------
(a) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

11
<PAGE>

FINANCIAL HIGHLIGHTS OF THE FIXED INCOME II FUND*

FIXED INCOME II FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $ 18.36 $ 18.55 $ 17.98 $ 18.99 $ 18.56 $ 19.68 $ 18.94 $ 18.69 $18.51 $18.63
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 1.08 1.04 1.16 1.21 .84 1.35 1.52 1.53 1.69 1.61
Net realized and
unrealized gain (loss)
on investments........ -- .19 .59 (1.07) .44 (.83) .72 .23 .27 (.12)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total From Investment
Operations........... 1.08 .85 1.75 .14 1.28 .52 2.24 1.76 1.96 1.49
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Net investment income.. (1.09) (1.04) (1.18) (1.15) (.71) (1.36) (1.50) (1.51) (1.78) (1.61)
Net realized gain on
investments........... -- -- -- -- -- (.28) -- -- -- --
Tax return of capital.. -- -- -- -- (.14) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total Distributions... (1.09) (1.04) (1.18) (1.15) (.85) (1.64) (1.50) (1.51) (1.78) (1.61)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF
YEAR................... $ 18.35 $ 18.36 $ 18.55 $ 17.98 $ 18.99 $ 18.56 $ 19.68 $ 18.94 $18.69 $18.51
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
TOTAL RETURN (%)(a)..... 6.02 4.76 9.95 .82 6.98 2.74 12.31 9.71 10.99 8.20
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets
(a)................... .66 .70 .58 .19 .16 .19 .13 .15 .17 .13
Net investment income
to average net assets
(a)................... 5.70 5.70 6.41 6.52 6.16 7.21 8.06 8.45 8.97 8.56
Portfolio turnover..... 213.14 264.40 269.31 233.75 229.07 330.58 188.30 184.38 320.16 217.58
Net assets, end of year
($000 omitted)........ 229,470 222,983 183,577 144,030 138,619 182,735 156,685 119,853 83,313 86,052
</TABLE>
- ---------------------
(a) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

12
<PAGE>

FINANCIAL HIGHLIGHTS OF THE FIXED INCOME III FUND*

FIXED INCOME III FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993++
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................. $ 10.17 $ 10.34 $ 9.37 $ 10.44 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .63 .64 .67 .66 .49
Net realized and unrealized gain
(loss) on investments........... .32 (.16) .97 (1.07) .52
------- ------- ------- ------- -------
Total From Investment Opera-
tions......................... .95 .48 1.64 (.41) 1.01
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income............ (.62) (.64) (.67) (.66) (.48)
In excess of net investment in-
come............................ (.02) (.01) -- -- --
Net realized gain on invest-
ments........................... (.06) -- -- -- (.08)
In excess of net realized gain on
investments..................... -- -- -- -- (.01)
------- ------- ------- ------- -------
Total Distributions............ (.70) (.65) (.67) (.66) (.57)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR...... $ 10.42 $ 10.17 $ 10.34 $ 9.37 $ 10.44
======= ======= ======= ======= =======
TOTAL RETURN (%)(a)(c)............ 9.64 4.88 17.99 (3.89) 10.22
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to aver-
age net assets (b)(c)........... .70 .73 .61 .20 .20
Operating expenses, gross, to av-
erage net assets (b)(c)......... .70 .73 .61 .20 .40
Net investment income to average
net assets (b).................. 6.13 6.32 6.83 7.02 6.30
Portfolio turnover (b)........... 274.84 144.26 141.37 134.11 181.86
Net assets, end of year ($000
omitted)........................ 382,433 292,077 252,465 166,620 124,234
</TABLE>
- ---------------------
++ For the period January 29, 1993 (commencement of operations) to December
31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended December 31, 1993 are annualized.
(c) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

13
<PAGE>

THE PURPOSE OF THE FUNDS--MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

The Funds offer Eligible Investors the opportunities to use FRIMCo's and
Russell's "multi-style, multi-manager diversification" investment method and
to obtain FRIMCo's and Russell's money manager evaluation services.

Russell acts as consultant to the Funds. Russell was founded in 1936 and has
been providing comprehensive asset management consulting services for almost
30 years to institutional investors, principally large corporate employee
benefit plans. Russell and its affiliates have offices around the world--in
Tacoma, New York, Toronto, London, Zurich, Paris, Sydney, Auckland and Tokyo.

Three functions form the core of Russell's consulting services:

. Objective Setting: Defining appropriate investment objectives and desired
investment returns, based on a client's unique situation and risk
tolerance.

. 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 a way most
likely to achieve the client's objectives and desired returns.

. Money Manager Research: Evaluating and recommending professional
investment advisory and management organizations ("money managers") to
make specific portfolio investments for each asset class, according to
designated investment objectives, styles and strategies.

When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique. The goals of this
process are to reduce risk and to increase returns.

FRIMCo and Russell believe investors should seek to hold fully diversified
portfolios that reflect both their own individual investment time horizons and
their ability to accept risk. FRIMCo and Russell believe that for many, this
can be accomplished through strategically purchasing shares in one or more of
the Funds which have been structured to provide access to specific asset
classes in a multi-style, multi-manager environment.

Capital market history shows that asset classes with greater risk will
generally outperform lower risk asset classes over time. For instance,
corporate equities, over the past 50 years, have outperformed corporate debt
in absolute terms. However, what is generally true of performance over
extended periods will not necessarily be true at any given time during a
market cycle, and from time to time asset classes with greater risk may also
underperform lower risk asset classes, on either a risk adjusted or absolute
basis. Investors should select a mix of asset classes that reflects their
overall ability to withstand market fluctuations over their investment
horizons.

Studies have shown that no one investment style within an asset class will
consistently outperform competing styles. For instance, investment styles
favoring securities with growth characteristics may outperform styles favoring
income producing securities, and vice versa. It is largely for this reason
that no single manager has consistently outperformed the market over extended
periods. While performance cycles tend to repeat themselves, they do not do so
predictably.

FRIMCo and Russell believe, however, that it is possible to select managers
who have shown a consistent ability to achieve superior results within
specific asset classes and investment styles by employing a unique combination
of qualitative and quantitative measurements. FRIMCo combines these select
managers with other managers within the same asset class who employ
complementary styles. By combining complementary investment styles within an
asset class, investors are better able to reduce their exposure to any one
investment style going out of favor.

14
<PAGE>

By strategically selecting from among a variety of investments by asset
class, each of which has been constructed using these multi-style, multi-
manager principles, investors are able to design portfolios that meet their
specific investment needs.

ELIGIBLE INVESTORS

Shares of the Funds are currently offered only to Eligible Investors.
Eligible Investors include:

. Institutional investors and Financial Intermediaries investing for their
own accounts or in fiduciary or agency capacity, which have entered into
asset management services agreements ("Agreements") with FRIMCo.
"Financial Intermediaries" include bank trust departments, registered
investment advisers, broker-dealers, employee benefit plans and other
financial services organizations;

. Institutions or individuals who have acquired shares through
institutional investors and Financial Intermediaries; and

. Trustees, officers, employees and certain third-party contractors of the
Trust and its affiliates.

The initial minimum aggregate investment in any combination of the Funds
described in this Prospectus and in the Trust's Specialty Funds Prospectus is
$5 million. You may be eligible to purchase shares of these Funds if you do
not meet the required initial minimum investment. FRIMCo at its discretion may
waive the initial minimum investment for some employee benefit plans and other
plans or if the requirements are met for a combined purchase privilege,
cumulative quantity discount or statement of intention. You should consult
your Financial Intermediary for details. Trustees, officers, employees, and
certain third-party contractors of the Trust and its affiliates are not
subject to any initial minimum investment requirement.

The Funds do not generally offer their shares directly to individual (i.e.,
retail) investors, although they may choose to do so. Financial Intermediaries
that have entered into Agreements with FRIMCo may acquire shares of the Funds
for their customers. Under the Agreements, FRIMCo provides objective-setting
and asset-allocation assistance and services to Financial Intermediaries,
which in turn provide similar services to their customers. Financial
Intermediaries receive no compensation from FRIMCo or Class S Shares of the
Funds. However, Financial Intermediaries may charge their customers a fee for
providing these services and other trust or investment-related services.

Each Agreement with respect to the Funds provides that a shareholder
investment services fee (the "Services Fee") may be paid to FRIMCo. The
Services Fee is usually expressed as a percentage of the client's assets
invested in the Funds. The Services Fee may include a fixed-dollar fee for
certain specific services. The client and FRIMCo agree to the Services Fee,
which is determined by the amount of assets the client expects to invest in
the Funds, the nature and extent of services that FRIMCo agrees to provide to
the client, and other factors.

Either the client or FRIMCo may terminate an Agreement upon written notice.
FRIMCo does not anticipate terminating any Agreement unless a client does not
(i) promptly pay fees due to FRIMCo, or (ii) invest sufficient assets in the
Trust's Funds to compensate FRIMCo for its services. If an Agreement is
terminated, FRIMCo will no longer provide asset-allocation, objective-setting
or other services to the client.

15
<PAGE>

GENERAL MANAGEMENT OF THE FUNDS

The Board oversees the Funds' operations, including reviewing and approving
the Funds' contracts with FRIMCo, Russell and the money managers. The Trust's
officers, all of whom are employed by and are officers of FRIMCo or its
affiliates, are responsible for the day-to-day management and administration
of the Funds' operations. The money managers are responsible for selection of
individual portfolio securities for the assets assigned to them.

FRIMCo:

. provides or supervises the general management and administration,
investment advisory and portfolio management, and distribution services
for the Funds;

. furnishes the Funds with office space, equipment and personnel to operate
and administer the Funds' business, and supervises services provided by
third parties, such as the money managers and the Custodian;

. develops the investment programs, selects money managers, allocates
assets among money managers and monitors the money managers' investment
programs and results;

. manages, or hires money managers to manage, the Liquidity Portfolio; and

. provides the Funds with transfer agent, dividend disbursing and
shareholder recordkeeping services.

FRIMCo pays the expenses of providing these services (other than transfer
agent and shareholder recordkeeping), as well as a portion of the costs of
preparing and distributing materials that describe the Funds.

FRIMCo's officers and employees who oversee the money managers are:

. Randall P. Lert, who has been Chief Investment Officer of FRIMCo since
1989.

. Mark D. Amberson, who has been a Portfolio Manager of FRIMCo since
January 1998. From 1991 to 1997, Mr. Amberson was a Portfolio Manager in
Russell's Money Market Trading Group. Mr. Amberson, jointly with another
portfolio manager identified herein, has primary responsibility for
management of the Fixed I, Diversified Bond, Fixed II, Volatility
Constrained Bond, Fixed III, and Multistrategy Bond Funds.

. Randal C. Burge, who has been a Portfolio Manager of FRIMCo since 1995.
From 1990 to 1995, Mr. Burge was a Client Executive for Frank Russell
Australia. Mr. Burge, jointly with another portfolio manager identified
herein, has primary responsibility for management of the Fixed I, Fixed
II, Fixed III, Diversified Bond, Volatility Constrained Bond,
Multistrategy Bond, and Emerging Markets Funds.

. Jean E. Carter, who has been a Portfolio Manager of FRIMCo since 1994.
From 1990 to 1994, Ms. Carter was a Client Executive in Russell's
Investment Group. Ms. Carter, jointly with another portfolio manager
identified herein, has primary responsibility for management of the
International, and International Securities Funds.

. Ann Duncan, who has been a Portfolio Manager of FRIMCo since January
1998. From 1996 to 1997, Ms. Duncan was a Senior Equity Research Analyst
with Russell. From 1992 to 1995, Ms. Duncan was an equity analyst and
portfolio manager with Avatar Associates. Ms. Duncan, jointly with
another portfolio manager identified herein, has primary responsibility
for management of the International, and International Securities Funds.

16
<PAGE>

. James M. Imhof, Manager of FRIMCo's Portfolio Trading, manages the Trust
on a day to day basis and has been responsible for ongoing analysis and
monitoring of the money managers since 1989.

. James A. Jornlin, who has been a Senior Investment Officer of FRIMCo
since April 1995. From 1991 to March 1995, Mr. Jornlin was employed as a
Senior Research Analyst with Russell. Mr. Jornlin, jointly with another
portfolio manager identified herein, has primary responsibility for
management of the Emerging Markets and Real Estate Securities Funds.

. Dennis J. Trittin, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1988 to 1996, Mr. Trittin was director of US Equity
Manager Research Department. Mr. Trittin, jointly with another portfolio
manager identified herein, has primary responsibility for management of
the Equity I, Equity II, Equity III, Equity Q, Equity T, Diversified
Equity, Quantitative Equity, Special Growth, and Equity Income Funds.

. C. Nola Williams, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1994 to 1995, Ms. Williams was a member of the Alpha
Strategy Group. From 1988 to 1994, Ms. Williams was Senior Research
Analyst with Russell. Ms. Williams, jointly with another portfolio
manager identified herein, has primary responsibility for management of
the Equity I, Equity II, Equity III, Equity Q, Equity T, Diversified
Equity, Quantitative Equity, Special Growth, and Equity Income Funds.

Russell provides to the Funds and FRIMCo the asset management consulting
services--including objective-setting and asset-allocation technology, and
money manager research and evaluation assistance--that Russell provides to its
other consulting clients. Russell does not receive any compensation from the
Funds for its consulting services.

As affiliates, Russell and FRIMCo may establish certain intercompany cost
allocations that reflect the consulting services supplied to FRIMCo. George F.
Russell, Jr., Chairman of the Trust, is the Chairman of the Board and
controlling shareholder of Russell. FRIMCo is a wholly owned subsidiary of
Russell.

The Trust has received an exemptive order from the SEC which permits the
Trust, with the approval of the Board, to engage and terminate money managers
without a shareholder vote and to disclose the aggregate fees paid to the
money managers of each Fund. On January 22, 1996, the shareholders of the
Trust's Funds voted to approve this arrangement.

FRIMCo has voluntarily agreed to waive all or a portion of its management
fees for certain Funds. This arrangement is not part of the Management
Agreement with the Trust and may be changed or discontinued at any time.
FRIMCo currently calculates its management fee based on a Fund's average daily
net assets less any management fee incurred on the Fund's assets to the extent
the Fund incurs management fees for investing a portion of its assets in the
Trust's Money Market Fund.

17
<PAGE>

The Board has approved, subject to approval by the shareholders of the
applicable Funds at a meeting to be held during 1998 (the "1998 Shareholder
Meeting"), an amendment to the Management Agreement. Under the amendment, in
addition to the fees set forth above (restructured as described in the next
paragraph), the Funds will pay FRIMCo a fee which compensates FRIMCo for
managing collateral which the Funds have received in securities lending and
certain other portfolio transactions. If the amendment is approved by
shareholders, each Fund will pay a fee to FRIMCo for its services in managing
the Fund's cash, securities and other investment assets which are not treated
as net assets of that Fund ("additional assets") in determining the Fund's net
asset value per share. If approved, the additional fee payable to FRIMCo will
equal an amount up to 0.07% of each Fund's additional assets on an annualized
basis.

It is also proposed that the services which FRIMCo provides to the Funds
under the present Management Agreement will be divided into two components.
Those services which are investment advisory in nature will be provided
pursuant to a new Advisory Agreement. Other services which are administrative
in nature will be provided pursuant to a new Administrative Agreement. It is
not anticipated that this restructuring of services provided to the Fund will
materially affect the costs of these services to the Funds, or affect FRIMCo's
current voluntary fee waivers.

EXPENSES OF THE FUNDS

The Funds (and each class, when appropriate) pay all their expenses other
than those expressly assumed by FRIMCo. The Funds' expenses for Class S Shares
for the year ended December 31, 1997, as a percentage of each Fund's average
net assets, are shown in the Financial Highlights tables in this Prospectus.
Principal expenses are:

. the management, transfer agent, and recordkeeping fees payable to FRIMCo;

. fees for custody, preparing tax records, and portfolio accounting,
payable to the Custodian; and

. fees for independent auditing and legal services; and filing and
registration fees payable to the SEC.

THE MONEY MANAGERS

Each Fund's assets are allocated among the money managers listed in "Money
Manager Profiles" in this Prospectus. FRIMCo may change the allocation of a
Fund's assets among money managers at any time. FRIMCo may employ or terminate
a money manager at any time, subject to the approval by the Board. A Fund will
notify its shareholders within 60 days of when a money manager begins
providing services. The money managers are selected for the Funds based
primarily upon the research and recommendations of FRIMCo and Russell. FRIMCo
and Russell evaluate 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 a money manager for any Fund.

From its management fees, FRIMCo, as the Trust's agent, pays fees to the
money managers for their investment selection services. Quarterly, each money
manager is paid the pro rata portion of an annual fee, based on the average of
all assets allocated to the manager for the quarter. For the year ended
December 31, 1997, management fees paid to the money managers were equivalent
to the following annual rates, expressed as a percentage of each Fund's
average daily net assets: Equity I Fund, 0.23%; Equity II Fund, 0.40%; Equity
III

18
<PAGE>

Fund, 0.19%; Equity Q Fund, 0.19%; International Fund, 0.39%; Fixed Income I
Fund, 0.08%; Fixed Income II Fund, 0.17%; and Fixed Income III Fund, 0.21%.

Each money manager has agreed that it will look only to FRIMCo for the
payment of the money manager's fee, after the Trust has paid FRIMCo. Fees paid
to the money managers are not affected by any voluntary or legal expense
limitations. Some money managers may receive investment research prepared by
Russell as additional compensation, or may receive brokerage commissions for
executing portfolio transactions for the Funds.

Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund. At the same time, however, each money
manager must operate within the Fund's investment objectives, restrictions and
policies and the more specific strategies developed by FRIMCo. Although the
money managers' activities are subject to general oversight by the Board and
the Trust's officers, neither the Board, the officers, FRIMCo nor Russell
evaluate the investment merits of the money managers' individual security
selections.

INVESTMENT OBJECTIVES, POLICIES AND PRACTICES

The investment objective and general investment policies of each Fund are
described in "Investment Objectives." Types of portfolio securities that may
be purchased by the Funds are described in "Fund Investment Securities."
Specific investment practices that may be employed by the Funds are identified
in "Other Investment Practices." The risks associated with portfolio
investments by the Funds are described in those sections, as well as in "Risk
Considerations." Certain terms used in these sections are described in the
Glossary in this Prospectus.

SUMMARY COMPARISON OF THE FUNDS

<TABLE>
<CAPTION>
ANTICIPATED MAXIMUM
EQUITY DEBT
FUND EXPOSURE EXPOSURE FOCUS
---- ----------- -------- -----
<S> <C> <C> <C>
Equity I Fund...................... 65-100% 35% Total return
Equity II Fund..................... 65-100% 35% Maximum total return
Equity III Fund.................... 65-100% 35% Current income
Equity Q Fund...................... 100% --% Total return
International Fund................. 65-100% 35% Total return
Fixed Income I..................... 35% 65-100% Diversification
Fixed Income II Fund............... 35% 65-100% Preservation of capital
Fixed Income III Fund.............. --% 100% Maximum total return
</TABLE>

INVESTMENT OBJECTIVES

Each Fund's investment objective is "fundamental," which means each
investment objective may not be changed without the approval of a majority of
each Fund's shareholders. Certain investment policies may also be fundamental.
Ordinarily, each Fund will invest more than 65% of its total assets in the
types of securities identified in its investment objective. However, the Funds
may hold assets as cash reserves for temporary and defensive purposes when
their money managers believe a conservative approach is desirable, or when
suitable investments are unavailable.

19
<PAGE>

EQUITY I FUND

Equity I Fund's objective is to provide income and capital growth by
investing principally in equity securities. Equity I Fund may invest in common
and preferred stocks, convertible securities, rights and warrants.

EQUITY II FUND

Equity II Fund's objective is to maximize total return primarily through
capital appreciation and by assuming a higher level of volatility than Equity
I Fund. Equity II Fund seeks to achieve its objective by investing in equity
securities.

The Fund also seeks to provide current income. The Fund may invest in common
and preferred stock, convertible securities, rights and warrants. The Fund's
investments may include companies whose securities have been publicly traded
for less than five years and smaller companies (i.e., companies not listed in
the Russell 1000(R) Index). A substantial portion of the Fund's portfolio will
generally consist of equity securities of "emerging growth-type" companies or
companies characterized as "special situations." "Emerging growth-type"
companies tend to reinvest most of their earnings, rather than pay significant
cash dividends. "Special situation" companies are those which the money
managers believe present opportunities for capital growth because of cyclical
developments in the securities markets, the industry, or the issuer.

EQUITY III FUND

Equity III Fund's objective is to achieve a high level of current income,
while maintaining the potential for capital appreciation. Equity III Fund
seeks to achieve its objective by investing primarily in income-producing
equity securities.

The income objective of the Fund is to exceed the yield on the S&P 500
Index. The index yield will change from year to year due to changes in prices
and dividends of stocks in the Index. Income streams will be considered in
light of their current level and the opportunity for future growth. Capital
appreciation may not be comparable to that delivered by Funds such as Equity
II Fund whose major objective is appreciation, although FRIMCo believes that a
high and growing stream of income is conducive to higher capital values. The
Fund may also invest in preferred stock, convertible securities, rights and
warrants.

EQUITY Q FUND

Equity Q Fund's objectives are to provide a total return greater than the
total return of the US stock market (as measured by the Russell 1000(R) Index
over a market cycle of four to six years), while maintaining volatility and
diversification similar to the Index. Equity Q Fund seeks to achieve its
objectives by investing in equity securities.

20
<PAGE>

Fund's investment objectives. The money managers anticipate that the Fund's
average price/earnings ratio, yield and other fundamental characteristics will
be near the averages of the Russell Index.

The money managers of the Fund will seek to achieve the Fund's objectives by
using various quantitative management techniques in selecting investments. A
quantitative manager bases its investment decisions primarily on quantitative
investment models. Money managers use these models to determine the investment
potential of a particular portfolio security and to rank securities based upon
their ability to outperform the total return of the Russell 1000(R) Index.
Once the money manager has ranked the securities, it then selects the
securities most likely to construct a portfolio that has superior return
prospects with risks similar to the Russell 1000(R) Index. FRIMCo believes
quantitative management over a market cycle should provide consistent
performance, diversification, market-like volatility and limited market under
performance. However, there is no guarantee that the Fund will have these
characteristics at any one time.

The Fund will attempt to be fully invested in common stock at all times.
However, the Fund is permitted to hold up to 20% of Fund assets in liquid
investments to meet redemption requests.

INTERNATIONAL FUND

International Fund's objectives are to provide favorable total return and
additional diversification for US investors. International Fund attempts to
achieve its objectives by investing primarily in equity and fixed-income
securities of foreign companies, and securities issued by foreign governments.
The Fund invests primarily in equity securities of companies domiciled outside
the United States. The Fund may also invest in US companies which derive, or
are expected to derive, a substantial portion of their revenues from
operations outside the United States.

The Fund may invest in equity and debt securities denominated in foreign
currencies and gold-related equity investments, including gold mining stocks
and gold-backed debt instruments. However, as a matter of fundamental policy,
the Fund will not invest more than 20% of its net assets in gold-related
investments.

FIXED INCOME I FUND

Fixed Income I Fund's objectives are to provide effective diversification
against equities and a stable level of cash flow by investing in fixed-income
securities.

The Fund's portfolio will consist primarily of conventional debt
instruments, including bonds, debentures, US government and US government
agency securities, preferred and convertible preferred stocks, and variable
amount demand master notes. (These notes represent a borrowing arrangement
under a letter agreement between commercial paper issuers and institutional
lenders, such as the Fund.) Money managers will select investments based on
fundamental economic and market factors. Money managers will evaluate
potential investments by sector, maturity, quality and other criteria. The
Fund will ordinarily invest at least 65% of its net assets in securities rated
no less than A or A-2 by S&P; A or Prime-2 by Moody's; or, if unrated, judged
by the money managers to be of at least equal credit quality to those
designations.

21
<PAGE>

FIXED INCOME II FUND

Fixed Income II Fund's objectives are the preservation of capital and the
generation of current income consistent with preservation of capital, by
investing primarily in fixed-income securities with low-volatility
characteristics.

The Fund will invest primarily in those fixed-income securities which mature
in two years or less from the date of acquisition or which have similar
volatility characteristics. To minimize credit risk and fluctuations in net
asset value per share, the Fund intends to maintain an average portfolio
maturity of less than five years.

Although the Fund will invest primarily in debt securities denominated in
the US dollar, the money managers will actively manage the Fund's portfolio in
accordance with a multi-market investment strategy. Accordingly, the money
managers will allocate the Fund's investments among securities denominated in
the currencies of the United States and selected foreign countries. The Fund
may also invest in high-quality, foreign debt securities. The money managers
which invest in foreign denominated securities will maintain a substantially
neutral currency exposure relative to the US dollar, and will establish and
adjust cross currency hedges based on their perception of the most favorable
markets and issuers. In this regard, the percentage of assets invested in
securities of a particular country or denominated in a particular currency
will vary in accordance with a money manager's assessment of the relative
yield of such securities and the relationship of a country's currency to the
US dollar. Money managers of the Fund will consider fundamental economic
strength, credit quality and interest rate trends in determining whether to
increase or decrease the emphasis placed upon a particular type of security or
industry sector. The Fund will not invest more than 10% of its total assets in
debt securities denominated in a single foreign currency, and FRIMCo currently
intends to limit total investments in non-US dollar securities to no more than
25% of the Fund's total assets.

The Fund will generally invest in the foreign debt securities of countries
whose governments it considers to be stable (the Fund may invest in countries
considered unstable or undeveloped, provided that it believes it is able to
hedge substantially the risk of a decline in the currency in which the
securities are denominated). In addition to the US dollar, such currencies
include (among others) the Australian Dollar, Austrian Schilling, Belgian
Franc, British Pound Sterling, Canadian Dollar, Danish Krone, Dutch Guilder,
European Currency Unit ("ECU"), French Franc, Irish Punt, Italian Lira,
Japanese Yen, New Zealand Dollar, Norwegian Krone, Spanish Peseta, Swedish
Krona, Swiss Franc and German Mark. An issuer of debt securities purchased by
the Fund may be domiciled in a country other than a country in whose currency
the instrument is denominated.

In selecting particular investments for the Fund, the money managers will
seek to minimize investment risk by limiting their portfolio investments to
debt securities of high-quality issuers. Accordingly, the Fund's portfolio
will consist only of: (a) US Government securities; (b) obligations issued or
guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies, or instrumentalities; (c) obligations issued or
guaranteed by supranational entities, all of which are rated AAA or AA by S&P
or Aaa or Aa by Moody's or, if unrated, determined to be of comparable quality
by the money managers; (d) investment grade corporate debt securities (or, if
unrated, corporate debt securities which the money managers determine to be of
equivalent quality); (e) bank instruments; and (f) commercial paper.

The Fund intends to use interest rate swaps as a hedge and not as a
speculative investment. For more information on risks, see "Risk
Considerations."

22
<PAGE>

FIXED INCOME III FUND

Fixed Income III Fund's objective is to provide maximum total return,
primarily through capital appreciation and by assuming a higher level of
volatility than is ordinarily expected from broad fixed-income market
portfolios. Fixed Income III Fund seeks to achieve its objective by investing
in fixed-income securities.

The Fund will invest primarily in fixed-income securities. The Fund's
investments will include: US Government securities; obligations of foreign
governments or their subdivisions, agencies and instrumentalities; securities
of international agencies or supranational agencies; corporate debt
securities; loan participations; corporate commercial paper; indexed
commercial paper; variable, floating and zero coupon rate securities; mortgage
and other asset-backed securities; municipal obligations; variable amount
demand master notes; bank instruments; repurchase agreements and reverse
repurchase agreements; and foreign currency exchange related securities.

The Fund may also invest in convertible securities and derivatives including
warrants and interest rate swaps. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities it anticipates purchasing at a later date. The Fund
intends to use these transactions as a hedge and not as a speculative
investment. For more information on risks, see "Risk Considerations."

FUND INVESTMENT SECURITIES

Commercial Paper

Fixed Income II and Fixed Income III Funds may invest in commercial paper.
Commercial paper represents a debt obligation of a company which is unsecured.
Fixed Income II and Fixed Income III Funds will invest in commercial paper
which is rated A-1 or A-2 by S&P; Prime-1 or Prime-2 by Moody's; Fitch-1 or
Fitch-2 by Fitch Investors Service, Inc.; Duff 1 or Duff 2 by Duff & Phelps,
Inc.; or TBW-1 or TBW-2 by Thomson Bank Watch, Inc. Fixed Income II and Fixed
Income III Funds may also invest in commercial paper which is not rated if it
is issued by US or foreign companies which the money managers conclude are of
high-quality and have outstanding debt securities which are rated AAA, AA or A
by S&P; or Aaa, Aa or A by Moody's.

DEBT SECURITIES

The Funds may purchase debt securities that complement their respective
investment objectives. The Funds, except Fixed Income III Fund, do not invest
in debt securities rated less than BBB by S&P or Baa by Moody's, or in unrated
securities judged by the money managers to be of a lesser credit quality than
those designations. Securities rated BBB by S&P or Baa by Moody's and above
are considered to be "investment grade" securities, although Moody's considers
securities rated Baa, and S&P considers bonds rated BBB, to have some
speculative characteristics. The Funds, other than Fixed Income III Fund, will
sell securities whose ratings drop below these minimum ratings, in a prudent
manner as determined by the money managers. The market value of debt
securities generally varies inversely with interest rates.

EQUITY SECURITIES

Equity I, Equity II, Equity III, Equity Q and International Funds invest
primarily in equity securities. Equity I, Equity II, Equity III and Equity Q
Funds may invest in common stock equivalents. The following constitute

23
<PAGE>

common stock equivalents: rights and warrants and convertible securities.
Common stock equivalents may be converted into or provide the holder with the
right to common stock. Equity I, Equity II, Equity III and Equity Q Funds may
also invest in other types of equity securities, including preferred stocks.

INTEREST RATE SWAPS

Fixed Income II and Fixed Income III Funds may enter into interest rate
swaps. When a Fund engages in an interest rate swap, it exchanges its
obligations to pay or rights to receive interest payments for the obligations
or rights to receive interest payments of another party (i.e., an exchange of
floating rate payments for fixed rate payments). The Funds expect to enter
into these transactions primarily to preserve a return or spread on a
particular investment or portion of their portfolios or to protect against any
increase in the price of securities they anticipate purchasing at a later
date.

INVESTMENT COMPANY SECURITIES

Each Fund may invest up to 10% of its total assets in shares of other
investment companies that invest in securities in which a Fund may otherwise
invest. Each Fund may invest its cash reserves in the Trust's Money Market
Fund. Because of restrictions on direct investment by US entities in certain
countries, other investment companies may provide the most practical or only
way for International Fund to invest in certain markets. These investments may
involve the payment of substantial premiums above the net asset value of those
investment companies' portfolio securities and are subject to limitations
under the 1940 Act. International Fund also may incur tax liability to the
extent it invests in the stock of a foreign issuer that is a "passive foreign
investment company" ("PFIC"), regardless of whether the PFIC makes
distributions to the Fund. See "Taxes" in this Prospectus and in the SAI.

OTHER DEBT SECURITIES

Fixed Income II and Fixed Income III Funds may invest in debt securities
issued by supranational organizations such as:

The World Bank -- An international bank which was chartered to finance
development projects in developing member countries.

The European Economic Community -- An organization which consists of
certain European states engaged in cooperative economic activities.

The European Coal and Steel Community -- An economic union of various
European nations' steel and coal industries.

The Asian Development Bank -- An international development bank
established to lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific regions.

Fixed Income II Fund may also invest in debt securities denominated in the
ECU, which is a "basket" consisting of specific amounts of currency of member
states of the European Economic Community. The Counsel of Ministers of the
European Economic Community may adjust specific amounts of currency comprising
the ECU to reflect changes in the relative values of the underlying
currencies. The money managers investing in these securities do not believe
that such adjustments will adversely affect holders of ECU-denominated
obligations or the marketability of the securities.

24
<PAGE>

US GOVERNMENT OBLIGATIONS

The Funds may invest in fixed-rate and floating or variable rate US
government obligations. Certain of the obligations, including US Treasury
bills, notes and bonds, and GNMA participation certificates, are issued or
guaranteed by the US government. Other securities issued by US government
agencies or instrumentalities are supported only by the credit of the agency
or instrumentality (for example, those issued by the Federal Home Loan Bank)
whereas others, such as those issued by FNMA, have an additional line of
credit with the US Treasury.

Short-term US government securities generally are considered to be among the
safest short-term investments. However the US government does not guarantee
the net asset value of the Funds' shares. With respect to US government
securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the US Treasury, there
is no guarantee that the US government will provide support to such agencies
or instrumentalities. Accordingly, such US government securities may involve
risk of loss of principal and interest.

The following table illustrates the investments that the Funds primarily
invest in or are permitted to invest in:

<TABLE>
<CAPTION>
FIXED FIXED FIXED
TYPE OF PORTFOLIO EQUITY I EQUITY II EQUITY III EQUITY Q INTERNATIONAL INCOME I INCOME II INCOME III
SECURITY FUND FUND FUND FUND FUND FUND FUND FUND
----------------- -------- --------- ---------- -------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stocks........... X X X X X
Common stock equivalents
(warrants)............. X X X X X
Common stock equivalents
(options) ............. X X X X X
Common stock equivalents
(convertible debt
securities) ........... X X X X
Common stock equivalents
(depository receipts).. X
Preferred stocks........ X X X X X
Equity derivative secu-
rities................. X X X X X
Debt securities (below
investment grade or
junk bonds)............ X
US government securi-
ties................... X X X X X X X X
Municipal obligations... X
Investment company
securities............. X X X X X X X X
Foreign securities...... X X
</TABLE>

25
<PAGE>

OTHER INVESTMENT PRACTICES

The Funds use investment techniques commonly used by other mutual funds. The
table below summarizes the principal investment practices of the Funds, each
of which may involve certain special risks. The Glossary describes each of the
investment techniques identified below. The SAI, under the heading "Investment
Restrictions, Policies and Certain Investments," contains more detailed
information about certain of these practices, including limitations designed
to reduce risks.

<TABLE>
<CAPTION>
FIXED FIXED FIXED
EQUITY I EQUITY II EQUITY III EQUITY Q INTERNATIONAL INCOME I INCOME II INCOME III
TYPE OF PRACTICE FUND FUND FUND FUND FUND FUND FUND FUND
---------------- -------- --------- ---------- -------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash reserves........... X X X X X X X X
Repurchase agreements
(1) ................... X X X X X X X X
When-issued and forward
commitment securities
....................... X X X X X X X X
Reverse repurchase
agreements ............ X X X X X X X X
Lending portfolio
securities, not to
exceed 33 1/3% of total
Fund assets............ X X X X X X X X
Illiquid securities
(limited to 15% of
Fund's net assets)..... X X X X X X X X
Forward currency con-
tracts (2).............
Write (sell) call and
put options on
securities, securities
indexes and foreign
currencies (3)......... X X X X X X X X
Purchase options on
securities, securities
indexes, and
currencies (3)......... X X X X X X X X
Interest rate futures
contracts, stock index
futures contracts,
foreign currency
contracts and options
on futures (4) ........ X X X X X X X X
Liquidity portfolio..... X X X X X
</TABLE>
- ---------------------
(1) Under the 1940 Act, repurchase agreements are considered to be loans by a
Fund and must be fully collateralized by collateral assets. If the seller
defaults on its obligations to repurchase the underlying security, a Fund
may experience delay or difficulty in exercising its rights to realize
upon the security, may incur a loss if the value of the security declines
and may incur disposition costs in liquidating the security.
(2) International, Fixed Income I, Fixed Income II, and Fixed Income III Funds
may not invest more than 25% of their assets in these contracts.
(3) A Fund will only engage in options where the options are traded on a
national securities exchange or in an over-the-counter market. A Fund may
invest up to 5% of its net assets, represented by the premium paid, in
call and put options. A 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 33% of the value of its net
assets. Only the Fixed Income III Fund currently intends to write or
purchase options on foreign currency.
(4) A Fund does not enter into any futures contracts or related options if the
sum of initial margin deposits on futures contracts, related options
(including options on securities, securities indexes and currencies) and
premiums paid for any such related options would exceed 5% of its total
assets. A Fund does not purchase futures contracts or related options if,
as a result, more than one-third of its total assets would be so invested.

Investment Restrictions. If a Fund changes its investment objective or
policies, you should consider whether the Fund remains right for you. The
Funds are subject to additional investment policies and restrictions described
in the SAI, some of which are fundamental.

26
<PAGE>

RISK CONSIDERATIONS

High Risk Bonds. Fixed Income III Fund may invest up to 25% 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.
While this debt may have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions. Fixed Income III Fund's money managers will seek to reduce the
risks associated with investing in lower-rated debt securities by limiting the
Fund's holding in the securities and by the depth of the managers' credit
analysis. For additional information, refer to the SAI.

Hedging and Risk Management Practices. In seeking to protect against the
effect of adverse changes in financial markets or against currency exchange
rate or interest rate changes that are adverse to the present or prospective
positions of the Funds, each of the Funds may employ certain risk management
practices using certain derivative securities and techniques (known as
"derivatives"). Markets in some countries currently do not have instruments
available for hedging transactions. To the extent that such instruments do not
exist, a money manager may not be able to hedge a Fund's investment
effectively in such countries. Furthermore, a Fund engages in hedging
activities only when its money managers deem it to be appropriate, and does
not necessarily engage in hedging transactions with respect to each
investment.

Hedging transactions involve certain risks. Although a Fund may benefit from
the use of hedging positions, unanticipated changes in interest rates or
securities prices may result in poorer overall performance for a Fund than if
it had not entered into a hedging position. If the correlation between a
hedging position and a portfolio position is not properly protected, the
desired protection may not be obtained and the Fund may be exposed to risk of
financial loss. In addition, a Fund pays commissions and other costs in
connection with such investments.

Investment in Foreign Securities. The Funds may invest in foreign securities
traded on US or foreign exchanges or in the over-the-counter market. Investing
in securities issued by foreign governments and corporations involves
considerations and risks not typically associated with investing in
obligations issued by the US 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 to 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 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.

27
<PAGE>

Foreign Debt Securities. Fixed Income III Fund's portfolio may include debt
securities issued by domestic or foreign entities, and denominated in US
dollars or foreign currencies. The Fund anticipates that no more than 25% of
its net assets will be denominated in foreign currencies. The Fund will only
use foreign currency exchange transactions (options on foreign currencies,
foreign currency futures contracts and forward foreign currency contracts) for
the purpose of hedging against foreign currency exchange risk arising from the
Fund's investment, or anticipated investment, in securities denominated in
foreign currencies. Foreign investment may include emerging market debt.

The risks associated with investing in foreign securities are heightened for
investments in developing or emerging markets. For purposes of the
International and Fixed Income III Funds' policy of investing in securities of
issuers located in emerging markets, those Funds will consider emerging
markets to be countries with developing 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. 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 US 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 Funds'
foreign securities will generally be denominated in foreign currencies, the
value of such securities to the Funds 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 US dollar will result in a corresponding change
in the US dollar value of the Funds' foreign securities. In addition, some
emerging market countries may have fixed or managed currencies which are not
free-floating against the US dollar. Further, certain emerging market
countries' currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the US dollar.
Many emerging market 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
countries.

The Fund may invest in the following types of emerging market debt--bonds;
notes and debentures of emerging market governments; and debt and other fixed
income securities issued or guaranteed by emerging market government agencies,
instrumentalities or central banks, or by banks or other companies in emerging
markets which money managers believe are suitable investments for the Fund.
Under current market conditions, it is expected that emerging market debt will
consist predominantly of Brady Bonds and other sovereign debt. Brady Bonds are
products of the "Brady Plan," under which bonds are issued in exchange for
cash and certain of the country's outstanding commercial bank loans.

Fixed Income III Fund may invest in bank instruments, which include European
certificates of deposit ("ECDs"), European time deposits ("ETDs") and Yankee
Certificates of deposit ("Yankee CDs"). ECDs, ETDs, and Yankee CDs are subject
to somewhat different risks from the obligations of domestic banks. ECDs are
dollar denominated certificates of deposit issued by foreign branches of US
and foreign banks; ETDs are US dollar denominated time deposits in a foreign
branch of a US bank or a foreign bank; and Yankee CDs are certificates of
deposit issued by a US branch of a foreign bank denominated in US dollars and
held in the United States. Different risks may also exist for ECDs, ETDs, and
Yankee CDs because the banks issuing these instruments, or their domestic or
foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing and recordkeeping, and the
public availability of information. These factors will be carefully

28
<PAGE>

considered by the money manager when evaluating credit risk in the selection
of investment for the Fixed Income III Fund.

Variable and Floating Rate Securities. Fixed Income III Fund may invest in
variable and floating rate securities. The variable and floating rate
securities provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations must provide that interest rates
are adjusted periodically based upon some appropriate interest rate adjustment
index. The adjustment intervals may be regular, (i.e., daily, monthly,
annually, etc.) event based, (i.e., a change in the prime rate). The Fund may
also invest in zero coupon US Treasury, foreign government and US and foreign
corporate debt securities, which are bills, notes and bonds that have been
stripped of their unmatured interest coupons and receipts or certificates
representing interests in such stripped debt obligations and coupons. A zero
coupon security pays no interest to its holder prior to maturity. Accordingly,
such securities usually trade at a deep discount from their face or par value
and will be subject to greater market value fluctuations in response to
changing interest rates than debt obligations of comparable maturities that
make current distributions of interest.

Borrowing. The Funds are authorized to borrow from banks to obtain cash to
pay redemption requests. Currently, each Fund may borrow up to 5% of its total
assets. The Board has approved, subject to approval by the shareholders of the
respective Funds at the 1998 Shareholder Meeting, a proposal to revise the
Funds' fundamental policy on borrowing. If approved by shareholders, this
limit would be increased to up to 33 1/3% of the current value of the Funds'
total assets. Please see the SAI for a more complete discussion of the Funds'
permissible borrowing activities.

PORTFOLIO TRANSACTION POLICIES

Money managers make decisions to buy and sell securities for the Fund assets
assigned to them. FRIMCo makes determinations for any other Fund assets. The
Funds do not seek to realize long-term (rather than short-term) capital gains
while making portfolio investment decisions.

Each money manager makes decisions to buy or sell securities independently
from other managers. Thus, one money manager for a Fund may be selling a
security when another money manager for the Fund (or for another Fund) is
purchasing the same security. Also, when a money manager's services are
terminated, the new money manager may significantly restructure an investment
portfolio. These practices may increase the Funds' portfolio turnover rates,
realization of gains or losses, brokerage commissions and other transaction
costs. The annual portfolio turnover rates for the Funds are shown in the
Financial Highlights tables in this Prospectus.

FRIMCo and the money managers arrange for the purchase and sale of the
Trust's securities and the selection of brokers and dealers (including
affiliates) ("Brokers") that, in the best judgment of FRIMCo and the money
managers, provide prompt and reliable execution at favorable prices and
reasonable commission rates. In addition to price and commission rates,
Brokers may be selected based on research, statistical or other services that
they provide. The Trust may pay commission rates that exceed rates that other
Brokers may have charged if the Trust concludes the commissions are reasonable
in relation to the value of the brokerage and/or research services.

The Funds may effect portfolio transactions through Frank Russell
Securities, Inc. ("Russell Securities"), an affiliate of FRIMCo, when a money
manager believes a Fund will receive competitive execution, price, and
commissions. When these transactions are completed, Russell Securities will
refund up to 70% of the commissions paid by the Fund after reimbursement for
research services provided to FRIMCo. Also, the Funds may effect portfolio
transactions through and pay brokerage commissions to Brokers that are
affiliates of the money managers.

29
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS

Each Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year. The amount and frequency of
distributions are not guaranteed--all distributions are at the Board's
discretion. Currently the Board intends to declare dividends from net
investment income and net short-term capital gains (if any) according to the
following schedule:

<TABLE>
<CAPTION>
DECLARED PAYABLE FUNDS
-------- ------- -----
<S> <C> <C>
Quarterly........... Mid: April, July, October and Equity I, Equity II, Equity III,
December Equity Q, Fixed Income I, Fixed
Income II and Fixed Income III
Funds

Annually................ Mid-December International Fund
</TABLE>

CAPITAL GAINS DISTRIBUTIONS

The Board annually intends to declare capital gains distributions through
October 31 (excess of capital gains over capital losses), generally in mid-
December. To meet certain legal requirements, a Fund may declare special year-
end dividend and capital gains distributions during October, November or
December to shareholders of record in that month. These distributions are
deemed to have been paid by a Fund and received by you on December 31 of the
prior year, provided that you receive them by January 31. Capital gains
realized during November and December will be distributed to you during
February of the following year.

BUYING A DIVIDEND

If you purchase shares just before a distribution, you will pay the full
price for the shares and receive a portion of the purchase price back as a
taxable distribution. This is called "buying a dividend." Unless your account
is a tax-deferred account, dividends paid to you would be included in your
gross income for tax purposes even though you may not have participated in the
increase of the net asset value of a Fund, regardless of whether you
reinvested the dividends.

AUTOMATIC REINVESTMENT

Your dividends and other distributions are automatically reinvested at the
closing net asset value on the record date, in additional shares of the
appropriate Fund, unless you elect to have the dividends or distributions paid
in cash or invested in another Fund. You may change your election by
delivering written notice no later than ten days prior to the payment date to
the Transfer Agent, at Operations Department, P.O. Box 1591, Tacoma, WA 98401.

TAXES

30
<PAGE>

based on net income except to the extent its earnings are not distributed or
are distributed in a manner that does not satisfy the requirements of the
Code. International Fund may incur tax liability to the extent it invests in
PFICs. See "Portfolio Securities" and the SAI. The Funds may be subject to
nominal, if any, state and local taxes.

For federal income tax purposes, the dividends from net investment income
and any excess of net short-term capital gains over net long-term capital loss
that you receive from the Funds are considered ordinary income. However,
depending upon the relevant state tax rules, a portion of the dividends paid
by Fixed Income I, Fixed Income II and Fixed Income III Funds attributable to
direct US Treasury and agency obligations may be exempt from state and local
taxes. 28% and 20% capital gains distributions declared by the Board are taxed
at the respective capital gains rates regardless of the length of time you
have held the shares. Distributions of income and capital gains are taxed in
the manner described above, whether you receive them in cash or reinvest them
in additional shares of the Funds. Distributions paid in excess of a Fund's
earnings will be treated as a nontaxable return of capital.

A Fund will notify you of the source of its dividends and distributions at
the time they are paid. After the close of each calendar year, the Funds will
advise their shareholders of the amounts of:

. ordinary income dividends, 28% capital gains dividend, and 20% capital
gains distributions, including any amounts which are deemed paid on
December 31 of the prior year;

. dividends which qualify for the 70% dividends-received deduction
available to corporations;

. any foreign taxes assessed against International, Fixed Income I, Fixed
Income II and Fixed Income III Funds;

. income which is a tax preference item (if any) for alternative minimum
tax purposes; and

. the percentages of Fixed Income I, Fixed Income II and Fixed Income III
Funds' income attributable to US government, Treasury and agency
securities.

If you are a corporate investor, a portion of the dividends from net
investment income paid by Equity I, Equity II, Equity III and Equity Q Funds
will generally qualify in part for the corporate dividends-received deduction.
However, the portion depends on the aggregate qualifying dividend income
received by each Fund from domestic (US) sources. Certain holding period and
debt financing restrictions may apply to corporate investors seeking to claim
the deduction. You should consult your tax adviser.

FRIMCo expects the International, Fixed Income I, Fixed Income II and Fixed
Income III Funds to invest more than 50% of their total assets in foreign
securities. In connection with those investments, FRIMCo intends to file
specified elections with the IRS. These elections will permit shareholders to
either 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 US income taxes. The Fund's taxable shareholders must
include their pro rata portion of the taxes withheld on their gross income for
federal income tax purposes.

31
<PAGE>

Shareholders of the Funds with foreign holdings should also be aware that
foreign exchange losses realized by a Fund are treated as ordinary losses for
federal income tax purposes. This treatment may reduce Fund income which is
available for distribution to shareholders.

The Fixed Income I, Fixed Income II and Fixed Income III Funds may acquire
zero coupon securities which were issued with original issue discount. When
holding these types of securities, the Funds will have to include a portion of
the original issue discount that accrues on the security for the taxable year
in taxable income. This requirement is imposed even if the Funds receive no
payment on the security during the year. Also, because the Funds must
distribute substantially all of their net investment income annually, the
Funds may be required to distribute a dividend that is greater than the total
amount of cash the Funds actually received in a particular year. Those
distributions will be made from a Fund's cash assets or from the proceeds of
sales of portfolio securities (if necessary). The Funds may realize capital
gains or losses from those sales, which could further increase or decrease the
Funds' dividends and distributions paid to shareholders.

Each Fund is required to withhold 31% of all taxable dividends,
distributions, and redemption proceeds payable to any non-corporate
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.

Additional information on these and other tax matters relating to the Funds
and their shareholders is included in the section entitled "Taxes" in the SAI.

PERFORMANCE INFORMATION

<TABLE>
<CAPTION>
5 YEARS 10 YEARS
1 YEAR ENDED ENDED INCEPTION TO
ENDED DEC. 31, DEC. 31, DEC. 31,
DEC. 31, 1997 1997 1997 INCEPTION
1997 (ANNUALIZED) (ANNUALIZED) (ANNUALIZED) DATE
-------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Equity I............. 32.02% 20.06% 17.76% 16.70% 10/15/81
Equity II............ 28.66% 17.40% 15.98% 14.87% 12/28/81
Equity III........... 33.13% 20.54% 18.35% 17.73% 11/27/81
Equity Q............. 33.07% 21.14% 18.31% 15.40% 05/29/87
International........ 0.58% 11.42% 8.65% 14.92% 01/31/83
Fixed Income I....... 9.42% 7.51% 9.12% 11.35% 10/15/81
Fixed Income II...... 6.02% 5.66% 7.19% 9.28% 10/30/81
Fixed Income III..... 9.64% --% --% 7.65% 01/29/93
</TABLE>

Funds also may from time to time advertise their yields. Yield, which is
based on historical earnings and is not intended to indicate future
performance, is calculated by dividing the net investment income per share
earned during the most recent 30-day (or one month) period by the maximum
offering price per share on the last day of the month. This income is then
annualized the amount of income generated by the investment during that 30-day
(or one month) period is assumed to be generated each month over a 12-month
period and is shown as a

32
<PAGE>

percentage of the investment. For purposes of the yield calculation, interest
income is computed based on the yield to maturity of each debt obligation and
dividend income is computed based upon the stated dividend rate of each
security in a Fund's portfolio. The calculation includes all recurring fees
that are charged. The 30-day yields for the year ended December 1, 1997 for
the Class S Shares of the Fixed Income I, Fixed Income II and Fixed Income III
Funds were, respectively, 6.13%, 5.56% and 5.80.

Each Fund may also advertise non-standardized performance information which
is for periods in addition to those that are legally required by the SEC.

HOW NET ASSET VALUE IS DETERMINED

NET ASSET VALUE PER SHARE

The net asset value per share is calculated for shares of each class of each
Fund on each business day on which shares are offered or redemption orders are
tendered. For the Funds, a business day is one on which the NYSE is open for
trading. Net asset value per share is computed for Class S Shares of a Fund by
dividing the current value of the Fund's assets attributable to the Class S
Shares, less liabilities attributable to the Class S Shares, by the number of
Class S Shares of the Fund outstanding, and rounding to the nearest cent. All
Funds determine their net asset value as of the close of the NYSE (currently
4:00 p.m. Eastern time).

VALUATION OF PORTFOLIO SECURITIES

With the exceptions noted below, the Funds value their portfolio securities
at "fair market value." This generally means that equity securities and fixed-
income securities listed and principally traded on any national securities
exchange are valued on the basis of the last sale price, or if there were no
sales, at the closing bid price, on the primary exchange on which the security
is traded. US 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 sale price.

Because many fixed-income securities do not trade each day, last sale or bid
prices often are not available. As a result, these securities may be valued
using prices provided by a pricing service when the prices are believed to be
reliable--that is, when the prices reflect the fair market value of the
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. If there
is no last sale or mean bid price, the securities may be valued on the basis
of prices provided by a pricing service when the prices are believed to be
reliable.

Money market instruments maturing within 60 days of the valuation date held
by Funds are valued on the basis of "amortized cost." Under this method, a
portfolio instrument is initially valued at cost, and thereafter a constant
accretion/amortization to maturity of any discount or premium is assumed. The
Funds utilize the amortized cost valuation method in accordance with the Rule.
These money market instruments are valued at "amortized cost" unless the Board
determines that amortized cost does not represent fair value. While amortized
cost provides certainty in valuation, it may result in periods when the value
of an instrument is higher or lower than the price a Fund would receive if it
sold the instrument.

The Funds value securities for which market quotations are not readily
available at "fair value," as determined in good faith and in accordance with
procedures established by the Board.

33
<PAGE>

HOW TO PURCHASE SHARES

Russell Funds are generally available only through a select network of
qualified Financial Intermediaries. If you are not currently working with one
of these Financial Intermediaries, please call Russell Investor Services at
(800) RUSSEL4 (787-7354) for assistance in contacting an investment
professional near you.

Certain information noted below, including trade deadlines and payment
procedures, are included for informational purposes only. Contact your
Financial Intermediary for further details.

PAYING FOR SHARES

Shares of the Funds may be purchased without a sales load on any business
day the Funds are open. Purchase orders are processed at the next net asset
value per share calculated after receipt of an order in proper form (defined
in the "Written Instructions" section), and acceptance of the order. Please
note the following:

Cash, third party checks and checks drawn on credit card accounts will not
be accepted.

All purchases must be made in U.S. dollars.

Checks and other negotiable bank drafts must be drawn on U.S. banks and made
payable to "Frank Russell Investment Company."

The Funds reserve the right to reject any purchase order for any reason
including, but not limited to, receiving a check which does not clear the bank
or a payment which does not arrive in proper form by settlement date. An
overdraft charge may also be applied.

OFFERING DATES AND TIMES

Orders must be received by the Transfer Agent on any day when Fund shares
are offered, prior to the close of the NYSE (currently 4:00 p.m. Eastern
time).

ORDER AND PAYMENT PROCEDURES

There are several ways to invest in the Funds. Purchase orders must be
placed through a Financial Intermediary and can be paid for by mail or
electronic funds transfer. Initial purchases require a completed and signed
Application for each new account regardless of the investment method. Specific
payment arrangements should be made with your Financial Intermediary.

BY MAIL

For new accounts, please mail the completed Application to the Financial
Intermediary. Payment for orders may be made by check or other negotiable bank
draft and sent to the Funds' Transfer Agent. Certified checks are not
necessary, but checks are accepted subject to collection at full face value in
U.S. funds. Third party checks will not be accepted. Checks should be made
payable to "Frank Russell Investment Company."

BY FEDERAL FUNDS WIRE

Payment for orders may be made by wiring federal funds to the Funds'
Custodian, State Street Bank and Trust Company. All wires must include the
investor's account registration and account number for identification.
Inability to properly identify a wire transfer may prevent or delay timely
settlement of an investor's purchase.

BY AUTOMATED CLEARING HOUSE ("ACH")

34
<PAGE>

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 on the day
received by the Funds' Custodian. In that case, the order would be placed on
the next business day.

AUTOMATED INVESTMENT PROGRAM

An investor can make regular investments (minimum $50) in Funds in an
established account on a monthly, quarterly, semiannual or annual basis by
automatic electronic funds transfer from a bank account. A separate transfer
is required for each Fund in which shares are purchased. An investor may
change the amount or stop the automatic purchase at any time. Contact your
Financial Intermediary for further information on this program and an
enrollment form.

THREE DAY SETTLEMENT PROGRAM

The Funds will accept orders from Financial Intermediaries to purchase
shares of the Funds for settlement on the third business day following the
receipt of the order. These orders are paid for by a federal funds wire if the
Financial Intermediary has enrolled in the program and agreed in writing to
indemnify the Funds against any losses resulting from non-receipt of payment.

EXCHANGE PRIVILEGE

BY MAIL OR TELEPHONE

Investors may exchange shares of any Fund they own for shares of any other
Fund on the basis of the current net asset value per share at the time of the
exchange. Shares of a Fund offered by this Prospectus may only be exchanged
for shares of a Fund offered by the Trust through another prospectus under
certain conditions and only in states where the exchange may be legally made.
For additional information, including prospectuses for other Funds, contact
your Financial Intermediary.

Exchanges may be made by mail or by telephone if the registration of the two
accounts is identical. Contact your Financial Intermediary for assistance in
exchanging shares. To request an exchange in writing, please follow the
procedures in the "Written Instructions" section before mailing to your
Financial Intermediary.

IN-KIND EXCHANGE OF SECURITIES

FRIMCo, in its capacity as investment manager of the Trust, may, at its
discretion, permit you to purchase Fund shares by exchanging securities you
currently own for Fund shares. Any securities exchanged must: meet the
investment objective, policies and limitations of the particular Fund, have a
readily ascertainable market value, be liquid and not be subject to
restrictions on resale, and have market value, plus any cash, equal to at
least $100,000.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled. This usually occurs within 15 days
following the purchase by exchange. If you are a taxable investor, you will
generally realize a gain or loss for federal income tax purposes on the
exchange. Investors contemplating an in-kind exchange should consult their tax
adviser.

35
<PAGE>

The basis of the exchange will depend upon the relative net asset value of
the Fund shares purchased and securities exchanged. Securities accepted by a
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 becomes the property of the Fund, along with the securities. Please
contact your Financial Intermediary for further information.

HOW TO REDEEM SHARES

Shares of the Funds may be redeemed on any business day the Funds are open
at the next net asset value per share calculated after receipt of an order in
proper form (defined in the "Written Instructions" section). Payment will
ordinarily be made within seven days after receipt of your request in proper
form. Shares recently purchased by check will not be available for liquidation
for 15 days following the purchase to assure payment has been collected.

The Funds reserve the right to reject or delay a redemption on certain legal
grounds or to suspend the right of redemption or postpone the date of payment
if any unlikely emergency conditions, as specified in the 1940 Act or
determined by the SEC, should develop.

REDEMPTION DATES AND TIMES

Redemption requests must be placed by a Financial Intermediary and received
by the Transfer Agent prior to the close of the NYSE (currently 4:00 p.m.
Eastern time). Requests can be made by mail or telephone on any day when Fund
shares are offered, or through the Systematic Withdrawal Program.

BY MAIL OR TELEPHONE

Shareholders may redeem shares by calling or writing to their Financial
Intermediary. Written requests to sell shares are in proper form when the
instructions are signed by all registered owners, with a signature guarantee
if necessary.

SYSTEMATIC WITHDRAWAL PROGRAM

The systematic withdrawal program allows you to redeem your shares and
receive regular payments from your account on a monthly, quarterly, semiannual
or annual basis. If you would like to establish a systematic withdrawal
program, please complete the proper section of the account application and
indicate how you would like to receive your payments. You will generally
receive your payment by the end of the month in which a payment is scheduled.
When you redeem your shares under a systematic withdrawal program, it is a
taxable transaction.

You may choose to have the payments mailed to you or directed to your bank
account by an ACH transfer. You may discontinue the systematic withdrawal
program, or change the amount and timing of withdrawal payments by contacting
your Financial Intermediary.

PAYMENT OF REDEMPTION PROCEEDS

BY CHECK

A check for the redemption proceeds will be sent to the shareholder(s) of
record at the address of record within seven days after receipt of a
redemption request in proper form.

36
<PAGE>

BY WIRE

If you have established the electronic redemption option, your redemption
proceeds can be wired to your predesignated bank account on the next bank
business day after receipt of your redemption request by the Transfer Agent.
Wire transfers may be charged a fee to cover the cost of the wire (for
redemptions less than $1,000) and your bank may charge an additional fee to
receive the wire. Wire transfers can be sent to domestic commercial banks
which are members of the Federal Reserve System.

WRITTEN INSTRUCTIONS

PROPER FORM: Written instructions must include:

A description of the request
The name of the Fund(s)
The class of shares, if applicable
The account number(s)
The amount of money or number of shares being purchased, exchanged,
transferred or redeemed
The name(s) on the account(s)
The signature(s) of all registered account owners
For exchanges, the name of the Fund you are exchanging into
Your daytime telephone number

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE

<TABLE>
<S> <C>
ACCOUNT TYPE REQUIREMENTS FOR WRITTEN REQUESTS
- --------------------------------------------------------------------------------
Individual, Joint Written instructions must be signed by each
Tenants, Tenants in shareholder, exactly as the names appear in the
Common account registration.
- --------------------------------------------------------------------------------
UGMA or UTMA (custodial Written instructions must be signed by the custodian
accounts for minors) in his/her capacity as it appears in the account
registration.
- --------------------------------------------------------------------------------
Corporation, Association Written instructions must be signed by authorized
person(s), stating his/her capacity as indicated by
the corporate resolution to act on the account.
A copy of the corporate resolution, certified within
the past 90 days, authorizing the signer to act.
- --------------------------------------------------------------------------------
Estate, Trust, Pension, Written instructions must be signed by all trustees.
Profit Sharing Plan If the name of the trustee(s) does not appear in the
account registration, please provide a copy of the
trust document certified within the last 60 days.
- --------------------------------------------------------------------------------
Joint tenancy Written instructions must by signed by the surviving
shareholders whose tenant(s). A certified copy of the death certificate
co-tenants are deceased must accompany the request.
</TABLE>

SIGNATURE GUARANTEE

The Funds reserve the right to require a signature guarantee under certain
circumstances. A signature guarantee verifies the authenticity of your
signature. You should be able to obtain a signature guarantee from a bank,
broker, credit union, savings association, clearing agency, or securities
exchange or association. Call your financial institution to see if it has the
ability to guarantee a signature. A notary public cannot provide a
signature guarantee.

37
<PAGE>

ACCOUNT POLICIES

THIRD PARTY TRANSACTIONS

Investors purchasing Fund shares through a program of services offered by a
Financial Intermediary may be required to pay additional fees. Investors
should contact their Financial Intermediary for information concerning what
additional fees, if any, may be charged.

REDEMPTION IN-KIND

A Fund may pay for any portion of the redemption amount in excess of
$250,000 by a distribution in-kind of securities from the Fund's portfolio,
instead of in cash. Investors will incur brokerage charges on the sale of
these portfolio securities.

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, INDEPENDENT ACCOUNTANTS, AND REPORTS

Russell Fund Distributors, Inc., a wholly owned subsidiary of FRIMCo, is the
principal distributor for Trust shares. The Distributor receives no
compensation from the Trust for its services with respect to Class S Shares.

State Street Bank and Trust Company ("Custodian"), Boston, Massachusetts,
holds all portfolio securities and cash assets of the Funds, and provides
portfolio recordkeeping services. The Custodian may deposit securities in
securities depositories or use subcustodians. The Custodian has no
responsibility for the supervision and management of the Funds.

Coopers & Lybrand L.L.P. ("Coopers"), Boston, Massachusetts, are the Funds'
independent accountants. Shareholders will receive unaudited semiannual
financial statements and annual financial statements audited by Coopers.
Shareholders may also receive additional reports concerning the Funds, or
their accounts, from FRIMCo.

YEAR 2000

The services provided to the Trust and the shareholders by FRIMCo, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact of handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no
adverse impact on the Trust, FRIMCo, the Distributor, the Transfer Agent and
the Custodian have advised the Trust that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will
be adapted in time for that event. The obligation to make such adaptations, if
any, would be the responsibility of the service provider that maintains the
system. Therefore, the Trust does not expect to incur any material expense in
that regard.

ORGANIZATION, CAPITALIZATION, AND VOTING

The Trust is organized and operates as a Massachusetts business trust.
Russell has the right to grant (and withdraw) the nonexclusive use of the name
"Frank Russell" or any variation.

38
<PAGE>

The Trust issues shares of beneficial interest which can be divided into an
unlimited number of funds. Each Fund is a separate trust under Massachusetts
law. Each Fund's shares may be offered in multiple classes. Shares of each
class of a Fund represent proportionate interests in the assets of that Fund
and have the same voting and other rights and preferences as the shares of
other classes of the Fund. Shares of each class of a Fund are entitled to the
dividends and distributions earned on the assets belonging to the Fund that
the Board declares. Each share of a class of a Fund has one vote in Trustee
elections and other matters submitted for shareholder vote. There are no
cumulative voting rights. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Special meetings may be called
by the Trustees at their discretion, but must be called by the Trustees upon
the written request of shareholders owning at least 10% of the Trust's
outstanding shares. On any matter which affects only a particular Fund or
class, only shares of that Fund or class are entitled to vote.

The Trustees hold office for the life of the Trust. A Trustee may resign or
retire, and a Trustee may be removed by the Trustees or by shareholders at a
special meeting.

MONEY MANAGER PROFILES

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

EQUITY I FUND

Alliance Capital Management L.P., 601 2nd Ave. South, Suite 5000,
Minneapolis, MN 55402-4322, a limited partnership whose (i) general partner is
a wholly owned subsidiary of The Equitable Companies Incorporated ("The
Equitable") and (ii) majority unit holder is ACM, Inc., a wholly owned
subsidiary of The Equitable. As of March 1, 1995, 60.5% of The Equitable was
owned by Axa, a French insurance holding company.

Barclays Global Fund Advisors, 45 Fremont Street, 17th Floor, San Francisco,
CA 94105, is an indirect, wholly-owned subsidiary of Barclays Bank PLC.

Equinox Capital Management, Inc., 590 Madison Avenue, 41st Floor, New York,
NY 10022. Equinox is a registered investment adviser with majority ownership
held by Ron Ulrich.

INVESCO Capital Management, Inc., 1315 Peachtree Street N.E., Suite 500,
Atlanta, GA 30309, is a corporation whose indirect parent is AMVESCO, PLC, a
London-based financial services holding company.

Lincoln Capital Management Company, 200 South Wacker Drive, Suite 2100,
Chicago, IL 60606. Lincoln Capital Management, Inc. is a division of Lincoln
Capital Management Company, and is a registered investment adviser with
majority ownership held by John Croghan, Parker Hall, Ken Meyer, Tim Ubben and
Ray Zemon.

39
<PAGE>

Morgan Stanley Asset Management, Inc., 1221 Avenue of the Americas, New
York, NY 10020, is a wholly owned subsidiary of Morgan Stanley Dean Witter &
Co., a publicly held corporation.

Peachtree Asset Management, One Peachtree Center, Suite 4500, 303 Peachtree
Street N.E., Atlanta, GA 30308 Peachtree is a unit of the Smith Barney Asset
Management division of Smith Barney Mutual Funds Management Inc., which is a
wholly owned subsidiary of Travelers Group Inc.

Schneider Capital Management, 460 E. Swedesford Road, Suite 1080, Wayne, PA
19087, is an SEC registered investment adviser owned by Arnold Schneider. In
response to an action brought by partners of Wellington Management Company LLP
("Wellington") on December 13, 1996 to enforce a non-compete provision of its
partnership agreement, a judge of the Middlesex County Superior Court in the
Commonwealth of Massachusetts issued an order on February 17, 1998 enjoining
Mr. Schneider from providing investment advisory services to certain former
clients of Wellington. Though not a party to that litigation, the Trust would
have been affected by that order. On April 7, 1998 the Trust joined a suit
brought by its investment manager and certain other persons in the United
States District Court for the Eastern District of Pennsylvania. On April 13,
1998, that Court issued a preliminary injunction restraining Wellington from
enforcing the non-compete provision in its partnership agreement against Mr.
Schneider.

Suffolk Capital Management, Inc., 250 West 57th Street, Suite 420, New York,
NY 10107. Suffolk Capital Management, Inc. is a registered investment adviser
and a wholly owned subsidiary of United Asset Management Company, a publicly
traded corporation.

Trinity Investment Management Corporation, 75 Park Plaza, Boston, MA 02116,
is a corporation with seven shareholders, with Stanford M. Calderwood holding
majority ownership.

EQUITY II FUND

Delphi Management, Inc., 50 Rowes Wharf, Suite 440, Boston, MA 02110, is
100% owned by Scott Black.

Fiduciary International, Inc., 2 World Trade Center, New York, NY 10048, an
investment adviser registered with the SEC, is an indirect wholly-owned
subsidiary of Fiduciary Trust Company International, a New York state
chartered bank.

GlobeFlex Capital, L.P., 4365 Executive Drive, Suite 720, San Diego, CA
92121, is a California limited partnership and an SEC registered investment
adviser. Its general partners are Robert J. Anslow, Jr. and Marina L.
Marrelli.

Jacobs Levy Equity Management, Inc., 280 Corporate Center, 3 ADP Boulevard,
Roseland, NJ 07068, is 100% owned by Bruce Jacobs and Kenneth Levy.

Sirach Capital Management, Inc., One Union Square, Suite 3323, 600 Union
Street, Seattle, WA 98101, is a wholly owned subsidiary of United Asset
Management Company, a publicly traded corporation.

Wellington Management Company LLP, 75 State Street, Boston, MA 02109, is a
private Massachusetts limited liability partnership, of which the following
persons are managing partners: Robert W. Doran, Duncan M. McFarland and John
R. Ryan.

40
<PAGE>

EQUITY III FUND

Brandywine Asset Management, Inc., Three Christina Centre, Suite 1200, 201
N. Walnut Street, Wilmington, DE 19801, is a wholly owned subsidiary of Legg
Mason, Inc.

Equinox Capital Management, Inc., See: Equity I Fund.

Trinity Investment Management Corporation, See: Equity I Fund.

EQUITY Q FUND

Barclays Global Fund Advisors, See: Equity I Fund.

Franklin Portfolio Associates LLC, Two International Place, 22nd Floor,
Boston, MA 02110-4104, is a Massachusetts business trust owned by Mellon
Financial Services Corporation, a holding company of Mellon Bank Corporation.

J.P. Morgan Investment Management, Inc., 522 Fifth Ave., 14th Floor, New
York, NY 10036, is a wholly owned subsidiary of J.P. Morgan & Co., Inc., a
publicly held bank holding company.

INTERNATIONAL FUND

J.P. Morgan Investment Management, Inc., See: Equity Q Fund.

Marathon Asset Management Limited, Orion House, 5 Upper St. Martin's Lane,
London, England WC2H 9EA, is a corporation 33.3% owned by each of the
following: Jeremy Hosking, William Arah and Neil Ostrer.

Mastholm Asset Management, LLC, 10500 N.E. 8th Street, Suite 660, Bellevue,
WA 98004, is a Washington limited liability corporation that is controlled by
the following founding members: Thomas M. Garr, Robert L. Gernstetter, Joseph
P. Jordan, Arthur M. Tyson and Theodore J. Tyson.

Oechsle International Advisors, One International Place, 23rd Floor, Boston,
MA 02110, is a limited partnership which is 100% controlled by its general
partners. The general partners are: S. Dewey Keesler, Stephen P. Langer,
Walter Oechsle, L. Sean Roche, Steven H. Schaefer and Tetsuo Shiozumi.

Rowe Price-Fleming International, Inc., 100 East Pratt Street, 9th Floor,
Baltimore, MD 21202, and 4th Floor, 25 Copthall Ave., London, England EC2R
7DR, which is a joint venture of T. Rowe Price Associates, Inc., and The
Fleming Group, each of which owns 50% of the company. Ownership of The Fleming
Group holding is split equally between Copthall Overseas Limited, a subsidiary
of Robert Fleming Holdings, and Jardine Fleming International Holdings
Limited, a subsidiary of Jardine Fleming Holdings. Robert Fleming Holdings is
a London-based UK holding company with the majority of the shares distributed:
51% to public companies and 38% to the Fleming family. Jardine Fleming is a
Hong Kong-based holding company which is owned 50% by Robert Fleming Holdings
and 50% by Jardine Matheson & Co., the Hong Kong trading company, a wholly
owned subsidiary of Jardine Matheson Holdings Limited. The stock of T. Rowe
Price Associates, Inc. is publicly traded with a substantial percentage of
such stock owned by the company's active management.

Sanford C. Bernstein & Co., Inc., 767 Fifth Avenue, New York, NY 10153, is a
registered investment adviser. Founded in 1967, Bernstein is controlled by its
Board of Directors, which consists of the following individuals: Andrew S.
Adelson, Zalman C. Bernstein, Kevin R. Rine, Charles C. Cahn, Jr., Marilyn
Goldstein Fedak, Michael L. Goldstein, Roger Hertog, Lewis A. Sanders and
Francis H. Trainer, Jr.

41
<PAGE>

The Boston Company Asset Management, Inc., One Boston Place, 14th Floor
Boston, MA 02108-4402, is 100% owned by Mellon Bank Corporation, a publicly
held corporation.

FIXED INCOME I FUND

Lincoln Capital Management Company, See: Equity I Fund.

Pacific Investment Management Company, 840 Newport Center Drive, Suite 360,
Newport Beach, CA 92660, is a subsidiary partnership of PIMCO Advisors L.P.
("Partnership"). PIMCO Partners, G.P. is the sole general partner of the
Partnership. Pacific Financial Asset Management Corporation indirectly holds a
majority interest in PIMCO Partners, G.P., with the remainder held indirectly
by a group comprised of PIMCO managing directors.

Standish, Ayer & Wood, Inc., One Financial Center, Boston, MA 02111, is a
company whose ownership is divided among seventeen directors, with no director
having more than a 25% ownership interest.

FIXED INCOME II FUND

BlackRock Financial Management, 345 Park Ave., 31st Floor, New York, NY
10154, is a wholly-owned indirect subsidiary of PNC Bank.

Standish, Ayer & Wood, Inc., See: Fixed Income I Fund.

STW Fixed Income Management Ltd., Trinity Hall, 43 Cedar Avenue, Hamilton HM
KX, Bermuda, is a Bermuda exempted company. William H. Williams III is the
sole shareholder.

FIXED INCOME III FUND

BEA Associates, One Citicorp Center, 153 East 53rd Street, 58th Floor, New
York, NY 10022, is a general partnership of Credit Suisse Capital Corporation
("CS Capital") and Basic Appraisals, Inc. ("Basic"). CS Capital is an 80%
partner, and is a wholly-owned subsidiary of Credit Suisse Investment
Corporation, which is in turn a wholly-owned subsidiary of Credit Suisse, a
Swiss bank, which is in turn a subsidiary of CS Holding, a Swiss corporation.
No one person or entity possesses a controlling interest in Basic, the 20%
partner. BEA Associates is a registered investment adviser.

Pacific Investment Management Company, See: Fixed Income I Fund.

Standish, Ayer & Wood, Inc., See: Fixed Income I Fund.

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE FUNDS OR THE MONEY MANAGERS SINCE THE DATE HEREOF; HOWEVER, IF
ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

42
<PAGE>

GLOSSARY

Agreements -- Asset Management Services Agreements, which are between FRIMCo
and institutional investors and Financial Intermediaries.

Bank instruments -- Include certificates of deposit, bankers' acceptances
and time deposits, and may include European certificates of deposit ("ECDs"),
European time deposits ("ETDs") and Yankee certificates of deposit ("Yankee
CDs").

Board -- The Board of Trustees of the Trust.

Cash reserves -- The Funds may invest their cash reserves (i.e., funds
awaiting investment) in money market instruments and in debt securities of
comparable quality to each Fund's permitted investments. As an alternative to
a Fund directly investing in money market instruments, the Funds and their
money managers may elect to invest the Funds' cash reserves in the Trust's
Money Market Fund. To prevent duplication of fees, FRIMCo waives its
management fee on that portion of a Fund's assets invested in the Trust's
Money Market Fund.

Code -- Internal Revenue Code of 1986, as amended.

Convertible security -- This is a fixed income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible securities are senior to common stock in a corporation's
capital structure but are usually subordinated to similar non-convertible
securities. The price of a convertible security is influenced by the market
value of the underlying common stock.

Covered call option -- A call option is "covered" if the Fund owns the
underlying securities, has the right to acquire the securities without
additional consideration, has collateral assets sufficient to meet its
obligations under the option or owns an offsetting call option.

Covered put option -- A put option is "covered" if the Fund has collateral
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security.

Custodian -- State Street Bank and Trust Company, the Trust's custodian and
portfolio accountant.

Depository receipts -- These include American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs"), Global Depository Receipts ("GDRs") and
other similar securities convertible into securities of foreign issuers. ADRs
are receipts typically issued by a US bank or trust company evidencing
ownership of the underlying securities. Generally, ADRs in registered form are
designed for use in US securities markets.

Derivatives -- These include forward currency exchange contracts, stock
options, currency options, stock and stock index options, futures contracts,
swaps and options on futures contracts on US government and foreign government
securities and currencies.

Distributor -- Russell Fund Distributors, Inc., the organization that sells
the shares of the Fund under a contract with the Trust.

Eligible Investors -- Institutional investors and Financial Intermediaries
that invest in the Funds for their own accounts or in a fiduciary or agency
capacity, and that have entered into an Agreement with FRIMCo, and
institutions or individuals who have acquired Fund shares through institutions
or Financial Intermediaries.

43
<PAGE>

Equity derivative securities -- These include, among other instruments,
options on equity securities, warrants and futures contracts on equity
securities.

Financial Intermediary -- Bank trust departments, registered investment
advisers, broker-dealers and other Eligible Investors that have entered into
Service Agreements with FRIMCo.

FNMA -- Federal National Mortgage Association.

Forward Commitments -- Each Fund may agree 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 the transactions are
consistent with the Fund's ability to manage its portfolio and meet redemption
requests. When effecting these transactions, liquid assets of a Fund of a
dollar amount sufficient to make payment for the portfolio securities to be
purchased are segregated on the Fund's records at the trade date and
maintained until the transaction is settled.

Forward currency contracts -- This is a contract individually negotiated and
privately traded by currency traders and their customers and creates an
obligation to purchase or sell a specific currency for an agreed-upon price at
a future date. International, Fixed Income I, Fixed Income II, and Fixed
Income III Funds generally do not enter into forward contracts with terms
greater than one year, and typically enters into forward contracts only under
two circumstances. First, if the Funds enter into a contract for the purchase
or sale of a security denominated in a foreign currency, they may desire to
"lock in" the US dollar price of the security by entering into a forward
contract to buy the amount of a foreign currency needed to settle the
transaction. Second, if a Fund's money managers believe that the currency of a
particular foreign country will substantially rise or fall against the US
dollar, a Fund may enter into a forward contract to buy or sell the currency
approximating the value of some or all of the Fund's portfolio securities
denominated in the currency. International, Fixed Income I, Fixed Income II
and Fixed Income III Funds will not enter into a forward contract if, as a
result, they would have more than one-third of their assets committed to such
contracts (unless they own the currency that they are obligated to deliver or
have caused the Custodian to segregate segregable assets having a value
sufficient to cover their obligations). Although forward contracts are used
primarily to protect International, Fixed Income I, Fixed Income II, and Fixed
Income III Funds from adverse currency movements, they involve the risk that
currency movements will not be accurately predicted.

FRIMCo -- Frank Russell Investment Management Company, the Trust's
administrator, manager and transfer and dividend paying agent.

Funds -- The 28 investment series of the Trust. Each Fund is considered a
separate registered investment company (or RIC) for federal income tax
purposes, and each Fund has its own investment objective, policies and
restrictions. Eight Funds are described in and offered by this Prospectus.

Futures and options on futures -- An interest rate futures contract is an
agreement to purchase or sell debt securities, usually US government
securities, at a specified date and price. For example, a Fund may sell
interest rate futures contracts (i.e., enter into a futures contract to sell
the underlying debt security) in an attempt to hedge against an anticipated
increase in interest rates and a corresponding decline in debt securities it
owns. A Fund will have collateral assets equal to the purchase price of the
portfolio securities represented by the underlying interest rate futures
contracts it has an obligation to purchase.

GNMA -- Government National Mortgage Association.

44
<PAGE>

Illiquid securities -- The Funds will not purchase or otherwise acquire any
security if, as a result, more than 15% of a Fund's net assets (taken at
current value) would be invested in securities, including repurchase
agreements maturing in more than seven days, that are illiquid because of the
absence of a readily available market or because of legal or contractual
resale restrictions. No Fund will invest more than 10% of its respective net
assets (taken at current value) in securities of issuers that may not be sold
to the public without registration under 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.

Investment grade -- Investment grade debt securities are those rated within
the four highest grades by S&P (at least BBB) or Moody's (at least Baa), or
unrated debt securities deemed to be of comparable quality by a money manager
using Board-approved guidelines.

IRS -- Internal Revenue Service.

Lending portfolio securities -- Each Fund may lend portfolio securities with
a value of up to 33 1/3% of each Fund's total assets. These loans may be
terminated at any time. A Fund will receive either cash (and agree to pay a
"rebate" interest rate), US government or US government agency obligations as
collateral in an amount equal to at least 102% (for loans of US securities) or
105% (for non-US securities) of the current market value of the loaned
securities. The collateral is daily "marked-to-market," and the borrower will
furnish additional collateral in the event that the value of the collateral
drops below the respective percentages set forth above. If the borrower of the
securities fails 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.

Liquidity portfolio -- FRIMCo will manage or will select a money manager to
exercise investment discretion for approximately 5%-15% of Equity I, Equity
II, Equity III, Equity Q and International Funds' assets assigned to a
liquidity portfolio. The liquidity portfolio will be used to temporarily
create an equity exposure for cash balances until those balances are invested
in securities or used for Fund transactions.

Money Market Funds -- Money Market, US Government Money Market and Tax-Free
Money Market Funds, each a Portfolio of the Trust. Each Money Market Fund
seeks to maintain a stable net asset value of $1 per share.

Moody's -- Moody's Investors Service, Inc., an NRSRO.

Municipal obligations -- Debt obligations issued by states, territories and
possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities the interest from which is exempt from federal income
tax, including the alternative minimum tax, in the opinion of bond counsel to
the issuer. Municipal obligations include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal obligations may
include project, tax anticipation, revenue anticipation, bond anticipation,
and construction loan notes; tax-exempt commercial paper; fixed and variable
rate notes; obligations whose interest and principal are guaranteed or insured
by the US government or fully collateralized by US government obligations;
industrial development bonds; and variable rate obligations.

NASD -- National Association of Securities Dealers, Inc.

45
<PAGE>

Net asset value (NAV) -- The value of a mutual fund is determined by
deducting the Fund's liabilities from the total assets of the portfolio. The
net asset value per share is determined by dividing the net asset value of the
Fund by the number of its shares that are outstanding.

NRSRO -- A nationally recognized statistical rating organization, such as
S&P or Moody's.

NYSE -- New York Stock Exchange.

Options on securities, securities indexes and currencies -- A Fund may
purchase call options on securities that it intends to purchase (or on
currencies in which those securities are denominated) in order to limit the
risk of a substantial increase in the market price of such security (or an
adverse movement in the applicable currency). A Fund may purchase put options
on particular securities (or on currencies in which those securities are
denominated) in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option (or an adverse movement in the applicable currency relative to the US
dollar). Prior to expiration, most options are expected to be sold in a
closing sale transaction. Profit or loss from the sale depends upon whether
the amount received is more or less than the premium paid plus transaction
costs. A Fund may purchase put and call options on stock indexes in order to
hedge against risks of stock market or industry-wide stock price fluctuations.

PFIC -- A passive foreign investment company. International Fund may
purchase interests in an issuer that is considered a PFIC under the Code.

Prime rate -- The interest rate charged by leading US banks on loans to
their most creditworthy customers.

Repurchase agreements -- Each 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 the 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 "Illiquid Securities" in this Glossary, a Fund will
not invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days.

Reverse repurchase agreements -- Each Fund may enter into reverse repurchase
agreements to meet redemption requests when a money manager determines that
selling portfolio securities would be inconvenient or disadvantageous. A
reverse repurchase agreement is a transaction where a Fund transfers
possession of a portfolio security to a bank or broker-dealer in return for a
percentage of the portfolio security's market value. The Fund retains record
ownership of the transferred security, 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. Liquid
assets of the Fund equal in value to the repurchase price, including any
accrued interest, are segregated on the Fund's records while a reverse
repurchase agreement is in effect.

The Rule -- Rule 2a-7 under the 1940 Act, which governs the operations of
the Money Market Funds.

46
<PAGE>

in the Index are closed-end investment companies, companies that do not file a
Form 10-K report with the SEC, foreign securities, and American Depository
Receipts. The Index's composition is changed annually to reflect changes in
market capitalization and share balances outstanding. The Russell 1000(R)
Index is used as the basis for Equity Q Fund's performance because FRIMCo
believes it represents the universe of stocks in which most active money
managers invest and is representative of the performance of publicly traded
common stocks most institutional investors purchase.

Russell -- Frank Russell Company, consultant to the Trust and to the Funds.

S&P -- Standard & Poor's Ratings Group, an NRSRO.

S&P 500 -- Standard & Poor's 500 Composite Price Index.

SAI -- The Trust's Statement of Additional Information, dated as noted on
the first page of this Prospectus.

SEC -- US Securities and Exchange Commission.

Shares -- The Class S Shares in the Funds described in this prospectus. Each
Class S Share of a Fund represents a share of beneficial interest in the Fund.

Transfer Agent -- FRIMCo, in its capacity as the Trust's transfer and
dividend paying agent.

Trust -- Frank Russell Investment Company, an open-end management investment
company which is registered with the SEC.

US -- United States.

US government securities -- These include US Treasury bills, notes, bonds
and other obligations issued or guaranteed by the US government, its agencies
or instrumentalities.

Variable rate obligations -- Municipal obligations with a demand feature
that typically may be exercised within 30 days. The rate of return on variable
rate obligations is readjusted periodically according to a market rate, such
as the Prime rate. Also called floating rate obligations.

Warrants -- Typically, a warrant is a long-term option that permits the
holder to buy a specified number of shares of the issuer's underlying common
stock at a specified exercise price by a particular expiration date. A warrant
not exercised or disposed of by its expiration date expires worthless.

1940 Act -- The Investment Company Act of 1940, as amended. The 1940 Act
governs the operations of the Trust and the Funds.

1933 Act -- The Securities Act of 1933, as amended.

47
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

MONEY MANAGERS

EQUITY I FUND
Alliance Capital Management L.P.
Barclays Global Fund Advisors
Equinox Capital Management, Inc.
INVESCO Capital Management, Inc.
Lincoln Capital Management Company
Morgan Stanley Asset Management, Inc.
Peachtree Asset Management
Schneider Capital Management
Suffolk Capital Management, Inc.
Trinity Investment Management Corporation

EQUITY II FUND
Delphi Management, Inc.
Fiduciary International, Inc.
GlobeFlex Capital, L.P.
Jacobs Levy Equity Management, Inc.
Sirach Capital Management, Inc.
Wellington Management Company LLP

EQUITY III FUND
Brandywine Asset Management, Inc.
Equinox Capital Management, Inc.
Trinity Investment Management Corporation

EQUITY Q FUND
Barclays Global Fund Advisors
Franklin Portfolio Associates LLC
J.P. Morgan Investment Management, Inc.

INTERNATIONAL FUND
J.P. Morgan Investment Management, Inc.
Marathon Asset Management Limited
Mastholm Asset Management, LLC
Oechsle International Advisors
Rowe Price-Fleming International, Inc.
Sanford C. Bernstein & Co., Inc.
The Boston Company Asset Management, Inc.

FIXED INCOME I FUND
Lincoln Capital Management Company
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

FIXED INCOME II FUND
BlackRock Financial Management
Standish, Ayer & Wood, Inc.
STW Fixed Income Management Ltd.

FIXED INCOME III FUND
BEA Associates
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment Management Company
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, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098

OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) 787-7354
(800) RUSSEL4
In Washington (253) 627-7001

<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

Frank Russell Investment Company (the "Trust") is an open-end, management
company with 28 different investment series or portfolios ("Funds"). This
Prospectus describes and offers interests in the Class S Shares of eight
Funds:

Diversified Equity Fund International Securities Fund
Special Growth Fund Diversified Bond Fund
Equity Income Fund Volatility Constrained Bond Fund
Quantitative Equity Fund Multistrategy Bond Fund

Each Fund has its own investment objective and policies designed to meet
different investment goals. As with all mutual funds, attainment of each
Fund's investment objective cannot be assured.

Frank Russell Investment Management Company ("FRIMCo") operates and
administers the Funds. Class S Shares are sold at their net asset value, with
no sales load, no commissions, no Rule 12b-1 fees and no exchange fees.
Although there is no specified minimum investment requirement for the Funds
described in this Prospectus, the Funds are designed for investors with at
least $100,000 to invest in any combination of Funds described in this
Prospectus and in the Trust's Specialty Funds Prospectus, in an allocated
investment portfolio. Additionally, investors must qualify as Eligible
Investors, as described in this Prospectus.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH STATE OR OTHER JURISDICTION.

This Prospectus sets forth concisely the information about the Funds that
you should know before investing. Please read it before investing and retain
it for future reference. A Statement of Additional Information ("SAI"), dated
May 1, 1998 and supplemented June 15, 1998, has been filed with the Securities
and Exchange Commission ("SEC"). The SAI is incorporated into this Prospectus
by reference and is available without charge by writing to the address listed
above or by telephoning (800) 972-0700.

This Prospectus relates only to the Class S Shares of the Funds. These Funds
also offer interests in another class of shares, the Class E Shares, through
other prospectuses. For more information concerning Class E Shares, contact
the person or organization from whom you obtained this Prospectus, or write or
telephone the Trust.

PROSPECTUS DATED MAY 1, 1998
AS SUPPLEMENTED THROUGH JUNE 15, 1998
<PAGE>

TABLE OF CONTENTS

CERTAIN TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE
GLOSSARY, WHICH BEGINS ON PAGE 45 OF THIS PROSPECTUS.

<TABLE>
<S> <C>
Summary..................................................................... 3
Annual Fund Operating Expenses.............................................. 4
Financial Highlights........................................................ 6
The Purpose of the Funds--Multi-Style, Multi-Manager Diversification........ 14
Eligible Investors.......................................................... 15
General Management of the Funds............................................. 16
Expenses of the Funds....................................................... 18
The Money Managers.......................................................... 18
Investment Objectives, Policies and Practices............................... 19
Portfolio Transaction Policies.............................................. 30
Dividends and Distributions................................................. 31
Taxes....................................................................... 31
Performance Information..................................................... 33
How Net Asset Value Is Determined........................................... 34
How to Purchase Shares...................................................... 34
How to Redeem Shares........................................................ 37
Additional Information...................................................... 39
Money Manager Profiles...................................................... 40
Glossary.................................................................... 45
</TABLE>

2
<PAGE>

SUMMARY

The Funds are designed to provide a means for Eligible Investors to use
FRIMCo's and the Frank Russell Company's ("Russell") "multi-style, multi-
manager diversification" techniques and money manager evaluation services.
Unlike most investment companies that have a single organization that acts as
both administrator and investment adviser, the Trust divides responsibility
for corporate management and investment advice between FRIMCo and a number of
different money managers. See "The Purpose of the Funds--Multi-Style, Multi-
Manager Diversification."

Each Fund seeks to achieve a specific investment objective by using distinct
investment strategies:

DIVERSIFIED EQUITY FUND -- Income and capital growth by investing
principally in equity securities.

SPECIAL GROWTH FUND -- Maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from Diversified Equity Fund, by investing in equity securities.

EQUITY INCOME FUND -- A high level of current income, while maintaining the
potential for capital appreciation by investing primarily in income-producing
equity securities.

QUANTITATIVE EQUITY FUND -- Total return greater than the total return of
the US stock market as measured by the Russell 1000(R) Index over a market
cycle of four to six years, while maintaining volatility and diversification
similar to the Index by investing in equity securities.

INTERNATIONAL SECURITIES FUND -- Favorable total return and additional
diversification for US investors by investing primarily in equity and fixed-
income securities of non-US companies, and securities issued by non-US
governments.

DIVERSIFIED BOND FUND -- Effective diversification against equities and a
stable level of cash flow by investing in fixed-income securities.

VOLATILITY CONSTRAINED BOND FUND -- Preservation of capital and generation
of current income consistent with the preservation of capital by investing
primarily in fixed-income securities with low-volatility characteristics.

MULTISTRATEGY BOND FUND -- Maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from broad fixed-income market portfolios, by investing in fixed-
income securities.

The Trust's Funds had aggregate net assets of approximately $13.6 billion on
April 1, 1998. The net assets of the Funds described in this Prospectus on
April 1, 1998 were:

<TABLE>
<S> <C>
Diversified Equity.... $1,253,343,607
Special Growth........ $ 675,279,992
Equity Income......... $ 272,115,924
Quantitative Equity... $1,777,094,136
</TABLE>
<TABLE>
<S> <C>
International Securi-
ties................... $978,541,730
Diversified Bond........ $748,047,919
Volatility Constrained
Bond................... $183,151,781
Multistrategy Bond...... $483,957,901
</TABLE>

You may buy and sell Class S Shares of the Funds through an authorized
Financial Intermediary. All Class S Shares are sold without a sales charge,
commission, or Rule 12b-1 fee. Except as indicated below, Class S

3
<PAGE>

Shares are redeemed at net asset value. You may also exchange shares of one
Fund for shares of another Fund. See "How to Purchase Shares" and "How to
Redeem Shares."

You should be aware of the general risks associated with investments in
mutual funds. One or more Funds may make investments and engage in investment
practices and techniques that involve risks, including entering into
repurchase agreements, lending portfolio securities and entering into hedging
transactions. These risks are described in "Risk Considerations" in
"Investment Objectives, Policies and Practices" and in the Glossary.

SHAREHOLDER TRANSACTIONS EXPENSES

You would pay the following charges when buying or redeeming Class S Shares
of a Fund:

<TABLE>
<CAPTION>
MAXIMUM SALES MAXIMUM SALES
LOAD IMPOSED LOAD IMPOSED ON DEFERRED EXCHANGE
ON PURCHASES REINVESTED DIVIDENDS SALES LOAD FEES
------------- -------------------- ---------- --------
<S> <C> <C> <C>
None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT GROSS OPERATING
FEE EXPENSES**
(NET OF FEE WAIVERS) OTHER EXPENSES** (NET OF FEE WAIVERS)+
-------------------- ---------------- ---------------------
<S> <C> <C> <C>
Diversified Equity
Fund................... 0.78% 0.17% 0.95%
Special Growth Fund..... 0.95% 0.25% 1.20%
Equity Income Fund...... 0.80% 0.26% 1.06%
Quantitative Equity
Fund................... 0.78% 0.16% 0.94%
International Securities
Fund................... 0.95% 0.35% 1.30%
Diversified Bond Fund... 0.45% 0.14% 0.59%
Volatility Constrained
Bond Fund.............. 0.50% 0.24% 0.74%
Multistrategy Bond
Fund*.................. 0.58% 0.22% 0.80%
</TABLE>
- ---------------------
* FRIMCo has voluntarily agreed to waive a portion of its 0.65% management
fee for the Multistrategy Bond Fund, up to the full amount of that fee,
for all fund expenses that exceed 0.80% of the average daily net assets on
an annual basis. This waiver is intended to be in effect for the current
year, but may be revised or eliminated at any time without notice to
shareholders. The gross annual total operating expenses absent the waiver
would be 0.87% of the average net assets of the Multistrategy Bond Fund.
** Restated to reflect changes to the Trust's Transfer and Dividend Paying
Agent agreement, which became effective June 8, 1998.
+ Investors purchasing Class S Shares of the fund through a financial
intermediary, such as a bank or an investment adviser, may also pay
additional fees to the intermediary for services provided by the
intermediary. Such investors should contact the intermediary for
information concerning what additional fees, if any, will be charged.

Because the Funds described in this prospectus are designed for investors
with an aggregate investment of at least $100,000, as described in the
"Eligible Investors" section, beginning January 1, 1999, any shareholder
account with respect to any Fund described in this Prospectus with a balance
of less than $10,000 will be subject to an account maintenance fee equal to
$12.50 per year. The fee will be deducted from dividends payable to each
applicable account or by liquidating shares in the account, or both. The fees
will be waived for: (i) accounts established before July 1, 1998; (ii)
accounts held by retirement plans representing multiple participants;
(iii) accounts held by trustees, officers, employees, and certain third-party
contractors of the Trust and its affiliates; and (iv) classes of accounts for
which maintenance costs are absorbed by a third-party.

4
<PAGE>

Investors considering an investment of less than $10,000 in any Fund described
in this prospectus may wish to consider investing in the Trust's LifePoints
Funds, shareholder accounts of which are not subject to an account maintenance
fee. For more information see the Trust's LifePoints Funds Prospectus.

These tables are intended to assist you in understanding the various
expenses of each Fund. Operating expenses are paid out of a Fund's assets and
are factored into the Fund's assets and share price. Each Fund estimates that
it will have the expenses listed (expressed as a percentage of average net
assets) for the current fiscal year.

EXAMPLE OF EXPENSES FOR THE FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Diversified Equity Fund......................... $10 $30 $52 $119
Special Growth Fund............................. $12 $38 $66 $151
Equity Income Fund.............................. $11 $33 $59 $133
Quantitative Equity Fund........................ $ 9 $30 $52 $118
International Securities Fund................... $13 $41 $72 $164
Diversified Bond Fund........................... $ 6 $19 $33 $ 74
Volatility Constrained Bond Fund................ $ 7 $23 $41 $ 93
Multistrategy Bond Fund......................... $ 8 $25 $44 $101
</TABLE>

5
<PAGE>

FINANCIAL HIGHLIGHTS OF THE DIVERSIFIED EQUITY FUND*

DIVERSIFIED EQUITY FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR..... $ 41.45 $ 38.62 $ 32.26 $ 34.88 $ 35.60 $ 36.36 $ 30.66 $ 35.22 $ 30.46 $ 27.22
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income............... .37 .48 .60 .58 .56 .60 .81 .99 .94 .89
Net realized and
unrealized gain
(loss) on invest-
ments................ 12.06 8.15 10.63 (.49) 3.03 2.30 8.36 (3.45) 7.68 3.57
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations.......... 12.43 8.63 11.23 .09 3.59 2.90 9.17 (2.46) 8.62 4.46
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment
income............... (.37) (.48) (.60) (.58) (.55) (.61) (.82) (.96) (1.11) (.81)
Net realized gain on
investments.......... (9.83) (5.32) (4.27) (1.87) (3.76) (3.05) (2.65) (1.14) (2.75) (.41)
In excess of net real-
ized gain on invest-
ments................ (.04) -- -- (.26) -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions.. (10.24) (5.80) (4.87) (2.71) (4.31) (3.66) (3.47) (2.10) (3.86) (1.22)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
YEAR.................. $ 43.64 $ 41.45 $ 38.62 $ 32.26 $ 34.88 $ 35.60 $ 36.36 $ 30.66 $ 35.22 $ 30.46
========== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)....... 31.32 23.29 35.17 (0.01) 10.53 8.32 31.05 (7.01) 29.06 16.37
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets... .92 .94 .95 .95 .96 .98 .98 1.03 1.01 1.00
Net investment income
to average net
assets............... .80 1.18 1.56 1.73 1.54 1.69 2.28 2.97 2.65 2.92
Portfolio turnover.... 114.11 99.90 92.53 57.53 99.80 77.02 116.53 96.90 61.80 66.02
Net assets, end of
year
($000 omitted)....... 1,042,620 699,691 530,645 414,036 388,420 337,549 325,746 251,254 234,988 202,948
Average commission
rate paid per share
of security ($ omit-
ted)................. .0500 .0465 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

6
<PAGE>

FINANCIAL HIGHLIGHTS OF THE SPECIAL GROWTH FUND*

SPECIAL GROWTH FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 40.79 $ 39.17 $ 33.47 $ 35.82 $ 36.63 $ 34.47 $ 24.71 $29.35 $26.19 $23.58
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .08 .12 .18 .16 .07 .05 .24 .42 .42 .24
Net realized and
unrealized gain (loss)
on investments........ 11.18 6.87 9.25 (.71) 5.22 4.22 10.34 (4.57) 5.78 2.99
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Total From Investment
Operations........... 11.26 6.99 9.43 (.55) 5.29 4.27 10.58 (4.15) 6.20 3.23
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Net investment income.. (.08) (.12) (.21) (.10) (.07) (.06) (.24) (.42) (.48) (.21)
Net realized gain on
investments........... (6.25) (5.25) (3.52) (.85) (6.03) (2.05) (.58) (.07) (2.56) (.41)
In excess of net real-
ized gain on invest-
ments................. -- -- -- (.85) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Total Distributions... (6.33) (5.37) (3.73) (1.80) (6.10) (2.11) (.82) (.49) (3.04) (.62)
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
NET ASSET VALUE, END OF
YEAR................... $ 45.72 $ 40.79 $ 39.17 $ 33.47 $ 35.82 $ 36.63 $ 34.47 $24.71 $29.35 $26.19
======= ======= ======= ======= ======= ======= ======= ====== ====== ======
TOTAL RETURN (%)........ 28.77 18.65 28.52 (3.71) 15.48 12.52 43.11 (14.28) 23.92 13.82
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses, net
to average net as-
sets.................. 1.15 1.19 1.22 1.20 1.31 1.33 1.36 1.50 1.49 1.47
Net investment income
to average net as-
sets.................. .18 .28 .49 .50 .19 .14 .80 1.57 1.42 .92
Portfolio turnover..... 97.19 118.13 87.56 55.40 91.97 42.20 42.81 63.87 85.24 51.75
Net assets, end of year
($000 omitted)........ 572,635 393,048 313,678 229,077 188,891 134,913 105,245 62,116 60,146 47,405
Average commission rate
paid per share of se-
curity
($ omitted)........... .0402 .0384 N/A N/A N/A N/A N/A N/A N/A N/A
Per share amount of
fees reimbursed ($
omitted).............. -- -- -- -- -- -- -- .0093 -- --
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

7
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY INCOME FUND*

EQUITY INCOME FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 40.22 $ 38.43 $ 32.21 $ 35.90 $ 35.32 $ 36.54 $ 30.75 $ 34.91 $ 30.85 $ 26.92
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .69 .82 .94 .90 .83 .99 1.11 1.43 1.34 1.22
Net realized and
unrealized gain (loss)
on investments........ 12.11 7.03 10.08 (.70) 3.69 3.08 7.15 (3.83) 6.47 3.96
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
Total From Investment
Operations........... 12.80 7.85 11.02 .20 4.52 4.07 8.26 (2.40) 7.81 5.18
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
LESS DISTRIBUTIONS:
Net investment income.. (.69) (.82) (.97) (.89) (.83) (1.00) (1.10) (1.37) (1.50) (1.25)
In excess of net in-
vestment
income................ (.01) (.01) -- -- (.00) -- -- -- -- --
Net realized gain on
investments........... (11.24) (5.23) (3.83) (3.00) (3.11) (4.29) (1.37) (.39) (2.25) --
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
Total Distributions... (11.94) (6.06) (4.80) (3.89) (3.94) (5.29) (2.47) (1.76) (3.75) (1.25)
-------- -------- -------- -------- -------- -------- -------- ------- -------- -------
NET ASSET VALUE, END OF
YEAR................... $ 41.08 $ 40.22 $ 38.43 $ 32.21 $ 35.90 $ 35.32 $ 36.54 $ 30.75 $ 34.91 $ 30.85
======== ======== ======== ======== ======== ======== ======== ======= ======== =======
TOTAL RETURN (%)........ 33.59 21.45 34.76 .69 13.23 11.51 27.52 (6.90) 25.61 19.42
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets.... 1.04 1.07 1.06 1.04 1.05 1.08 1.11 1.14 1.15 1.13
Net investment income
to
average net assets.... 1.51 2.03 2.51 2.56 2.23 2.68 3.11 4.12 3.94 4.08
Portfolio turnover..... 139.33 106.40 92.40 89.91 78.72 95.07 61.73 65.97 79.82 58.12
Net assets, end of year
($000 omitted)........ 226,952 195,132 180,116 144,285 149,532 134,365 122,689 99,575 101,589 68,998
Average commission rate
paid per share of
security ($ omitted).. .0410 .0441 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

8
<PAGE>

FINANCIAL HIGHLIGHTS OF THE QUANTITATIVE EQUITY FUND*

QUANTITATIVE EQUITY FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 33.05 $ 30.76 $ 24.84 $ 26.44 $ 25.82 $ 25.88 $ 21.07 $ 23.57 $ 20.21 $18.08
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .38 .51 .50 .49 .45 .49 .58 .66 .68 .56
Net realized and
unrealized gain (loss)
on investments........ 10.00 6.24 8.72 (.19) 2.69 1.67 5.93 (1.99) 4.53 2.14
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total From Investment
Operations............ 10.38 6.75 9.22 .30 3.14 2.16 6.51 (1.33) 5.21 2.70
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Net investment income.. (.38) (.51) (.51) (.49) (.45) (.49) (.58) (.64) (.76) (.57)
Net realized gain on
investments........... (6.27) (3.95) (2.79) (1.41) (2.07) (1.73) (1.12) (.53) (1.09) --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions... (6.65) (4.46) (3.30) (1.90) (2.52) (2.22) (1.70) (1.17) (1.85) (.57)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
YEAR................... $ 36.78 $ 33.05 $ 30.76 $ 24.84 $ 26.44 $ 25.82 $ 25.88 $ 21.07 $ 23.57 $20.21
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN (%)........ 32.70 23.08 37.69 .19 12.56 8.67 31.70 (5.60) 26.08 15.05
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses to
average net assets.... .91 .93 .93 .94 .98 1.02 1.03 1.12 1.14 1.16
Net investment income
to average net
assets................ 1.04 1.59 1.71 1.95 1.68 1.94 2.39 2.94 3.00 3.00
Portfolio turnover..... 87.67 74.33 78.83 45.97 62.48 59.19 58.07 57.49 90.65 59.37
Net assets, end of year
($000 omitted)........ 996,880 663,925 488,948 380,592 314,647 244,870 201,614 147,730 124,111 89,858
Average commission rate
paid per share of
security ($ omitted).. .0349 .0331 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

9
<PAGE>

FINANCIAL HIGHLIGHTS OF THE INTERNATIONAL SECURITIES FUND*

INTERNATIONAL SECURITIES FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 58.48 $ 56.61 $ 53.96 $ 57.95 $ 44.75 $ 49.15 $ 44.60 $ 55.81 $ 50.49 $45.26
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .56 .53 .56 .44 .40 .61 .72 1.05 .67 .86
Net realized and
unrealized gain (loss)
on investments(a)..... (.46) 3.72 4.89 1.23 14.53 (4.02) 4.60 (9.53) 0.32 8.98
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total From Investment
Operations........... .10 4.25 5.45 1.67 14.93 (3.41) 5.32 (8.48) 0.99 9.84
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Net investment income
...................... (.37) (.31) (.88) (.04) (.38) (.68) (.76) (1.08) (.89) (.95)
In excess of net
investment income..... (.27) (.17) (.23) (.02) (.23) -- -- -- -- --
Net realized gain on
investments........... (2.19) (1.90) (1.69) (5.60) (1.12) (.31) (.01) (1.65) (4.78) (3.66)
In excess of net real-
ized gain on invest-
ments................. (1.06) -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions... (3.89) (2.38) (2.80) (5.66) (1.73) (.99) (.77) (2.73) (5.67) (4.61)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
YEAR................... $ 54.69 $ 58.48 $ 56.61 $ 53.96 $ 57.95 $ 44.75 $ 49.15 $ 44.60 $ 55.81 $50.49
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN (%)........ .26 7.63 10.20 4.86 33.48 (6.94) 11.99 (15.34) 22.24 22.05
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses,
net, to average
assets................ 1.26 1.30 1.30 1.30 1.38 1.45 1.49 1.50 1.50 1.50
Operating expenses,
gross, to average as-
sets.................. 1.26 1.31 1.31 1.33 1.42 1.47 1.49 1.50 1.54 1.50
Net investment income
to average net
assets................ .91 .91 .97 .70 .82 1.37 1.68 2.28 1.54 1.60
Portfolio turnover..... 73.54 42.43 42.96 72.23 60.22 48.93 52.46 68.89 57.16 43.50
Net assets, end of year
($000 omitted)........ 839,767 743,615 623,389 563,333 454,482 262,886 243,065 169,818 123,823 91,006
Average commission rate
paid per share of
security ($ omitted).. .0055 .0039 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
(a) Provision for federal income tax for the year ended December 31, 1991
amounted to $.03 per share.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

10
<PAGE>

FINANCIAL HIGHLIGHTS OF THE DIVERSIFIED BOND FUND*

DIVERSIFIED BOND FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 22.97 $ 23.69 $ 21.53 $ 23.73 $ 23.49 $ 24.29 $ 22.81 $ 22.90 $ 22.38 $ 22.38
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 1.45 1.4 1.54 1.46 1.48 1.62 1.72 1.74 1.87 1.69
Net realized and
unrealized gain (loss)
on investments........ .56 (.71) 2.18 (2.22) .83 (.10) 1.61 (.09) 83 (.02)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operation............ 2.01 .76 3.72 (.76) 2.31 1.52 3.33 1.65 2.70 1.67
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income.. (1.45) (1.48) (1.56) (1.42) (1.48) (1.63) (1.69) (1.74) (1.92) (1.67)
In excess of net
investment income..... (.02) -- -- -- (.01) -- -- -- -- --
Net realized gain on
investments........... -- -- -- -- (.58) (.69) (.16) -- (.26) --
In excess of net
realized gain on
investments........... (.08) -- -- (.02) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions... (1.55) (1.48) (1.56) (1.44) (2.07) (2.32) (1.85) (1.74) (2.18) (1.67)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
YEAR................... $ 23.43 $ 22.97 $ 23.69 $ 21.53 $ 23.73 $ 23.49 $ 24.29 $ 22.81 $ 22.90 $ 22.38
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 9.09 3.43 17.76 (3.25) 10.02 6.57 15.29 7.58 12.52 7.67
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses,
net, to average
assets................ .60 .61 .59 .56 .58 .62 .74 .88 .93 .93
Operating expenses,
gross, to average
assets................ .60 .61 .59 .56 .58 .67 .74 .88 .93 .93
Net investment income
to average net
assets................ 6.35 6.46 6.69 6.57 6.13 6.79 7.38 7.89 8.16 7.48
Portfolio turnover 172.43 138.98 135.85 153.21 177.74 228.37 130.96 94.88 195.14 197.15
Net assets, end of year
($000 omitted)........ 687,331 554,804 513,808 525,315 477,341 412,394 344,081 294,677 230,156 211,656
Per share amount of
fees waived
($ omitted)........... -- -- -- -- -- .0115 -- -- -- --
</TABLE>
- -------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

11
<PAGE>

FINANCIAL HIGHLIGHTS OF THE VOLATILITY CONSTRAINED BOND FUND*

VOLATILITY CONSTRAINED BOND FUND

12
<PAGE>

FINANCIAL HIGHLIGHTS OF THE MULTISTRATEGY BOND FUND*

MULTISTRATEGY BOND FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993+
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR......................... $ 10.11 $ 10.25 $ 9.29 $ 10.31 $ 10.00
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERA-
TIONS:
Net investment income........ .60 .61 .65 .58 .46
Net realized and unrealized
gain (loss) on investments.. .33 (.12) .97 (1.03) .40
-------- -------- -------- -------- -------
Total From Investment Opera-
tions...................... .93 .49 1.62 (.45) .86
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Net investment income........ (.60) (.61) (.66) (.57) (.46)
In excess of net investment
income...................... (.01) (.01) -- -- --
Net realized gain on invest-
ments....................... (.17) (.01) -- -- (.08)
In excess of net realized
gain on investments......... -- -- -- -- (.01)
-------- -------- -------- -------- -------
Total Distributions......... (.78) (.63) (.66) (.57) (.55)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF YEAR.. $ 10.26 $ 10.11 $ 10.25 $ 9.29 $ 10.31
======== ======== ======== ======== =======
TOTAL RETURN (%)(a)........... 9.50 4.97 17.92 (4.35) 8.74
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to
average net assets (b)...... .80 .81 .85 .85 .85
Operating expenses, gross, to
average net assets (b)...... .83 .88 .89 .90 1.20
Net investment income to av-
erage net assets (b)........ 5.93 6.19 6.61 6.26 5.60
Portfolio turnover (b)....... 263.75 145.38 142.26 136.39 188.95
Net assets, end of year ($000
omitted).................... 437,312 305,428 218,765 173,035 98,374
</TABLE>
- ---------------------
+ For the period January 29, 1993 (commencement of operations) to December
31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended December 31, 1993 are annualized.
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

13
<PAGE>

THE PURPOSE OF THE FUNDS -- MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

Russell acts as consultant to the Funds. Russell was founded in 1936, and
has been providing comprehensive asset management consulting services for
almost 30 years to institutional investors, principally large corporate
employee benefit plans. Russell and its affiliates have offices around the
world -- in Tacoma, New York, Toronto, London, Zurich, Paris, Sydney, Auckland
and Tokyo.

Three functions form the core of Russell's consulting services:

. Objective Setting: Defining appropriate investment objectives and desired
investment returns, based on a client's unique situation and risk
tolerance.

. 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 a way most
likely to achieve the client's objectives and desired returns.

When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique. The goals of this
process are to reduce risk and to increase returns.

14
<PAGE>

investment styles within an asset class, investors are better able to reduce
their exposure to any one investment style going out of favor.

ELIGIBLE INVESTORS

Shares of the Funds are currently offered only to Eligible Investors.
Eligible Investors include:

. Institutional investors and Financial Intermediaries investing for their
own accounts or in a fiduciary or agency capacity, which have entered
into asset management services agreements ("Agreements") with FRIMCo.
"Financial Intermediaries" include bank trust departments, registered
investment advisers, broker-dealers, employee benefit plans and other
financial service organizations

. Institutions or individuals who have acquired shares through
institutional investors and Financial Intermediaries; and

. Trustees, officers, employees and certain third-party contractors of the
Trust and its affiliates.

Although there is currently no required minimum investment in the Funds
described in this Prospectus, the Funds were designed for investors making an
aggregate investment of at least $100,000 in any combination of Funds
described in this Prospectus and in the Trust's Specialty Funds Prospectus.

The Funds do not generally offer their shares directly to individual (i.e.,
retail) investors, although they may choose to do so. Financial Intermediaries
which have entered into Agreements with FRIMCo may acquire shares of the Funds
for their customers. Under the Agreements, FRIMCo provides objective-setting
and asset-allocation assistance and services to Financial Intermediaries,
which in turn provide similar services to their customers. Financial
Intermediaries receive no compensation from FRIMCo or Class S Shares of the
Funds. However, Financial Intermediaries may charge their customers a fee for
providing these services and other trust or investment-related services.

With respect to certain Funds, the Agreement provides that a shareholder
investment services fee (the "Services Fee") may be paid to FRIMCo. The
Services Fee is usually expressed as a percentage of the client's assets
invested in the applicable Funds. The Services Fee may include a fixed-dollar
fee for certain specific services. The client and FRIMCo agree to the Services
Fee, which is determined by the amount of assets the client expects to invest
in the Funds, the nature and extent of services that FRIMCo agrees to provide
to the client, and other factors.

Either the client or FRIMCo may terminate an Agreement upon written notice.
FRIMCo does not anticipate terminating an Agreement unless a client does not
(i) promptly pay fees due to FRIMCo, or (ii) invest sufficient assets in the
Trust's Funds to compensate FRIMCo for its services. If an Agreement is
terminated, FRIMCo will no longer provide asset-allocation, objective-setting
or other services to the client.

15
<PAGE>

GENERAL MANAGEMENT OF THE FUNDS

FRIMCo:

. provides or supervises the general management and administration,
investment advisory and portfolio management, and distribution services
for the Funds;

. develops the investment programs, selects money managers, allocates
assets among money managers and monitors the money managers' investment
programs and results;

. manages, or hires money managers to manage, the Funds' Liquidity
Portfolio; and

. provides the Funds with transfer agent, dividend disbursing and
shareholder recordkeeping services.

FRIMCo's officers and employees who oversee the money managers are:

. Randall P. Lert, who has been Chief Investment Officer of FRIMCo since
1989.

. James M. Imhof, Manager of FRIMCo's Portfolio Trading, manages the Trust
on a day to day basis and has been responsible for ongoing analysis and
monitoring of the money managers since 1989.

16
<PAGE>

. Dennis J. Trittin, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1988 to 1996, Mr. Trittin was director of US Equity
Manager Research Department with Russell. Mr. Trittin, jointly with
another portfolio manager identified herein, has primary responsibility
for management of the Equity I, Equity II, Equity III, Equity Q, Equity
T, Diversified Equity, Quantitative Equity, Special Growth, and Equity
Income Funds.

Russell provides to the Funds and FRIMCo the asset management consulting
services -- including objective-setting and asset-allocation technology, and
money manager research and evaluation assistance -- that Russell provides to
its other consulting clients. Russell does not receive any compensation from
the Funds for its consulting services.

Under its Management Agreement with the Trust, FRIMCo receives a management
fee from each Fund for FRIMCo's services. From this fee, FRIMCo, as the
Trust's agent, pays the money managers for their investment selection
services. The remainder of the management fee is retained by FRIMCo as
compensation for the services described above and to pay expenses. The annual
rate of management fees, payable to FRIMCo monthly on a pro rata basis, are
the following percentages of each Fund's average daily net assets: Diversified
Equity Fund, 0.78%; Special Growth Fund, 0.95%; Equity Income Fund, 0.80%;
Quantitative Equity Fund, 0.78%; International Securities Fund, 0.95%;
Diversified Bond Fund, 0.45%; Volatility Constrained Bond Fund, 0.50%; and
Multistrategy Bond Fund, 0.65%. The fees of the Funds, other than the
Diversified Bond and Volatility Constrained Bond Funds, may be higher than the
fees charged by some mutual funds with similar objectives that use only a
single money manager.

FRIMCo has voluntarily agreed to waive all or a portion of its management
fees for certain Funds. This arrangement is not part of the Management
Agreement with the Trust and may be changed or discontinued at any time.
FRIMCo currently calculates its management fee based on a Fund's average daily
net assets less any management fee incurred on the Fund's assets invested to
the extent the Fund incurs management fees for investing a portion of its
assets in the Trust's Money Market Fund.

17
<PAGE>

It is also proposed that the services which FRIMCo provides to the Funds
under the present Management Agreement will be divided into two components.
Those services which are investment advisory in nature will be provided
pursuant to a new Advisory Agreement. Other services which are administrative
in nature will be provided pursuant to a new Administrative Agreement. It is
not anticipated that this restructuring of services provided to the Funds will
materially affect the costs of these services to the Funds, or affect FRIMCo's
current voluntary fee waivers.

EXPENSES OF THE FUNDS

. the management, transfer agent and recordkeeping fees payable to FRIMCo;

. fees for custody, preparing tax records, and portfolio accounting,
payable to the Custodian;

. fees for independent auditing and legal services; and

. filing and registration fees payable to the SEC.

THE MONEY MANAGERS

From its management fees, FRIMCo, as the Trust's agent, pays fees to the
money managers for their investment selection services. Quarterly, each money
manager is paid the pro rata portion of an annual fee, based on the average of
all assets allocated to the manager for the quarter. For the year ended
December 31, 1997, management fees paid to the money managers were equivalent
to the following annual rates, expressed as a percentage of each Fund's
average daily net assets: Diversified Equity Fund, 0.23%; Special Growth Fund,
0.40%;

18
<PAGE>

Equity Income Fund, 0.19%; Quantitative Equity Fund, 0.19%; International
Securities Fund, 0.39%, Diversified Bond Fund, 0.08%; Volatility Constrained
Bond Fund, 0.17%; and Multistrategy Bond Fund, 0.21%.

Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund. At the same time, however, each money
manager must operate within the Fund's investment objectives, restrictions and
policies, and the more specific strategies developed by FRIMCo. Although the
money managers' activities are subject to general oversight by the Board and
the Trust's officers, neither the Board, the officers, FRIMCo, nor Russell
evaluate the investment merits of the money managers' individual security
selections.

INVESTMENT OBJECTIVES, POLICIES AND PRACTICES

SUMMARY COMPARISON OF THE FUNDS

<TABLE>
<CAPTION>
ANTICIPATED MAXIMUM
EQUITY DEBT
FUND EXPOSURE EXPOSURE FOCUS
---- ----------- -------- ----------------------------------
<S> <C> <C> <C>
Diversified Equity
Fund................... 65-100% 35% Income and capital growth
Special Growth Fund..... 65-100% 35% Maximum total return
Equity Income Fund...... 65-100% 35% Current income
Quantitative Equity
Fund................... 100% --% Total return
International Securities
Fund................... 65-100% 35% Total return
Diversified Bond Fund... 35% 65-100% Current Income and Diversification
Volatility Constrained
Bond Fund.............. 35% 65-100% Preservation of capital
Multistrategy Bond
Fund................... 0% 100% Maximum total return
</TABLE>

INVESTMENT OBJECTIVES

19
<PAGE>

DIVERSIFIED EQUITY FUND

Diversified Equity Fund's objective is to provide income and capital growth
by investing principally in equity securities. Diversified Equity Fund may
invest in common and preferred stocks, convertible securities, rights and
warrants.

SPECIAL GROWTH FUND

Special Growth Fund's objective is to maximize total return primarily
through capital appreciation and assuming a higher level of volatility than
Diversified Equity Fund. Special Growth Fund seeks to achieve its objective by
investing in equity securities.

EQUITY INCOME FUND

Equity Income Fund's objective is to achieve a high level of current income,
while maintaining the potential for capital appreciation. Equity Income Fund
seeks to achieve its objective by investing primarily in income-producing
equity securities.

The income objective of the Fund is to exceed the yield on the S&P 500
Index. The Index yield will change from year to year due to changes in prices
and dividends of stocks in the Index. Income streams will be considered in
light of their current level and the opportunity for future growth. Capital
appreciation may not be comparable to that achieved by Funds such as the
Special Growth Fund whose major objective is appreciation, although FRIMCo
believes that a high and growing stream of income is conducive to higher
capital values. The Fund may also invest in preferred stock, convertible
securities, rights and warrants.

QUANTITATIVE EQUITY FUND

Quantitative Equity Fund's objectives are to provide a total return greater
than the total return of the US stock market (as measured by the Russell
1000(R) Index over a market cycle of four to six years), while maintaining
volatility and diversification similar to the Index. Quantitative Equity Fund
seeks to achieve its objectives by investing in equity securities.

20
<PAGE>

the Fund's investment objectives. The money managers anticipate that the
Fund's average price/earnings ratio, yield and other fundamental
characteristics will be near the averages of the Russell Index.

The Fund will attempt to be fully invested in common stock at all times.
However, the Fund is permitted to hold up to 20% of Fund assets in liquid
investments to meet redemption requests.

INTERNATIONAL SECURITIES FUND

International Securities Fund's objectives are to provide favorable total
return and additional diversification for US investors. International
Securities Fund attempts to achieve its objectives by investing primarily in
the equity and fixed-income securities of foreign companies, and securities
issued by foreign governments. The Fund invests primarily in equity securities
issued by companies domiciled outside the United States. The Fund may also
invest in US companies which derive, or are expected to derive, a substantial
portion of their revenues from operations outside the United States.

DIVERSIFIED BOND FUND

Diversified Bond Fund's objectives are to provide effective diversification
against equities and a stable level of cash flow by investing in fixed-income
securities.

It is FRIMCo's philosophy that investors should strategically allocate
investments among a number of asset classes and should see a mix of investment
styles. As with the Trust's other Funds, this Fund seeks to provide
shareholders with a diversification of Money Manager styles. The Fund's
portfolio is different from mutual funds that invest primarily in equity
securities. To this end, the Fund seeks to provide a stable level of cash flow
by investing in fixed income investments that balance a shareholder's
investments in mutual funds that invest in equity securities.

21
<PAGE>

economic and market factors. Money managers will evaluate potential
investments by sector, maturity, quality, and other criteria. The Fund will
ordinarily invest at least 65% of its net assets in securities rated no less
than A or A-2 by S&P; A or Prime-2 by Moody's; or, if unrated, judged by the
money manager to be of at least equal credit quality to those designations.

VOLATILITY CONSTRAINED BOND FUND

Volatility Constrained Bond Fund's objectives are the preservation of
capital and the generation of current income consistent with the preservation
of capital by investing primarily in fixed-income securities with low-
volatility characteristics.

Although the Fund will invest primarily in debt securities denominated in
the US dollar, the money managers will actively manage the Fund's portfolio in
accordance with a multi-market investment strategy. Accordingly, the money
managers will allocate the Fund's investments among securities denominated in
the currencies of the US and selected foreign countries. The Fund may also
invest in high-quality, foreign debt securities. The money managers which
invest in foreign denominated securities will maintain a substantially neutral
currency exposure relative to the US dollar, and will establish and adjust
cross currency hedges based on their perception of the most favorable markets
and issuers. In this regard, the percentage of assets invested in securities
of a particular country or denominated in a particular currency will vary in
accordance with a money manager's assessment of the relative yield of such
securities and the relationship of a country's currency to the US dollar.
Money managers of the Fund will consider fundamental economic strength, credit
quality and interest rate trends in determining whether to increase or
decrease the emphasis placed upon a particular type of security or industry
sector. The Fund will not invest more than 10% of its total assets in debt
securities denominated in a single foreign currency, and FRIMCo currently
intends to limit total investments in non-US dollar securities to no more than
25% of the Fund's total assets.

In selecting particular investments for the Fund, the money managers will
seek to minimize investment risk by limiting their portfolio investments to
debt securities of high-quality issuers. Accordingly, the Fund's portfolio
will consist only of: (a) US Government obligations; (b) obligations issued or
guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies, or instrumentalities; (c) obligations issued or
guaranteed by supranational entities all of which are rated AAA or AA by S&P
or Aaa or Aa by Moody's or, if unrated, determined to be of comparable quality
by the money managers; (d) investment grade corporate debt

22
<PAGE>

securities (or, if unrated, corporate debt securities which the money managers
determine to be of equivalent quality); (e) bank instruments; and (f)
commercial paper.

The Board of Trustees of the Fund has concluded that it would be in the
interests of the shareholders to reorganize the Fund into the Trust's Fixed
Income II Fund, which is described in the Trust's Institutional Funds
prospectus. A proposal will be submitted to the shareholders of the Fund at
the 1998 Shareholder Meeting seeking approval of this reorganization.

The Fund intends to use interest rate swaps as a hedge and not as a
speculative investment.

MULTISTRATEGY BOND FUND

Multistrategy Bond Fund's objective is to provide maximum total return,
primarily through capital appreciation and by assuming a higher level of
volatility than is ordinarily expected from broad fixed-income market
portfolios. Multistrategy Bond Fund seeks to achieve its objective by
investing in fixed-income securities.

The Fund will invest primarily in fixed-income securities. The Fund's
investments will include: US Government Securities; obligations of foreign
governments or their subdivisions, agencies and instrumentalities; securities
of international agencies or supranational agencies; corporate debt
securities; loan participations; corporate commercial paper; indexed
commercial paper; variable, floating and zero coupon rate securities; mortgage
and other asset-backed securities; municipal obligations; variable amount
demand master notes; bank instruments; repurchase agreements and reverse
repurchase agreements; and foreign currency exchange related securities.

The Fund may also invest in convertible securities and derivatives including
warrants and interest rate swaps. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio to protect against any increase in the
price of securities it anticipates purchasing at a later date. The Fund
intends to use these transactions as a hedge and not as a speculative
investment. For more information on risks see "Risk Considerations."

FUND INVESTMENT SECURITIES

Commercial Paper

Volatility Constrained Bond and Multistrategy Bond Funds may invest in
commercial paper. Commercial paper represents a debt obligation of a company
which is unsecured. Volatility Constrained Bond and Multistrategy Bond Funds
will invest in commercial paper which is rated A-1 or A-2 by S&P; Prime-1 or
Prime-2 by Moody's; Fitch-1 or Fitch-2 by Fitch Investors Service, Inc.; Duff
1 or Duff 2 by Duff & Phelps, Inc.; or TBW-1 or TBW-2 by Thomson Bank Watch,
Inc. Volatility Constrained Bond and Multistrategy Bond Funds may also invest
in commercial paper which is not rated if it is issued by US or foreign
companies which the money managers conclude are of high-quality and have
outstanding debt securities which are rated AAA, AA or A by S&P; or Aaa, Aa or
A by Moody's.

DEBT SECURITIES

The Funds may purchase debt securities that complement their respective
investment objectives. The Funds, except Multistrategy Bond Fund, do not
invest in debt securities rated less than BBB by S&P or Baa by Moody's,

23
<PAGE>

or in unrated securities judged by the money managers to be of a lesser credit
quality than those designations. Securities rated BBB by S&P or Baa by Moody's
and above are considered by those rating agencies to be "investment grade"
securities, although Moody's considers securities rated Baa, and S&P considers
securities rated BBB, to have some speculative characteristics. The Funds,
other than Multistrategy Bond Fund, will sell securities whose ratings drop
below these minimum ratings, in a prudent manner as determined by the money
managers. The market value of debt securities generally varies inversely with
interest rates.

EQUITY SECURITIES

Diversified Equity, Special Growth, Equity Income, Quantitative Equity and
International Securities Funds invest primarily in equity securities.
Diversified Equity, Special Growth, Equity Income and Quantitative Equity
Funds may invest in common stock equivalents. The following constitute common
stock equivalents: rights and warrants and convertible securities. Common
stock equivalents may be converted into or provide the holder with the right
to common stock. Diversified Equity, Special Growth, Equity Income and
Quantitative Equity Funds may also invest in other types of equity securities,
including preferred stocks.

FOREIGN DEBT SECURITIES

Multistrategy Bond and International Securities Funds' portfolios may
include debt securities issued by domestic or foreign entities, and
denominated in US dollars or foreign currencies. The Multistrategy Bond Fund
anticipates that no more than 25% of its net assets will be denominated in
foreign currencies. The Funds will only use foreign currency exchange
transactions (options on foreign currencies, foreign currency futures
contracts and forward foreign currency contracts) for the purpose of hedging
against foreign currency exchange risk arising from the Funds' investments, or
anticipated investments, in securities denominated in foreign currencies.
Foreign investment may include emerging market debt. The risks associated with
investment in securities issued by foreign governments and companies are
described under "Risk Considerations -- Investment in Foreign Securities."
Emerging markets consist of countries determined by the money managers of the
Fund 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. The Funds may
invest in the following types of emerging market debt -- bonds; notes and
debentures of emerging market governments; debt and other fixed income
securities issued or guaranteed by emerging market government agencies,
instrumentalities or central banks; and other fixed-income securities issued
or guaranteed by banks or other companies in emerging markets which the money
managers believe are suitable investments for the Funds. Under current market
conditions, it is expected that emerging market debt will consist
predominantly of Brady Bonds and other sovereign debt. Brady Bonds are
products of the "Brady Plan," under which bonds are issued in exchange for
cash and certain of the country's outstanding commercial bank loans.

INTEREST RATE SWAPS

Volatility Constrained Bond and Multistrategy Bond Funds may enter into
interest rate swaps. When a Fund engages in an interest rate swap, it
exchanges its obligations to pay or rights to receive interest payments for
the obligations or rights to receive interest payments of another party (i.e.,
an exchange of floating rate payments for fixed rate payments). The Funds
expect to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of their portfolios or to protect
against any increase in the price of securities they anticipate purchasing at
a later date.

24
<PAGE>

OTHER DEBT SECURITIES

Multistrategy Bond Fund may invest in debt securities issued by
supranational organizations such as:

The World Bank -- An international bank which was chartered to finance
development projects in developing member countries.

The European Community -- An organization which consists of certain
European states engaged in cooperative economic activities.

The European Coal and Steel Community -- An economic union of various
European nations' steel and coal industries.

The Asian Development Bank -- An international development bank
established to lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific regions.

Multistrategy Bond Fund may also invest in debt securities denominated in
the ECU, which is a "basket" consisting of specific amounts of currency of
member states of the European Economic Community. The Counsel of Ministers of
the European Economic Community may adjust specific amounts of currency
comprising the ECU to reflect changes in the relative values of the underlying
currencies. The money managers investing in these securities do not believe
that such adjustments will adversely affect holders of ECU-denominated
obligations or the marketability of the securities.

US GOVERNMENT OBLIGATIONS

25
<PAGE>

The following table illustrates the investments that the Funds primarily
invest in or are permitted to invest in:

<TABLE>
<CAPTION>
VOLATILITY
DIVERSIFIED SPECIAL EQUITY QUANTITATIVE INTERNATIONAL DIVERSIFIED CONSTRAINED MULTISTRATEGY
TYPE OF PORTFOLIO EQUITY GROWTH INCOME EQUITY SECURITIES BOND BOND BOND
SECURITY FUND FUND FUND FUND FUND FUND FUND FUND
----------------- ----------- ------- ------ ------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stocks........... X X X X X
Common stock equivalents
(warrants)............. X X X X X
Common stock equivalents
(options).............. X X X X X
Common stock equivalents
(convertible debt
securities)............ X X X X X
Common stock equivalents
(depository receipts)..
Preferred stocks........ X X X X X
Equity derivative secu-
rities................. X X X X X
Debt securities (below
investment grade or
junk bonds)............ X
US government securi-
ties................... X X X X X X X X
Municipal obligations... X
Foreign securities...... X X
</TABLE>

26
<PAGE>

OTHER INVESTMENT PRACTICES

<TABLE>
<CAPTION>
VOLATILITY
DIVERSIFIED SPECIAL EQUITY QUANTITATIVE INTERNATIONAL DIVERSIFIED CONSTRAINED MULTISTRATEGY
EQUITY GROWTH INCOME EQUITY SECURITIES BOND BOND BOND
TYPE OF PRACTICE FUND FUND FUND FUND FUND FUND FUND FUND
---------------- ----------- ------- ------ ------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash reserves........... X X X X X X X X
Repurchase agree-
ments(1)............... X X X X X X X X
When-issued and forward
commitment securities.. X X X X X X X X
Reverse repurchase
agreements ............ X X X X X X X X
Lending portfolio
securities, not to
exceed 33 1/3% of total
Fund assets............ X X X X X X X X
Illiquid securities
(limited to 15% of a
Fund's net assets)..... X X X X X X X X
Forward currency
contracts(2)........... X X X X
Write (sell) call and
put options on
securities, securities
indexes and foreign
currencies(3).......... X X X X X X X X
Purchase options on
securities, securities
indexes, and
currencies(3).......... X X X X X X X X
Interest rate futures
contracts, stock index
futures contracts,
foreign currency
contracts and options
on futures(4).......... X X X X X X X X
Liquidity portfolios.... X X X X X
</TABLE>
- ---------------------
(1) Under the 1940 Act, repurchase agreements are considered to be loans by a
Fund and must be fully collateralized by collateral assets. If the seller
defaults on its obligations to repurchase the underlying security, a Fund
may experience delay or difficulty in exercising its rights to realize
upon the security, may incur a loss if the value of the security declines
and may incur disposition costs in liquidating the security.
(2) International Securities, Diversified Bond, Volatility Constrained and
Multistrategy Bond Funds may not invest more than 33% of its assets in
these contracts.
(3) A Fund will only engage in options where the options are traded on a
national securities exchange or in an over-the-counter market. A Fund may
invest up to 5% of its net assets, represented by the premium paid, in
call and put options. A 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.
(4) A Fund does not enter into any futures contracts or related options if the
sum of initial margin deposits on futures contracts, related options
(including options on securities, securities indexes and currencies) and
premiums paid for any such related options would exceed 5% of its total
assets. A Fund does not purchase futures contracts or related options if,
as a result, more than one-third of its total assets would be so invested.

27
<PAGE>

Investment Restrictions. If a Fund changes its investment objectives or
policies, you should consider whether the Fund remains right for you. The
Funds are subject to additional investment policies and restrictions described
in the SAI, some of which are fundamental.

RISK CONSIDERATIONS

Variable and Floating Rate Securities. The Multistrategy Bond Fund may
invest in variable and floating rate securities. The variable and floating
rate securities provide for a periodic adjustment in the interest rate paid on
the obligations. The terms of such obligations must provide that interest
rates are adjusted periodically based upon some appropriate interest rate
adjustment index. The adjustment intervals may be regular (i.e., daily,
monthly, annually, etc.) or event based (i.e., a change in the prime rate).
The Fund may also invest in zero coupon US Treasury, foreign government and US
and foreign corporate debt securities, which are bills, notes and bonds that
have been stripped of their unmatured interest coupons and receipts or
certificates which represent interests in such stripped debt obligations and
coupons. A zero coupon security pays no interest to its holder prior to
maturity. Accordingly, these securities usually trade at a deep discount from
their face or par value and will be subject to greater market value
fluctuations in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest.

Investment in Foreign Securities. The Funds may invest in foreign securities
traded on US or foreign exchanges or in 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 US 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 to 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 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 US 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 Funds'
foreign securities will generally be denominated in foreign currencies, the
value of such securities to the Funds 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 US dollar will result in a corresponding change
in the US dollar value of the Funds' foreign securities. In addition, some
emerging market countries may have fixed or managed currencies which are not
free-floating against the US dollar. Further, certain emerging

28
<PAGE>

market countries' currencies may not be internationally traded. Certain of
these currencies have experienced a steady devaluation relative to the US
dollar. Many emerging market 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 countries.

Volatility Constrained Bond Fund and Multistrategy Bond Fund may invest in
bank instruments, which include European certificates of deposit ("ECDs"),
European time deposits ("ETDs") and Yankee Certificates of deposit ("Yankee
CDs"). ECDs, ETDs, and Yankee CDs are subject to somewhat different risks from
the obligations of domestic banks. ECDs are dollar denominated certificates of
deposit issued by foreign branches of US and foreign banks; ETDs are US dollar
denominated time deposits in a foreign branch of a US bank or a foreign bank;
and Yankee CDs are certificates of deposit issued by a US branch of a foreign
bank denominated in US dollars and held in the United States. Different risks
may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the money managers when evaluating credit risk
in the selection of investments for the Volatility Constrained Bond Fund and
Multistrategy Bond Fund.

High Risk Bonds. The Multistrategy Bond Fund may invest up to 25% 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 money managers of the Fund 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. While the debt may have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions. Multistrategy Bond Fund's money managers will
seek to reduce the risks associated with investing in lower-rated debt
securities by limiting the Fund's holdings in the securities and by the depth
of the managers' credit analysis. For additional information, refer to the
SAI.

29
<PAGE>

PORTFOLIO TRANSACTION POLICIES

Money managers make decisions to buy and sell securities for the Fund assets
assigned to them. FRIMCo makes determinations for any other Fund assets. The
Funds do not give significant weight to attempting to realize long term rather
than short term capital gains while making portfolio investment decisions.

Each money manager makes decisions to buy or sell securities independently
from other managers. Thus, one money manager for a Fund may be selling a
security when another money manager for the Fund (or for another Fund) is
purchasing the same security. Also, when a money manager's services are
terminated, the new money manager may significantly restructure an investment
portfolio. These practices may increase the Funds' portfolio turnover rates,
realization of gains or losses, brokerage commissions and other transaction
costs. The annual portfolio turnover rates for each of the Funds are shown in
the Financial Highlights tables in this Prospectus.

30
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS

Each Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year. The amount and frequency of
distributions are not guaranteed--all distributions are at the Board's
discretion. Currently, the Board intends to declare dividends from net
investment income and net short-term capital gains (if any), according to the
following schedule:

<TABLE>
<CAPTION>
DECLARED PAYABLE FUNDS
-------- ------- -----
<S> <C> <C>
Monthly............ Early in the following month Diversified Bond, Volatility
Constrained Bond and
Multistrategy Bond Funds

Quarterly.......... Mid: April, July, October and Diversified Equity, Special
December Growth, Equity Income and
Quantitative Equity Funds

Annually........... Mid-December International Securities Fund
</TABLE>

CAPITAL GAINS DISTRIBUTIONS

The Board annually intends to declare capital gains distributions of net
capital gains realized during the period from November 1 through October 31
(excess of capital gains over capital losses), generally in mid-December. To
meet certain legal requirements, a Fund may declare special year-end dividend
and capital gains distributions during October, November or December to
shareholders of record in that month. These latter distributions are deemed to
have been paid by a Fund and received by you on December 31 of the prior year,
provided that the Fund pays them by January 31. Capital gains realized during
November and December will be distributed to you during February of the
following year.

BUYING A DIVIDEND

AUTOMATIC REINVESTMENT

TAXES

31
<PAGE>

income and diversification of assets. Accordingly, a Fund will generally not
be liable for federal income or excise taxes based on net income except to the
extent its earnings are not distributed or are distributed in a manner that
does not satisfy the requirements of the Code. The Funds may be subject to
nominal, if any, state and local taxes.

For federal income tax purposes, the dividends from net investment income
and any excess of net short-term capital gains over net long-term capital loss
that you receive from the Funds are considered ordinary income. However,
depending upon the relevant state tax rules, a portion of the dividends paid
by Diversified Bond, Volatility Constrained Bond and Multistrategy Bond Funds
attributable to direct US Treasury and agency obligations may be exempt from
state and local taxes. 28% and 20% capital gains distributions declared by the
Board are taxed at the respective capital gains rates regardless of the length
of time you have held the shares. Distributions of income and capital gains
are taxed in the manner described above, whether you receive them in cash or
reinvest them in additional shares of the Funds. Distributions paid in excess
of a Fund's earnings will be treated as a non-taxable return of capital.

A Fund will notify you of the source of its dividends and distributions at
the time they are paid. After the close of each calendar year, the Funds will
advise their shareholders of the amounts of:

. ordinary income dividends, 28% capital gain dividends and 20% capital
gain distributions, including any amounts which are deemed paid on
December 31 of the prior year;

. dividends which qualify for the 70% dividends-received deduction
available to corporations;

. any foreign taxes assessed against Diversified Bond, Volatility
Constrained Bond, Multistrategy Bond and/or International Securities
Fund;

. income which is a tax preference item (if any) for alternative minimum
tax purposes; and

. the percentages of Diversified Bond, Volatility Constrained Bond and
Multistrategy Bond Funds' income attributable to US government, Treasury
and agency securities.

If you are a corporate investor, a portion of the dividends from net
investment income paid by Diversified Equity, Special Growth, Equity Income
and Quantitative Equity Funds will generally qualify in part for the corporate
dividends-received deduction. However, the portion of the dividends so
qualified depends on the aggregate qualifying dividend income received by each
Fund from domestic (US) sources. Certain holding period and debt financing
restrictions may apply to corporate investors seeking to claim the deduction.
You should consult your tax adviser.

The sale of shares of a 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
portfolios of a mutual fund). Any loss incurred on the sale or exchange of a
Funds' shares, held for six months or less, will be disallowed to the extent
of exempt-interest dividends (described below) paid with respect to shares.
Any loss not disallowed will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.

32
<PAGE>

particular year. Those distributions will be made from a Fund's cash assets or
from the proceeds of sales of portfolio securities (if necessary). The Funds
may realize capital gains or losses from those sales, which could further
increase or decrease the Funds' dividends and distributions paid to
shareholders.

Each Fund is required to withhold 31% of all taxable dividends,
distributions and redemption proceeds payable to any non-corporate 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.

Additional information on these and other tax matters relating to the Funds
and their shareholders is included in the section entitled "Taxes" in the SAI.

PERFORMANCE INFORMATION

From time to time, the Funds may publish their total return and average
annual total return, and, in the case of certain Funds, current yield, in
advertisements and investor communications. Total return information generally
will include a Fund's 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. The average annual total returns for Class S
Shares of each of the Funds are as follows:

<TABLE>
<CAPTION>
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED INCEPTION TO
DEC. 31, DEC. 31, 1997 DEC. 31, 1997 DEC. 31, 1997
1997 (ANNUALIZED) (ANNUALIZED) (ANNUALIZED)
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Diversified Equity...... 31.32% 19.32% 16.97% 16.48%
Special Growth.......... 28.77% 16.90% 15.57% 14.78%
Equity Income........... 33.59% 20.04% 17.34% 15.60%
Quantitative Equity..... 32.70% 20.46% 17.39% 15.40%
International Securi-
ties................... .26% 10.73% 8.16% 13.14%
Diversified Bond........ 9.09% 7.18% 8.52% 8.82%
Volatility Constrained
Bond................... 5.90% 5.37% 6.81% 6.81%
Multistrategy Bond...... 9.50% 7.23%*
</TABLE>
- ---------------------
* From inception on January 29, 1993 to December 31, 1997.

The Diversified Bond, Volatility Constrained Bond and Multistrategy Bond
Funds also may from time to time advertise their yields. Yield, which is based
on historical earnings and is not intended to indicate future performance, is
calculated by dividing the net investment income per share earned during the
most recent 30-day (or one month) period by the maximum offering price per
share on the last day of the month. This income is then annualized -- The
amount of income generated by the investment during that 30-day (or one month)
period is assumed to be generated each month over a 12-month period and is
shown as a percentage of the investment. For purposes of the yield
calculation, interest income is computed based on the yield to maturity of
each debt obligation and dividend income is computed based upon the stated
dividend rate of each security in a Fund's portfolio. The calculation includes
all recurring fees that are charged. The 30-day yields for the year ended
December 31, 1997 for the Class S Shares of the Diversified Bond, Volatility
Constrained Bond and Multistrategy Bond Funds were, respectively 5.88%, 5.39%
and 5.63%.

Each Fund may also advertise non-standardized performance information that
is for periods in addition to those that are legally required by the SEC.

33
<PAGE>

HOW NET ASSET VALUE IS DETERMINED

NET ASSET VALUE PER SHARE

The net asset value per share is calculated for shares of each class of each
Fund on each business day on which shares are offered or redemption orders are
tendered. For all Funds, a business day is one on which the NYSE is open for
trading. Net asset value per share is computed for Class S Shares of a Fund by
dividing the current value of the Fund's assets attributable to the Class S
Shares, less liabilities attributable to the Class S Shares, by the number of
Class S Shares of the Fund outstanding, and rounding to the nearest cent. All
Funds determine net asset value as of the close of the NYSE (currently 4:00
p.m. Eastern time).

VALUATION OF PORTFOLIO SECURITIES

With the exceptions noted below, the Funds value their portfolio securities
at "fair market value." This generally means that equity securities and fixed-
income securities listed and principally traded on any national securities
exchange are valued on the basis of the last sale price or, if there were no
sales, at the closing bid price, on the primary exchange on which the security
is traded. US 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 sale price.

Money market instruments maturing within 60 days of the valuation date held
by the Funds are valued using the amortized cost method. Under this method, a
portfolio instrument is initially valued at cost, and thereafter a constant
accretion/amortization to maturity of any discount or premium is assumed. The
Funds utilize the amortized cost valuation method in accordance with the Rule.
The money market instruments are valued at "amortized cost" unless the Board
determines that amortized cost does not represent fair value. While amortized
cost provides certainty in valuation, it may result in periods when the value
of an instrument is higher or lower than the price a Fund would receive if it
sold the instrument.

The Funds value securities for which market quotations are not readily
available at "fair value," as determined in good faith and in accordance with
procedures established by the Board.

HOW TO PURCHASE SHARES

Russell Funds are generally available only through a select network of
qualified Financial Intermediaries. If you are not currently working with one
of these Financial Intermediaries, please call Russell Investor Services at
(800) RUSSEL4, (787-7354) for assistance in contacting an investment
professional near you.

Certain information noted below, including trade deadlines and payment
procedures, are included for informational purposes only. Contact your
Financial Intermediary for further details.

34
<PAGE>

PAYING FOR SHARES

Cash, third party checks and checks drawn on credit card accounts will not
be accepted.

All purchases must be made in U.S. dollars.

Checks and other negotiable bank drafts must be drawn on U.S. banks and made
payable to "Frank Russell Investment Company."

OFFERING DATES AND TIMES

Orders must be received by the Transfer Agent on any day when Fund shares
are offered, prior to the close of the NYSE (currently 4:00 p.m. Eastern
time).

ORDER AND PAYMENT PROCEDURES

BY MAIL

BY FEDERAL FUNDS WIRE

BY AUTOMATED CLEARING HOUSE ("ACH")

An investor can make initial or subsequent investments through ACH to the
Funds' Custodian, State Street Bank and Trust Company. Funds transferred by
ACH 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 on the day received by the
Funds' Custodian. In that case, the order would be placed on the next business
day.

35
<PAGE>

AUTOMATED INVESTMENT PROGRAM

THREE DAY SETTLEMENT PROGRAM

EXCHANGE PRIVILEGE

BY MAIL OR TELEPHONE

IN-KIND EXCHANGE OF SECURITIES

36
<PAGE>

exchange will be considered in valuing the securities. All interest,
dividends, subscription or other rights attached to the securities becomes the
property of the Fund, along with the securities. Please contact your Financial
Intermediary for further information.

HOW TO REDEEM SHARES

REDEMPTION DATES AND TIMES

BY MAIL OR TELEPHONE

SYSTEMATIC WITHDRAWAL PROGRAM

PAYMENT OF REDEMPTION PROCEEDS

BY CHECK

A check for the redemption proceeds will be sent to the shareholder(s) of
record at the address of record within seven days after receipt of a
redemption request in proper form.

BY WIRE

37
<PAGE>

Transfer Agent. Wire transfers may be charged a fee to cover the cost of the
wire (for redemptions less than $1,000) and your bank may charge an additional
fee to receive the wire. Wire transfers can be sent to domestic commercial
banks which are members of the Federal Reserve System.

WRITTEN INSTRUCTIONS

PROPER FORM: Written instructions must include:

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE

<TABLE>
<S> <C>
ACCOUNT TYPE REQUIREMENTS FOR WRITTEN REQUESTS
- ------------------------------------------------------------------------------------
Individual, Joint Written instructions must be signed by each shareholder,
Tenants, Tenants in exactly as the names appear in the account registration.
Common
- ------------------------------------------------------------------------------------
UGMA or UTMA (custodial Written instructions must be signed by the custodian in
accounts for minors) his/her capacity as it appears in the account
registration.
- ------------------------------------------------------------------------------------
Corporation, Association Written instructions must be signed by authorized
person(s), stating his/her capacity as indicated by the
corporate resolution to act on the account.
A copy of the corporate resolution, certified within the
past 90 days, authorizing the signer to act.
- ------------------------------------------------------------------------------------
Estate, Trust, Pension, Written instructions must be signed by all trustees.
Profit Sharing Plan
If the name of the trustee(s) does not appear in the
account registration, please provide a copy of the trust
document certified within the last 60 days.
- ------------------------------------------------------------------------------------
Joint tenancy Written instructions must by signed by the surviving
shareholders whose tenant(s).
co-tenants are
deceased
A certified copy of the death certificate must accompany
the request.
</TABLE>

38
<PAGE>

SIGNATURE GUARANTEE

ACCOUNT POLICIES

THIRD PARTY TRANSACTIONS

REDEMPTION IN-KIND

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, INDEPENDENT ACCOUNTANTS, AND REPORTS

YEAR 2000

39
<PAGE>

their computer systems to prepare for the year 2000 and expect that their
systems, and those of their outside service providers, will be adapted in time
for that event. The obligation to make such adaptations, if any, would be the
responsibility of the service provider that maintains the system. Therefore,
the Trust does not expect to incur any material expense in that regard.

ORGANIZATION, CAPITALIZATION, AND VOTING

The Trust is organized and operates as a Massachusetts business trust.
Russell has the right to grant (and withdraw) the nonexclusive use of the name
"Frank Russell" or any variation.

The Trustees hold office for the life of the Trust. A Trustee may resign or
retire, and a Trustee may be removed by the Trustees or by shareholders at a
special meeting.

In addition to offering Class S Shares, the Funds also offer beneficial
interests in Class E Shares, which are described in a separate prospectus.
Class E Shares are designed to meet different investor needs and are subject
to a shareholder servicing fee. This fee may affect the performance of the
Class E Shares. To obtain more information about Class E Shares, contact your
Financial Intermediary, or write or telephone the Trust.

At March 31, 1998, no one Shareholder could be deemed by the 1940 Act to
"control" the Funds.

MONEY MANAGER PROFILES

The money managers have no other affiliations with the Funds, FRIMCo or with
Frank Russell Company. Each money 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 Funds
in the Trust, or to other clients of Frank Russell Company, including its
wholly owned subsidiary, Frank Russell Trust Company.

DIVERSIFIED EQUITY FUND

Alliance Capital Management L.P., First Bank Place, 601 2nd Ave. South,
Suite 5000, Minneapolis, MN 55402-4322, is a limited partnership whose (i)
general partner is a wholly owned subsidiary of The Equitable Companies
Incorporated ("The Equitable") and (ii) majority unit holder is ACM, Inc., a
wholly owned subsidiary of The Equitable. As of March 1, 1995, 60.5% of The
Equitable was owned by Axa, a French insurance holding company.

40
<PAGE>

Barclays Global Fund Advisors N.A., 45 Fremont Street, San Francisco, CA
94105, is an indirect, wholly-owned subsidiary of Barclays Bank PLC.

Equinox Capital Management, Inc., 590 Madison Avenue, 41st Floor, New York,
NY 10022. Equinox is a registered investment adviser with majority ownership
held by Ron Ulrich.

INVESCO Capital Management, Inc., 1315 Peachtree Street N.E., Suite 500,
Atlanta, GA 30309, is a corporation whose indirect parent is AMVESCO, PLC, a
London-based financial services holding company.

Morgan Stanley Asset Management, Inc., 1221 Avenue of the Americas, New
York, NY 10020, is a wholly owned subsidiary of Morgan Stanley Dean Witter &
Co., a publicly held corporation.

Peachtree Asset Management, One Peachtree Center, Suite 4500, 303 Peachtree
Street N.E., Atlanta, GA 30308. Peachtree is a unit of the Smith Barney Asset
Management division of Smith Barney Mutual Funds Management Inc., which is a
wholly owned subsidiary of Travelers Group Inc.

Trinity Investment Management Corporation, 75 Park Plaza, Boston, MA 02116,
is a corporation with seven shareholders, with Stanford M. Calderwood holding
majority ownership.

SPECIAL GROWTH FUND

Delphi Management, Inc., 50 Rowes Wharf, Suite 440, Boston, MA 02110, is
100% owned by Scott Black.

41
<PAGE>

Jacobs Levy Equity Management, Inc., 280 Corporate Center, 3 ADP Boulevard,
Roseland, NJ 07068, is 100% owned by Bruce Jacobs and Kenneth Levy.

Sirach Capital Management, Inc., One Union Square, Suite 3323, 600 Union
Street, Seattle, WA 98101, is a wholly owned subsidiary of United Asset
Management Company, a publicly traded corporation.

EQUITY INCOME FUND

Brandywine Asset Management, Inc., Three Christina Centre, Suite 1200, 201
N. Walnut Street, Wilmington, DE19801, is a wholly-owned subsidiary of Legg
Mason, Inc.

Equinox Capital Management, Inc., See: Diversified Equity Fund.

Trinity Investment Management Corporation, See: Diversified Equity Fund.

QUANTITATIVE EQUITY FUND

Barclays Global Fund Advisors, See: Diversified Equity Fund.

J.P. Morgan Investment Management, Inc., 522 Fifth Ave., New York, NY 10036,
is a wholly owned subsidiary of J.P. Morgan & Co., Inc., a publicly held bank
holding company.

INTERNATIONAL SECURITIES FUND

J.P. Morgan Investment Management, Inc., See: Quantitative Equity Fund.

Marathon Asset Management Limited, Orion House, 5 Upper St. Martin S. Lane,
London, England WC2H 9EA, is a corporation 33.3% owned by each of the
following: Jeremy Hosking, William Arah and Neil Ostrer.

42
<PAGE>

Sanford C. Bernstein & Co., Inc., 767 Fifth Avenue, New York, NY 10153, is a
registered investment adviser. Founded in 1967, Bernstein is controlled by its
Board of Directors, which consists of the following individuals: Andrew S.
Adelson, Zalman C. Berstein, Kevin R. Rine, Charles C. Cahn, Jr., Marilyn
Goldstein Fedak, Michael L. Goldstein, Roger Hertog, Lewis A. Sanders and
Francis H. Trainer, Jr.

The Boston Company Asset Management, Inc., One Boston Place, 14th Floor,
Boston, MA 02108-4402, is 100% owned by Mellon Bank Corporation, a publicly
held corporation.

DIVERSIFIED BOND FUND

Lincoln Capital Management Company, See: Diversified Equity Fund.

Pacific Investment Management Company, 840 Newport Center Drive, Suite 360,
Newport Beach, CA 92660, is a subsidiary partnership of PIMCO Advisers L.P.
("Partnership"). PIMCO Partners, G.P. is the sole general partner of the
Partnership. Pacific Financial Asset Management Corporation indirectly holds a
majority interest in PIMCO Partners, G.P., with the remainder held indirectly
by a group comprised of PIMCO managing directors.

Standish, Ayer & Wood, Inc., One Financial Center, Boston, MA 02111, whose
ownership is divided among seventeen directors, with no director having more
than a 25% ownership interest.

VOLATILITY CONSTRAINED BOND FUND

BlackRock Financial Management, 345 Park Ave., New York, NY 10154, is a
wholly-owned indirect subsidiary of PNC Bank.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

STW Fixed Income Management Ltd., Trinity Hall, 43 Cedar Avenue, P.O. Box
2910 Hamilton HM KX, Bermuda, is a Bermuda exempted company. William H.
Williams III is the sole shareholder.

43
<PAGE>

MULTISTRATEGY BOND FUND

BEA Associates Inc., One Citicorp Center, 153 East 53rd Street, 58th Floor,
New York, NY 10022, is a general partnership of Credit Suisse Capital
Corporation ("CS Capital") and Basic Appraisals, Inc. ("Basic"). CS Capital is
an 80% partner, and is a wholly owned subsidiary of Credit Suisse Investment
Corporation, which is in turn a wholly-owned subsidiary of Credit Suisse, a
Swiss bank, which is in turn a subsidiary of CS Holding, a Swiss corporation.
No one person or entity possesses a controlling interest in Basic, the 20%
partner. BEA Associates is a registered investment adviser.

Pacific Investment Management Company, See: Diversified Bond Fund.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATIONS THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUNDS OR
THE MONEY MANAGERS SINCE THE DATE HEREOF; HOWEVER, IF ANY MATERIAL CHANGE
OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

44
<PAGE>

GLOSSARY

Agreements -- Asset Management Services Agreements, which are between FRIMCo
and institutional investors and Financial Intermediaries.

Board -- The Board of Trustees of the Trust.

Cash reserves -- Each 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 of comparable
quality to the Fund's permitted investments. As an alternative to a Fund
directly investing in money market instruments, the Funds and their money
managers may elect to invest the Fund's cash reserves in the Trust's Money
Market Fund. To prevent duplication of fees, FRIMCo waives its management fee
on that portion of a Fund's assets invested in the Trust's Money Market Fund.

Code -- Internal Revenue Code of 1986, as amended.

Covered put option -- A put option is "covered" if the Fund has collateral
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security.

Custodian -- State Street Bank and Trust Company, the Trust's custodian and
portfolio accountant.

Depository receipts -- These include American Depository Receipts ("ADRs"),
European Depository Receipts, Global Depository Receipts, and other similar
securities convertible into securities of foreign issuers. ADRs are receipts
typically issued by a United States bank or trust company evidencing ownership
of the underlying securities. Generally, ADRs in registered form are designed
for use in US securities markets.

Distributor -- Russell Fund Distributors, Inc., the organization that sells
the shares of the Funds under a contract with the Trust.

45
<PAGE>

Emerging market companies -- A company in an emerging market means (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 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.

Equity derivative securities -- These include, among other instruments,
options on equity securities, warrants and futures contracts on equity
securities.

Financial Intermediary -- Bank trust departments, registered investment
advisers, broker-dealers and other Eligible Investors that have entered into
Agreements with FRIMCo

FNMA -- Federal National Mortgage Association

Forward commitments -- Each Fund may agree 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 the transactions are
consistent with the Fund's ability to manage its portfolio and meet redemption
requests. When effecting these transactions, liquid assets of a Fund of a
dollar amount sufficient to make payment for the portfolio securities to be
purchased are segregated on the Fund's records at the trade date and
maintained until the transaction is settled.

Forward currency contracts -- This is a contract individually negotiated and
privately traded by currency traders and their customers and creates an
obligation to purchase or sell a specific currency for an agreed-upon price at
a future date. The Funds generally do not enter into forward contracts with
terms greater than one year, and they typically enter into forward contracts
only under two circumstances. First, if a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may
desire to "lock in" the US dollar price of the security by entering into a
forward contract to buy the amount of a foreign currency needed to settle the
transaction. Second, if the Fund's money managers believe that the currency of
a particular foreign country will substantially rise or fall against the US
dollar, the Fund may enter into a forward contract to buy or sell the currency
approximating the value of some or all of the Fund's portfolio securities
denominated in the currency. A Fund will not enter into a forward contract if,
as a result, it would have more than one-third of its assets committed to such
contracts (unless it owns the currency that it is obligated to deliver or has
caused the Custodian to segregate segregable assets having a value sufficient
to cover its obligations). Although forward contracts are used primarily to
protect a Fund from adverse currency movements, they involve the risk that
currency movements will not be accurately predicted.

FRIMCo -- Frank Russell Investment Management Company, the Trust's
administrator, manager and transfer and dividend paying agent.

46
<PAGE>

GNMA -- Government National Mortgage Association

IRS -- Internal Revenue Service

Lending portfolio securities -- Each Fund may lend portfolio securities with
a value of up to 33 1/3% of each Fund's total assets. These loans may be
terminated at any time. A Fund will receive either cash (and agree to pay a
"rebate" interest rate), US government or US government agency obligations as
collateral in an amount equal to at least 102% (for loans of US securities) or
105% (for non-US securities) of the current market value of the loaned
securities. The collateral is daily "marked-to-market," 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. If the borrower
of the securities fails 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.

Liquidity portfolio -- FRIMCo will manage or will select a money manager to
exercise investment discretion for approximately 5%-15% of Diversified Equity,
Special Growth, Equity Income, Quantitative Equity and International
Securities Funds' assets assigned to a Liquidity portfolio. The Liquidity
portfolio will be used to temporarily create an equity exposure for cash
balances until those balances are invested in securities or used for Fund
transactions.

Money Market Funds -- Money Market, US Government Money Market and Tax-Free
Money Market Funds, each a Fund of the Trust. Each Money Market Fund seeks to
maintain a stable net asset value of $1 per share.

Moody's -- Moody's Investors Service, Inc., an NRSRO

47
<PAGE>

agencies or authorities the interest from which is exempt from federal income
tax, including the alternative minimum tax, in the opinion of bond counsel to
the issuer. Municipal obligations include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal obligations may
include project, tax anticipation, revenue anticipation, bond anticipation,
and construction loan notes; tax-exempt commercial paper; fixed and variable
rate notes; obligations whose interest and principal are guaranteed or insured
by the US government or fully collateralized by US government obligations;
industrial development bonds; and variable rate obligations.

NASD -- National Association of Securities Dealers, Inc.

Net asset value (NAV) -- The value of a Fund is determined by deducting the
Fund's liabilities from the total assets of the portfolio. The net asset value
per share is determined by dividing the net asset value of the Fund by the
number of its shares that are outstanding.

NRSRO -- A nationally recognized statistical rating organization, such as
S&P or Moody's

NYSE -- New York Stock Exchange

Prime rate -- The interest rate charged by leading US banks on loans to
their most creditworthy customers

REITs -- Real estate investment trusts

48
<PAGE>

The Rule -- Rule 2a-7 under the 1940 Act, which governs the operations of
the Money Market Funds

Russell 1000(R) Index. The Russell 1000 Index consists of the 1,000 largest
US companies by capitalization (i.e., market price per share times the number
of shares outstanding). The smallest company in the Index at the time of
selection has a capitalization of approximately $1 billion. The Index does not
include cross-corporate holdings in a company's capitalization. For example,
when IBM owned approximately 20% of Intel, only 80% of the total shares
outstanding of Intel were used to determine Intel's capitalization. Also not
included in the Index are closed-end investment companies, companies that do
not file a Form 10-K report with the SEC, foreign securities, and American
Depository Receipts. The Index's composition is changed annually to reflect
changes in market capitalization and share balances outstanding. The Russell
1000(R) Index is used as the basis for Quantitative Equity Fund's performance
because FRIMCo believes it represents the universe of stocks in which most
active money managers invest and is representative of the performance of
publicly traded common stocks most institutional investors purchase.

Russell -- Frank Russell Company, consultant to the Trust and to the Funds

S&P -- Standard & Poor's Ratings Group, an NRSRO

S&P 500 -- Standard & Poor's 500 Composite Price Index

SAI -- The Trust's Statement of Additional Information, dated as noted on
the first page of this Prospectus.

SEC -- US Securities and Exchange Commission

Shares -- The Class S Shares in the Funds described in this prospectus. Each
Class S Share of a Fund represents a share of beneficial interest in the Fund.

Transfer Agent -- FRIMCo, in its capacity as the Trust's transfer and
dividend paying agent

Trust -- Frank Russell Investment Company, an open-end management investment
company which is registered with the SEC

US -- United States

US government obligations -- These include US Treasury bills, notes, bonds
and other obligations issued or guaranteed by the US government, its agencies
or instrumentalities.

Variable rate obligation -- Municipal obligations with a demand feature
that typically may be exercised within 30 days. The rate of return on variable
rate obligations is readjusted periodically according to a market rate, such
as the Prime rate. Also called floating rate obligations.

1940 Act -- The Investment Company Act of 1940, as amended. The 1940 Act
governs the operations of the Trust and the Funds.

1933 Act -- The Securities Act of 1933, as amended.

49
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

MONEY MANAGERS

DIVERSIFIED EQUITY
Alliance Capital Management L.P.
Barclays Global Fund
Investors, N.A.
Peachtree Asset Management
Equinox Capital Management, Inc.
INVESCO Capital Management, Inc.
Lincoln Capital Management Company
Morgan Stanley Asset Management, Inc.
Schneider Capital Management
Suffolk Capital Management, Inc.
Trinity Investment Management Corporation

SPECIAL GROWTH
Delphi Management, Inc.
Fiduciary International, Inc.
GlobeFlex Capital, L.P.
Jacobs Levy Equity Management, Inc.
Sirach Capital Management, Inc.
Wellington Management Company LLP

EQUITY INCOME
Brandywine Asset Management, Inc.
Equinox Capital Management, Inc.
Trinity Investment Management Corporation

QUANTITATIVE EQUITY
Barclays Global Fund Investors, N.A.
Franklin Portfolio Associates LLC
J.P. Morgan Investment Management, Inc.

INTERNATIONAL SECURITIES
J.P. Morgan Investment Management, Inc.
Marathon Asset Management Limited
Mastholm Asset Management, LLC
Oechsle International Advisors
Rowe Price-Fleming International, Inc.
Sanford C. Bernstein & Co., Inc.
The Boston Company Asset Management, Inc.

DIVERSIFIED BOND
Lincoln Capital Management Company
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

VOLATILITY CONSTRAINED BOND
BlackRock Financial Management
Standish, Ayer & Wood, Inc.
STW Fixed Income Management Ltd.

MULTISTRATEGY BOND
BEA Associates
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

MANAGER, TRANSFER AND DIVIDEND
PAYING AGENT
Frank Russell Investment Management Company
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, Massachusetts 02109

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

OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) 787-7354
(800) Russel4
Washington (253) 627-7001

50
<PAGE>

PROSPECTUS CLASS E SHARES

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

Frank Russell Investment Company (the "Trust") is an open-end management
investment company with 28 different investment series or portfolios
("Funds"). This Prospectus describes and offers interests in the Class E
Shares of ten Funds:

Diversified Equity Fund Emerging Markets Fund
Special Growth Fund Real Estate Securities Fund
Equity Income Fund Diversified Bond Fund
Quantitative Equity Fund Volatility Constrained Bond
International Securities Fund Fund
Multistrategy Bond Fund

Each Fund has its own investment objective and policies designed to meet
different investment goals. As with all mutual funds, attainment of each
Fund's investment objective cannot be assured.

Frank Russell Investment Management Company ("FRIMCo") operates and
administers the Funds. Class E Shares are sold at their net asset value, with
no sales load, no commissions, no Rule 12b-1 fees and no exchange fees.
Although there is no specified minimum investment requirement for the Funds
described in this Prospectus, the Funds are designed for investors with at
least $100,000 to invest in any combination of Funds described in this
Prospectus and in the Trust's Specialty Funds Prospectus, in an allocated
investment portfolio. Additionally, investors must qualify as Eligible
Investors, as described in this Prospectus.

ALL CLASS E SHARES OF FRANK RUSSELL INVESTMENT COMPANY FUNDS ARE AVAILABLE
FOR PURCHASE, EXCEPT CLASS E SHARES OF THE VOLATILITY CONSTRAINED BOND FUND.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH STATE OR OTHER JURISDICTION.

This Prospectus relates only to the Class E Shares of the Funds. These Funds
also offer interests in another class of shares, the Class S Shares, through
other prospectuses. For more information concerning Class S Shares, contact
the person or organization from whom you obtained this Prospectus, or write or
telephone the Trust.

PROSPECTUS DATED MAY 1, 1998
AS SUPPLEMENTED THROUGH JUNE 15, 1998
<PAGE>

TABLE OF CONTENTS

CERTAIN TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE
GLOSSARY, WHICH BEGINS ON PAGE 46 OF THIS PROSPECTUS.

<TABLE>
<S> <C>
Summary..................................................................... 3
Annual Fund Operating Expenses.............................................. 4
Financial Highlights........................................................ 5
The Purpose of the Funds--Multi-Style, Multi-Manager Diversification........ 13
Eligible Investors.......................................................... 14
General Management of the Funds............................................. 15
Expenses of the Funds....................................................... 17
The Money Managers.......................................................... 17
Investment Objectives, Policies and Practices............................... 18
Portfolio Transaction Policies.............................................. 30
Dividends and Distributions................................................. 31
Taxes....................................................................... 32
Performance Information..................................................... 33
How Net Asset Value Is Determined........................................... 34
How to Purchase Shares...................................................... 35
How to Redeem Shares........................................................ 37
Additional Information...................................................... 40
Money Manager Profiles...................................................... 41
Glossary.................................................................... 46
</TABLE>

2
<PAGE>

SUMMARY

Each Fund seeks to achieve a specific investment objective by using distinct
investment strategies:

DIVERSIFIED EQUITY FUND -- Income and capital growth by investing
principally in equity securities.

EQUITY INCOME FUND -- A high level of current income, while maintaining the
potential for capital appreciation by investing primarily in income-producing
equity securities.

EMERGING MARKETS FUND -- 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.

REAL ESTATE SECURITIES FUND -- A high level of total return generated
through above-average current income, while maintaining the potential for
capital appreciation by investing primarily in the equity securities of
companies in the real estate industry.

DIVERSIFIED BOND FUND -- Effective diversification against equities and a
stable level of cash flow by investing in fixed-income securities.

The Trust's Funds had aggregate net assets of approximately $13.6 billion on
April 1, 1998. The net assets of the Funds described in this Prospectus on
April 1, 1998 were:

<TABLE>
<S> <C>
Diversified Equity.........$3,823,169
Special Growth.............$4,018,843
Equity Income..............$ 590,638
Quantitative Equity........$2,980,547
</TABLE>
<TABLE>
<S> <C>
International Securities... $1,579,206
Real Estate Securities..... $ 464,534
Diversified Bond........... $3,639,154
</TABLE>

3
<PAGE>

You may buy and sell Class E Shares of the Funds through an authorized
Financial Intermediary. All Class E Shares are sold without a sales charge or
commission. Class E Shares are not subject to Rule 12b-1 fees. Class E Shares
are redeemed at net asset value. You may also exchange shares of one Fund for
shares of another Fund. See "How to Purchase Shares" and "How to Redeem
Shares."

Also, foreign securities in which the Funds may invest may be subject to
certain risks in addition to those inherent in US investments. These risks are
described in "Risk Considerations" in "Investment Objectives, Policies and
Practices," and in the Glossary.

SHAREHOLDER TRANSACTION EXPENSES

You would pay the following charges when buying or redeeming Class E Shares
of a Fund:

<TABLE>
<CAPTION>
MAXIMUM SALES MAXIMUM SALES LOAD
LOAD IMPOSED IMPOSED ON DEFERRED REDEMPTION EXCHANGE
ON PURCHASES REINVEST DIVIDENDS SALES LOAD* FEES FEES
------------- ------------------ ----------- ---------- --------
<S> <C> <C> <C> <C>
None None None None None
</TABLE>
- ---------------------
* If you purchase shares of the Funds, you will pay a shareholder servicing
fee. This fee is 0.25% of your daily average net assets.

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
MANAGEMENT FEE OTHER EXPENSES** EXPENSES**
(NET OF RULE 12B-1 SHAREHOLDER (NET OF (NET OF
REIMBURSEMENTS/ DISTRIBUTION SERVICING REIMBURSEMENTS/ REIMBURSEMENTS/
WAIVERS) FEE** FEE WAIVERS) WAIVERS)+
--------------- ------------ ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Diversified Equity
Fund................... 0.78% 0.00% 0.25% 0.23% 1.26%
Special Growth Fund..... 0.95% 0.00% 0.25% 0.30% 1.50%
Equity Income Fund...... 0.80% 0.00% 0.25% 0.31% 1.36%
Quantitative Equity
Fund................... 0.78% 0.00% 0.25% 0.19% 1.22%
International Securities
Fund................... 0.95% 0.00% 0.25% 0.40% 1.60%
Emerging Markets Fund... 1.20% 0.00% 0.25% 0.61% 2.06%
Real Estate Securities
Fund................... 0.85% 0.00% 0.25% 0.29% 1.39%
Diversified Bond Fund... 0.45% 0.00% 0.25% 0.18% 0.88%
Volatility Constrained
Bond Fund.............. 0.50% 0.00% 0.25% 0.24% 0.99%
Multistrategy Bond
Fund*.................. 0.58% 0.00% 0.25% 0.22% 1.05%
</TABLE>
- ---------------------
+ Investors purchasing Class E Shares of the Fund through a financial
intermediary, such as a bank or an investment adviser, may also pay
additional fees to the intermediary for services provided by the
intermediary. Such investors should contact the intermediary for
information concerning what additional fees, if any, will be charged.
* FRIMCo has voluntarily agreed to waive a portion of its 0.65% management
fee for the Multistrategy Bond Fund, up to the full amount of that fee,
equal to the amount by which the Fund's total operating expenses other than
12b-1 fees, Shareholder Servicing Fees and certain other class-level
expenses in excess of 0.80% of the Fund's average net assets on an annual
basis. This waiver is intended to be in effect for the current year, but
may be revised or eliminated at any time without notice to shareholders.
The gross annual total operating expenses absent the waiver would be 1.12%
of average net assets of Multistrategy Bond Fund.
** Restated to reflect changes to the Trust's Rule 12b-1 Plan and to its
Transfer and Dividend Paying Agent agreement, which became effective May
18, 1998 and June 8, 1998, respectively.

4
<PAGE>

Because the Funds described in this Prospectus are designed for investors
with an aggregate investment of at least $100,000, as described in the
"Eligible Investors" section, beginning January 1, 1999, any shareholder
account with respect to any Fund described in this Prospectus with a balance
of less than $10,000 will be subject to an account maintenance fee equal to
$12.50 per year. The fee will be deducted from dividends payable to each
applicable account or by liquidating shares in the account, or both. The fees
will be waived for: (i) accounts established before July 1, 1998; (ii)
accounts held by retirement plans representing multiple participants;
(iii) accounts of trustees, officers, employees, and certain third-party
contractors of the Trust and its affiliates; and (iv) classes of accounts for
which maintenance costs are absorbed by a third-party. Investors considering
an investment of less than $10,000 in any Fund described in this prospectus
may wish to consider investing in the Trust's LifePoints Funds, shareholder
accounts of which are not subject to an account maintenance fee. For more
information see the Trust's LifePoints Funds Prospectus.

These tables are intended to assist you in understanding the various
expenses of each Fund. Operating expenses are paid out of a Fund's assets and
are factored into the Fund's share price. Each Fund expects that it will have
the expenses listed (expressed as a percentage of average net assets) for the
current fiscal year.

EXAMPLE OF EXPENSES FOR THE FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Diversified Equity Fund......................... $13 $40 $ 70 $158
Special Growth Fund............................. $15 $47 $ 83 $189
Equity Income Fund.............................. $14 $43 $ 75 $171
Quantitative Equity Fund........................ $12 $38 $ 67 $153
International Securities Fund................... $16 $50 $ 88 $201
Emerging Markets Fund........................... $21 $65 $114 $259
Real Estate Securities Fund..................... $14 $44 $ 77 $175
Diversified Bond Fund........................... $ 9 $28 $ 49 $111
Volatility Constrained Bond Fund................ $10 $31 $ 55 $125
Multistrategy Bond Fund......................... $11 $33 $ 58 $132
</TABLE>

FINANCIAL HIGHLIGHTS

Class E Shares of the Volatility Constrained Bond, MultiStrategy Bond and
Emerging Markets Funds were not issued prior to December 31, 1997. Those
Funds' financial statements and related notes thereto are incorporated herein
by reference to the Statement of Additional Information and appear, along with
the report of Coopers & Lybrand L.L.P., in those Funds' Annual Reports to
shareholders. Funds' Annual Reports may be obtained without charge by writing
to or calling the Investment Company as described on the first page of this
prospectus. Financial Highlights' pages for those Funds named above described
herein are included in the Statement of Additional Information. Such Financial
Highlights do not reflect the Shareholder Service Fee imposed with respect to
Class E Shares.

5
<PAGE>

FINANCIAL HIGHLIGHTS OF THE DIVERSIFIED EQUITY FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P., in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

DIVERSIFIED EQUITY FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997+
------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR...................................... $45.55
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)........................................... .06
Net realized and unrealized gain (loss) on investments................. 7.97
------
Total Income From Investment Operations.............................. 8.03
------
LESS DISTRIBUTIONS:
Net investment income.................................................. (.06)
In excess of net investment income..................................... (.01)
Net realized gain on investments....................................... (9.83)
In excess of net realized gain on investments.......................... (.04)
------
Total Distributions.................................................. (9.94)
------
NET ASSET VALUE, END OF YEAR............................................ $43.64
======
TOTAL RETURN (%)(a)..................................................... 15.99
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, to average net assets (b).......................... 1.63
Net investment income (loss) to average net assets (b)................. .10
Portfolio turnover (b)................................................. 114.11
Net assets, end of year ($000 omitted)................................. 2.839
Avg. Commission rate paid per share of security ($ omitted)............ .0500
</TABLE>
- ---------------------
* See the notes to financial statements which appear in Trust's Annual Report
to Shareholders and which are incorporated by reference into the Statement
of Additional Information.
+ For the period May 27, 1997 (commencement of sales) to December 31, 1997.
(a) Total return represents performance for the period May 27, 1997 to
December 31, 1997.
(b) The ratios for the period December 31, 1997 are annualized.

6
<PAGE>

FINANCIAL HIGHLIGHTS OF THE SPECIAL GROWTH FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

SPECIAL GROWTH FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......................... $40.75 $43.48
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................... (.13) (.02)
Net realized and unrealized gain (loss) on investments..... 11.05 1.63
------ ------
Total Income From Investment Operations.................. 10.92 1.61
------ ------
LESS DISTRIBUTIONS:
Net realized gain on investments........................... (6.25) (4.34)
------ ------
Total Distributions...................................... (6.25) (4.34)
====== ======
NET ASSET VALUE, END OF YEAR................................ $45.42 $40.75
====== ======
TOTAL RETURN (%)............................................ 27.90 4.04 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, to average net assets (b).............. 1.83 1.89
Net investment income (loss) to average net assets (b)..... (.51) (.38)
Portfolio turnover (b)..................................... 97.19 118.13
Net assets, end of year ($000 omitted)..................... 3,153 910
Avg. Commission rate paid per share of security ($ omit-
ted)...................................................... .0402 .0384
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

7
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY INCOME FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

EQUITY INCOME FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR........................ $ 40.22 $ 41.86
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... .32 .10
Net realized and unrealized gain (loss) on investments... 12.20 2.39
------- -------
Total Income From Investment Operations................ 12.52 2.49
------- -------
LESS DISTRIBUTIONS:
Net investment income.................................... (.07) (.18)
Net realized gain on investments......................... (11.24) (3.95)
------- -------
Total Distributions.................................... (11.31) (4.13)
------- -------
NET ASSET VALUE, END OF YEAR.............................. $ 41.43 $ 40.22
======= =======
TOTAL RETURN (%).......................................... 32.68 6.23 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses to average net assets (b)............. 1.74 1.77
Net investment income to average net assets (b).......... .77 1.50
Portfolio turnover (b)................................... 139.33 106.40
Net assets, end of year ($000 omitted)................... 338 122
Avg. Commission rate paid per share of security ($ omit-
ted).................................................... .0410 .0441
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

8
<PAGE>

FINANCIAL HIGHLIGHTS OF THE QUANTITATIVE EQUITY FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

QUANTITATIVE EQUITY FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......................... $33.05 $33.81
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... .14 .05
Net realized and unrealized gain (loss) on investments..... 9.95 1.87
------ ------
Total Income From Investment Operations.................. 10.09 1.92
------ ------
LESS DISTRIBUTIONS:
Net investment income...................................... (.07) (.08)
Net realized gain on investments........................... (6.27) (2.60)
------ ------
Total Distributions...................................... (6.34) (2.68)
------ ------
NET ASSET VALUE, END OF YEAR................................ $36.80 $33.05
====== ======
TOTAL RETURN (%)............................................ 31.70 5.91 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses to average net assets (b)............... 1.59 1.65
Net investment income to average net assets (b)............ .33 .81
Portfolio turnover (b)..................................... 87.67 74.33
Net assets, end of year ($000 omitted)..................... 2,344 322
Avg. Commission rate paid per share of security ($ omit-
ted)...................................................... .0349 .0331
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and incorporated by reference into the Statement of
Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

9
<PAGE>

FINANCIAL HIGHLIGHTS OF THE INTERNATIONAL SECURITIES FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

INTERNATIONAL SECURITIES FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......................... $58.47 $58.56
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... .35 (.03)
Net realized and unrealized gain (loss) on investments..... (.64) 1.68
------ ------
Total Income From Investment Operations.................. (.29) 1.65
------ ------
LESS DISTRIBUTIONS:
Net investment income...................................... (.14) (.27)
In excess of net investment income......................... (.15) (.16)
Net realized gain on investments........................... (2.19) (1.31)
In excess of net realized gains on investments............. (1.06) --
------ ------
Total Distributions...................................... (3.54) (1.74)
------ ------
NET ASSET VALUE, END OF YEAR................................ $54.64 $58.47
====== ======
TOTAL RETURN (%)............................................ (.41) 2.86 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, to average assets (b).................. 1.96 2.00
Net investment income (loss) to average net assets (b)..... .19 (.61)
Portfolio turnover (b)..................................... 73.54 42.43
Net assets, end of year ($000 omitted)..................... 1,271 623
Avg. Commission rate paid per share of security ($ omit-
ted)...................................................... .0055 .0039
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

10
<PAGE>

FINANCIAL HIGHLIGHTS OF THE REAL ESTATE SECURITIES FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class E Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

REAL ESTATE SECURITIES FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......................... $29.18 $26.67
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... 1.14 .24
Net realized and unrealized gain (loss) on investments..... 3.95 3.85
------ ------
Total Income From Investment Operations.................. 5.09 4.09
------ ------
LESS DISTRIBUTIONS:
Net investment income...................................... (1.04) (.32)
Net realized gain on investments........................... (2.21) (1.26)
------ ------
Total Distributions...................................... (3.25) (1.58)
------ ------
NET ASSET VALUE, END OF YEAR................................ $31.02 $29.18
====== ======
TOTAL RETURN (%)............................................ 18.20 15.75 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, to average net assets (b).............. 1.71 1.77
Net investment income to average net assets (b)............ 3.94 5.31
Portfolio turnover (b)..................................... 49.40 51.75
Net assets, end of year ($000 omitted)..................... 388 101
Avg. Commission rate paid per share of security ($ omit-
ted)...................................................... .0618 .0631
</TABLE>
- ---------------------
* See notes to Financial Statements which appear in the Trust's Annual Report
to Shareholders and which are incorporated by reference into the Statement
of Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

11
<PAGE>

FINANCIAL HIGHLIGHTS OF THE DIVERSIFIED BOND FUND CLASS E SHARES*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout each year ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Trust.

DIVERSIFIED BOND FUND CLASS E SHARES

<TABLE>
<CAPTION>
1997 1996+
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR......................... $ 22.98 $ 23.16
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 1.22 .25
Net realized and unrealized gain (loss) on investments.... .66 (.09)
------- -------
Total From Investment Operations........................ 1.88 .16
------- -------
LESS DISTRIBUTIONS:
Net investment income..................................... (.72) (.34)
In excess of net realized gain on investments............. (.08) --
------- -------
Total Distributions..................................... (.80) (.34)
------- -------
NET ASSET VALUE, END OF YEAR............................... $ 24.06 $ 22.98
======= =======
TOTAL RETURN (%)........................................... 8.35 .67 (a)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, to average assets (b)................. 1.29 1.31
Net investment income to average net assets (b)........... 5.64 5.75
Portfolio turnover (b).................................... 172.43 138.98
Net assets, end of year ($000 omitted).................... 2,469 962
</TABLE>
- ---------------------
* See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
+ For the period November 4, 1996 (commencement of sales) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) The ratios for the period December 31, 1996 are annualized.

12
<PAGE>

THE PURPOSE OF THE FUNDS--MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

Three functions form the core of Russell's consulting services:

. Objective Setting: Defining appropriate investment objectives and desired
investment returns based on a client's unique situation and risk
tolerance.

When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique. The goals of this
process are to reduce risk and to increase returns.

13
<PAGE>

managers within the same asset class who employ complementary styles. By
combining complementary investment styles within an asset class, investors are
better able to reduce their exposure to any one investment style going out of
favor.

ELIGIBLE INVESTORS

Shares of the Funds are currently offered only to Eligible Investors.
Eligible Investors include:

. Institutions or individuals who have acquired shares through
institutional investors and Financial Intermediaries; and

. Trustees, officers, employees and certain third-party contractors of the
Trust and its affiliates.

The Funds generally do not offer their shares directly to individual (i.e.,
retail) investors, although they may choose to do so. Financial Intermediaries
who have entered into Agreements with FRIMCo may acquire shares of the Funds
for their customers. Under the Agreements, FRIMCo provides objective-setting
and asset-allocation assistance and services to Financial Intermediaries,
which in turn provide similar services to their customers. Financial
Intermediaries may charge their customers a fee for providing these services
and other trust or investment-related services.

14
<PAGE>

GENERAL MANAGEMENT OF THE FUNDS

FRIMCo:

. provides or supervises the general management and administration,
investment advisory and portfolio management, and distribution services
for the Funds;

. develops the investment programs, selects money managers, allocates
assets among money managers and monitors the money managers' investment
programs and results;

. manages, or hires money managers to manage the Funds' Liquidity
Portfolios; and

. provides the Funds with transfer agent, dividend disbursing and
shareholder recordkeeping services.

FRIMCo's officers and employees who oversee the money managers are:

. Randall P. Lert, who has been Chief Investment Officer of FRIMCo since
1989.

. Mark D. Amberson, who has been a Portfolio Manager of FRIMCo, since
January 1998. From 1991 to 1997, Mr. Amberson was a Portfolio Manager in
Russell's Money Market Trading Group. Mr. Amberson jointly with another
portfolio manager identified herein has primary responsibility for
management of the Fixed I, Diversified Bond, Fixed II, Volatility
Constrained Bond, Fixed III, and Multistrategy Bond Funds.

15
<PAGE>

. James M. Imhof, Manager of FRIMCo's Portfolio Trading, manages the Trust
on a day to day basis and has been responsible for ongoing analysis and
monitoring of the money managers since 1989.

Under its Management Agreement with the Trust, FRIMCo receives a management
fee from each Fund for FRIMCo's services. From this fee, FRIMCo, as the
Trust's agent, pays the money managers for their investment selection
services. The remainder of the management fee is retained by FRIMCo as
compensation for the services described above and to pay expenses. The annual
rate of management fees, payable to FRIMCo monthly on a pro rata basis, are
the following percentages of each Fund's average daily net assets: Diversified
Equity Fund, 0.78%; Special Growth Fund, 0.95%; Equity Income Fund, 0.80%;
Quantitative Equity Fund, 0.78%; International Securities Fund, 0.95%;
Emerging Markets Fund, 1.20%; Real Estate Securities Fund, 0.85%; Diversified
Bond Fund, 0.45%; Volatility Constrained Bond Fund, 0.50%; and Multistrategy
Bond Fund, 0.65%. The fees of the Funds, other than the Diversified Bond and
Volatility Constrained Bond Funds, may be higher than the fees charged by some
mutual funds with similar objectives that use only a single money manager.

16
<PAGE>

The Board has approved, subject to the approval of the shareholders of the
applicable Funds, which will be sought at a shareholder meeting expected to be
held during 1998 (the "1998 Shareholder Meeting"), an amendment to the
Management Agreement. Under the amendment in addition to the fees set forth
above (restructured as described in the next paragraph), the Funds will pay
FRIMCo a fee which compensates FRIMCo for managing collateral which the Funds
have received in securities lending and certain other portfolio transactions.
If the amendment is approved by shareholders, each Fund will pay a fee to
FRIMCo for its services in managing the Fund's cash, securities and other
investment assets which are not treated as net assets of that Fund
("additional assets") in determining the Fund's net asset value per share. If
approved, the additional fee payable to FRIMCo will equal an amount up to
0.07% of each Fund's additional assets on an annualized basis.

It is also proposed that the services which FRIMCo provides to the Funds
under the present Management Agreement will be divided into two components.
Those services which are investment advisory in nature will be provided
pursuant to a new Advisory Agreement. Other services which are administrative
in nature will be provided pursuant to a new Administrative Agreement. It is
not anticipated that this restructuring of services provided to the Funds will
materially affect the costs of these services to the Funds, or affect FRIMCo's
current voluntary fee waivers.

EXPENSES OF THE FUNDS

The Funds (and each class, when appropriate) pay all their expenses other
than those expressly assumed by FRIMCo. The Funds' expenses for Class E Shares
for the year ended December 31, 1997, as a percentage of each Fund's average
net assets, are shown in the Financial Highlights tables in this Prospectus.
Principal expenses (excluding certain discounted Rule 12b-1 fees) are:

. the management, transfer agent and recordkeeping fees payable to FRIMCo;

. fees for custody, preparing tax records, and portfolio accounting,
payable to the Custodian;

. fees for independent auditing and legal services;

. filing and registration fees payable to the SEC; and

. shareholder servicing fees.

THE MONEY MANAGERS

17
<PAGE>

percentage of each Fund's average daily net assets: Diversified Equity Fund,
0.23%; Special Growth Fund, 0.40%; Equity Income Fund, 0.19%; Quantitative
Equity Fund, 0.19%; International Securities Fund, 0.39%; Emerging Markets
Fund, 0.68%; Real Estate Securities Fund, 0.29%; Diversified Bond Fund, 0.08%;
Volatility Constrained Bond Fund, 0.17%; and Multistrategy Bond Fund, 0.21%.

Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund. At the same time, however, each money
manager must operate within the Fund's investment objectives, restrictions and
policies, and the more specific strategies developed by FRIMCo. Although the
money managers' activities are subject to general oversight by the Board and
the Trust's officers, neither the Board, the officers, FRIMCo, nor Russell
evaluate the investment merits of the money managers' individual security
selections.

INVESTMENT OBJECTIVES, POLICIES AND PRACTICES

The investment objective and general investment policies of each Fund are
described in "Investment Objectives." Types of investment securities that may
be purchased by the Funds are described in "Fund Investment Securities."
Specific investment practices that may be employed by the Funds are identified
in "Other Investment Practices." The risks associated with portfolio
investments by the Funds are described in those sections, as well as in "Risk
Considerations." Certain terms used in these sections are described in the
Glossary in this Prospectus.

SUMMARY COMPARISON OF THE FUNDS

<TABLE>
<CAPTION>
ANTICIPATED MAXIMUM
EQUITY DEBT
FUND EXPOSURE EXPOSURE FOCUS
---- ----------- -------- -----
<S> <C> <C> <C>
Diversified Equity
Fund................... 65-100% 35% Income and capital growth
Special Growth Fund..... 65-100% 35% Maximum total return
Equity Income Fund...... 65-100% 35% Current income
Quantitative Equity
Fund................... 100% -- % Total return
International Securities
Fund................... 65-100% 35% Total return
Emerging Markets Fund... 65-100% 35% Maximum total return
Real Estate Securities
Fund................... 65-100% 35% Total return
Diversified Bond Fund... 35% 65-100% Current Income and Diversification
Volatility Constrained
Bond Fund.............. 35% 65-100% Preservation of capital
Multistrategy Bond
Fund................... -- % 100% Maximum total return
</TABLE>

INVESTMENT OBJECTIVES

18
<PAGE>

be fundamental. Ordinarily, each Fund will invest more than 65% of its total
assets in the types of securities identified in its investment objective.
However, the Funds may hold assets as cash reserves for temporary and
defensive purposes when their money managers believe a conservative approach
is desirable, or when suitable investments are unavailable.

DIVERSIFIED EQUITY FUND

SPECIAL GROWTH FUND

Special Growth Fund's objective is to maximize total return primarily
through capital appreciation and by assuming a higher level of volatility than
Diversified Equity Fund. Special Growth Fund seeks to achieve its objective by
investing in equity securities.

EQUITY INCOME FUND

The income objective of the Fund is to exceed the yield on the S&P 500
Index. The Index yield will change from year to year due to changes in prices
and dividends of stocks in the Index. Income streams will be considered in
light of their current level and the opportunity for future growth. Capital
appreciation may not be comparable to that achieved by Funds such as Special
Growth Fund whose major objective is appreciation, although FRIMCo believes
that a high and growing stream of income is conducive to higher capital
values. The Fund may also invest in preferred stock, convertible securities,
rights and warrants.

19
<PAGE>

QUANTITATIVE EQUITY FUND

The Fund's portfolio will be structured similarly to the Russell Index, as
the Fund will maintain industry weights and economic sector weights near those
of the Index. As a result, the Fund's money managers generally select stocks
from the set of stocks comprising the Russell 1000(R) Index; however, a money
manager may purchase securities that are not included in the Index or sell
securities still included in the Index in order to meet the Fund's investment
objectives. The money managers anticipate that the Fund's average
price/earnings ratio, yield and other fundamental characteristics will be near
the averages of the Russell Index.

The Fund will attempt to be fully invested in common stock at all times.
However, the Fund is permitted to hold up to 20% of Fund assets in liquid
investments to meet redemption requests.

INTERNATIONAL SECURITIES FUND

International Securities Fund's objectives are to provide favorable total
return and additional diversification for US investors. International
Securities Fund attempts to achieve its objectives by investing primarily in
equity and fixed-income securities of foreign companies, and securities issued
by foreign governments. The Fund invests primarily in equity securities of
companies domiciled outside the United States. The Fund may also invest in US
companies which derive, or are expected to derive, a substantial portion of
their revenues from operations outside the United States.

20
<PAGE>

EMERGING MARKETS FUND

Emerging Markets Fund's objective is to seek 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
(these companies are referred to as "Emerging Market Companies"). For purposes
of the Fund's operations, an "emerging market" country will be a country
having an economy and market that the World Bank or the United Nations would
consider to be emerging or developing. These countries generally include every
country in the world except the United States, Canada, Japan, Australia and
most countries located in Western Europe.

The Fund may not invest in all emerging markets at all times. Lack of
adequate custody arrangements or current legal requirements make investing in
some developing markets unfeasible. In the future, the Fund's money managers
may determine, based on information then available, to expand the 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 market countries. 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.

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, and American Depository Receipts and European Depository Receipts
("Depository Receipts"). 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 US
companies that derive, or are expected to derive, a substantial portion of
their revenues from operations outside the United States. The Fund's fixed-
income securities may be denominated in other than US dollars.

Certain emerging markets are closed in whole or in part to equity
investments by foreigners. The Fund may be able to invest in those markets
solely or primarily through governmental authorized investment vehicles. For
more information on risks, see "Risk Considerations."

REAL ESTATE SECURITIES FUND

Real Estate Securities Fund's objective is to seek to generate a high level
of total return through above average current income, while maintaining the
potential for capital appreciation. The Fund seeks to achieve its objective by
investing primarily in the equity securities of companies in the real estate
industry.

21
<PAGE>

partnerships, common and preferred stock, and convertible debt securities
believed to have attractive equity characteristics. The Fund may invest up to
35% of its total assets in other debt securities of real estate companies. For
information on risks, see "Risk Considerations."

The Fund will attempt to be fully invested at all times. However, the Fund
is permitted to hold up to 20% of Fund assets in liquid investments to meet
redemption requests.

DIVERSIFIED BOND FUND

Diversified Bond Fund's objectives are to provide effective diversification
against equities and a stable level of cash flow by investing in fixed-income
securities.

The Fund's portfolio will consist primarily of conventional debt
instruments, including bonds, debentures, US government and US government
agency securities, preferred and convertible preferred stocks, and variable
amount demand master notes. (These notes represent a borrowing arrangement
under a letter agreement between commercial paper issuers and institutional
lenders, such as the Fund.) Money managers will select investments based on
fundamental economic and market factors. Money managers will evaluate
potential investments by sector, maturity, quality and other criteria. The
Fund will ordinarily invest at least 65% of its net assets in securities rated
no less than A or A-2 by S&P; A or Prime-2 by Moody's; or, if unrated, judged
by the money manager to be of at least equal credit quality to those
designations.

VOLATILITY CONSTRAINED BOND FUND

22
<PAGE>

securities of a particular country or denominated in a particular currency
will vary in accordance with a money manager's assessment of the relative
yield of such securities and the relationship of a country's currency to the
US dollar. Money managers of the Fund will consider fundamental economic
strength, credit quality and interest rate trends in determining whether to
increase or decrease the emphasis placed upon a particular type of security or
industry sector. The Fund will not invest more than 10% of its total assets in
debt securities denominated in a single foreign currency, and FRIMCo currently
intends to limit total investments in non-US dollar securities to no more than
25% of the Fund's total assets.

In selecting particular investments for the Fund, the money managers will
seek to minimize investment risk by limiting their portfolio investments to
debt securities of high-quality issuers. Accordingly, the Fund's portfolio
will consist only of: (a) US Government securities; (b) obligations issued or
guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies, or instrumentalities; (c) obligations issued or
guaranteed by supranational entities all of which are rated AAA or AA by S&P
or Aaa or Aa by Moody's or, if unrated, determined to be of comparable quality
by the money managers; (d) investment grade corporate debt securities (or, if
unrated, corporate debt securities which the money managers determine to be of
equivalent quality); (e) bank instruments; and (f) commercial paper.

The Fund intends to use interest rate swaps as a hedge and not as a
speculative investment.

MULTISTRATEGY BOND FUND

23
<PAGE>

FUND INVESTMENT SECURITIES

Commercial Paper

DEBT SECURITIES

The Funds may purchase debt securities that complement their respective
investment objectives. The Funds, except Emerging Markets and Multistrategy
Bond Funds, do not invest in debt securities rated less than BBB by S&P or Baa
by Moody's, or in unrated securities judged by the money managers to be of a
lesser credit quality than those designations. Securities rated BBB by S&P or
Baa by Moody's and above are considered by those rating agencies to be
"investment grade" securities, although Moody's considers securities rated
Baa, and S&P considers securities rated BBB, to have some speculative
characteristics. The Funds, other than Emerging Markets and Multistrategy Bond
Funds, will sell securities whose ratings drop below these minimum ratings, in
a prudent manner as determined by the money managers. The market value of debt
securities generally varies inversely with interest rates.

DEPOSITORY RECEIPTS

Emerging Markets Fund may invest in Depository Receipts. These are
securities traded in the United States that are typically issued in connection
with a US or foreign bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. These securities may
not necessarily be denominated in the same currency as the securities into
which they may be converted.

EQUITY SECURITIES

FOREIGN DEBT SECURITIES

Multistrategy Bond, Emerging Markets and International Securities Funds'
portfolios may include debt securities issued by domestic or foreign entities,
and denominated in US dollars or foreign currencies. The

24
<PAGE>

Multistrategy Bond Fund anticipates that no more than 25% of its net assets
will be denominated in foreign currencies. The Funds will only use foreign
currency exchange transactions (options on foreign currencies, foreign
currency futures contracts and forward foreign currency contracts) for the
purpose of hedging against foreign currency exchange risk arising from the
Funds' investments, or anticipated investments, in securities denominated in
foreign currencies. Foreign investment may include emerging market debt. The
risks associated with investment in securities issued by foreign governments
and companies are described under "Risk Considerations--Investment in Foreign
Securities." Emerging markets consist of countries determined by the money
managers of the Funds 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.
The Funds may invest in the following types of emerging market debt--bonds;
notes and debentures of emerging market governments; debt and other fixed-
income securities issued or guaranteed by emerging market government agencies,
instrumentalities or central banks; and other fixed-income securities issued
or guaranteed by banks or other companies in emerging markets which the money
managers believe are suitable investments for the Funds. Under current market
conditions, it is expected that emerging market debt will consist
predominantly of Brady Bonds and other sovereign debt. Brady Bonds are
products of the "Brady Plan," under which bonds are issued in exchange for
cash and certain of the country's outstanding commercial bank loans.

INTEREST RATE SWAPS

INVESTMENT COMPANY SECURITIES

Each Fund may invest up to 10% of its total assets in shares of other
investment companies that invest in securities in which a Fund may otherwise
invest. Each Fund may invest its cash reserves in the Money Market Fund.
Because of restrictions on direct investment by US entities in certain
countries, other investment companies may provide the most practical or only
way for Emerging Markets Fund to invest in certain markets. To access these
markets, the Fund may invest up to 10% of its total assets in the shares of
other investment companies. These investments may involve the payment of
substantial premiums above the net asset value of those investment companies'
portfolio securities and are subject to limitations under the 1940 Act.
Emerging Markets Fund also may incur tax liability to the extent it invests in
the stock of a foreign issuer that is a "passive foreign investment company"
("PFIC"), regardless of whether the PFIC makes distributions to the Fund.
See "Taxes" in this Prospectus and in the SAI.

OTHER DEBT SECURITIES

Volatility Constrained Bond and Multistrategy Bond Funds may invest in debt
securities issued by supranational organizations such as:

The World Bank -- An international bank which was chartered to finance
development projects in developing member countries.

25
<PAGE>

The European Economic Community -- An organization which consists of
certain European states engaged in cooperative economic activities.

The European Coal and Steel Community -- An economic union of various
European nations' steel and coal industries.

The Asian Development Bank -- An international development bank
established to lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific regions.

US GOVERNMENT OBLIGATIONS

The following table illustrates the investments that the Funds primarily
invest in or are permitted to invest in:
<TABLE>
<CAPTION>
REAL MULTI-
TYPE OF SPECIAL EQUITY INTERNATIONAL EMERGING ESTATE VOLATILITY STRATEGY
PORTFOLIO DIVERSIFIED GROWTH INCOME QUANTITATIVE SECURITIES MARKETS SECURITIES DIVERSIFIED CONSTRAINED BOND
SECURITY EQUITY FUND FUND FUND EQUITY FUND FUND FUND FUND BOND FUND BOND FUND FUND
--------- ----------- ------- ------ ------------ ------------- -------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stocks... X X X X X X
Common stock
equivalents
(warrants)..... X X X X X X X
Common stock
equivalents
(options) ..... X X X X X X X
Common stock
equivalents
(convertible
debt
securities).... X X X X X X X
Common stock
equivalents
(depository
receipts)...... X X
Preferred
stocks......... X X X X X X
Equity deriva-
tive securi-
ties........... X X X X X X
Debt securities
(below invest-
ment grade or
junk bonds).... X X
US government
securities..... X X X X X X X X X X
Municipal obli-
gations........ X
Investment com-
pany securi-
ties........... X X X X X X X X X X
Foreign securi-
ties........... X X X
</TABLE>

26
<PAGE>

OTHER INVESTMENT PRACTICES

<TABLE>
<CAPTION>
REAL MULTI-
SPECIAL EQUITY INTERNATIONAL EMERGING ESTATE VOLATILITY STRATEGY
DIVERSIFIED GROWTH INCOME QUANTITATIVE SECURITIES MARKETS SECURITIES DIVERSIFIED CONSTRAINED BOND
TYPE OF PRACTICE EQUITY FUND FUND FUND EQUITY FUND FUND FUND FUND BOND FUND BOND FUND FUND
- ---------------- ----------- ------- ------ ------------ ------------- -------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash reserves... X X X X X X X X X X
Repurchase
agreements
(1)............ X X X X X X X X X X
When-issued and
forward
commitment
securities..... X X X X X X X X X X
Reverse repur-
chase agree-
ments.......... X X X X X X X X X X
Lending
portfolio
securities, not
to exceed 33
1/3% of total
Fund assets.... X X X X X X X X X X
Illiquid securi-
ties (limited
to 15% of a
Fund's net as-
sets).......... X X X X X X X X X X
Forward currency
contracts (2).. X X X X X
Write (sell)
call and put
options on se-
curities, secu-
rities indexes
and foreign
currencies
(3)............ X X X X X X X X X X
Purchase options
on securities,
securities
indexes, and
currencies (3).. X X X X X X X X X X
Interest rate
futures con-
tracts, stock
index futures
contracts, for-
eign currency
contracts and
options on
futures (4)....
Liquidity port-
folios......... X X X X X X X
</TABLE>
- ---------------------
(1) Under the 1940 Act, repurchase agreements are considered to be loans by a
Fund and must be fully collateralized by collateral assets. If the seller
defaults on its obligations to repurchase the underlying security, a Fund
may experience delay or difficulty in exercising its rights to realize
upon the security, may incur a loss if the value of the security declines
and may incur disposition costs in liquidating the security.
(2) Emerging Markets, International Securities, Diversified Bond, Volatility
Constrained and Multistrategy Bond Funds may not invest more than 33% of
their assets in these contracts.
(3) A Fund will only engage in options where the options are traded on a
national securities exchange or in an over-the-counter market. A Fund may
invest up to 5% of its net assets, represented by the premium paid, in
call and put options. A 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. Only the Multistrategy Bond Fund currently intends to write or
purchase options on foreign currency.
(4) A Fund does not enter into any futures contracts or related options if the
sum of initial margin deposits on futures contracts, related options
(including options on securities, securities indexes and currencies) and
premiums paid for any such related options would exceed 5% of its total
assets. A Fund does not purchase futures contracts or related options if,
as a result, more than one-third of its total assets would be so invested.

RISK CONSIDERATIONS

27
<PAGE>

direct ownership of real estate. Additional risks include declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in neighborhood values, the appeal of properties
to tenants and increases in interest rates. The value of securities of
companies that service the real estate industry may also be affected by such
risks.

In addition, equity REITs may be affected by changes in the value of the
underlying properties owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. Moreover, the underlying portfolios of
equity and mortgage REITs may not be diversified, and therefore are subject to
the risk of financing a single or a limited number of projects. REITs are also
dependent upon management skills and are subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation and the possibility of
failing either to qualify for tax-free pass through of income under the Code
or to maintain their exemption from the 1940 Act.

Variable and Floating Rate Securities. The Multistrategy Bond Fund may
invest in variable and floating rate securities. The variable and floating
rate securities provide for a periodic adjustment in the interest rate paid on
the obligations. The terms of such obligations must provide that interest
rates are adjusted periodically based upon some appropriate interest rate
adjustment index. The adjustment intervals may be regular (i.e., daily,
monthly, annually, etc.) or event based (i.e., a change in the prime rate).
The Fund may also invest in zero coupon US Treasury, foreign government and US
and foreign corporate debt securities, which are bills, notes and bonds that
have been stripped of their unmatured interest coupons and receipts or
certificates representing interests in such stripped debt obligations and
coupons. A zero coupon security pays no interest to its holder prior to
maturity. Accordingly, such securities usually trade at a deep discount from
their face or par value and will be subject to greater market value
fluctuations in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest.

28
<PAGE>

Because the Funds' foreign securities will generally be denominated in foreign
currencies, the value of such securities to the Funds 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 US dollar will result in
a corresponding change in the US dollar value of the Funds' foreign
securities. In addition, some emerging market countries may have fixed or
managed currencies which are not free-floating against the US dollar. Further,
certain emerging market countries' currencies may not be internationally
traded. Certain of these currencies have experienced a steady devaluation
relative to the US dollar. Many emerging market 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 countries.

High Risk Bonds. Emerging Markets Fund may invest up to 5%, and
Multistrategy Bond Fund may invest up to 25%, of their total assets in debt
securities rated less than BBB by S&P or Baa by Moody's, or in unrated
securities judged by the Funds' 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. While this
debt may have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposure to adverse
conditions. Emerging Markets and Multistrategy Bond Funds' money managers will
seek to reduce the risks associated with investing in lower-rated debt
securities by limiting the Funds' holdings in the securities and by the depth
of the managers' credit analysis. For additional information, refer to the
SAI.

29
<PAGE>

Borrowing. The Funds are authorized to borrow from banks to obtain cash to
pay redemption requests. Currently, each Fund may borrow up to 5% of its total
assets. The Board has approved, subject to approval by shareholders of the
respective Funds at the 1998 Shareholder Meeting, a proposal to revise the
Funds' fundamental policy on borrowing. If approved by the shareholders, this
limit would be increased up to 33 1/3% of the current value of the Funds'
total assets. Please see the SAI for a more complete discussion of the Funds'
permissible borrowing activities.

PORTFOLIO TRANSACTION POLICIES

Money managers make decisions to buy and sell securities for the Fund assets
assigned to them. FRIMCo makes determinations for any other Fund assets. The
Funds do not give significant weight to attempting to realize long-term rather
than short-term, capital gains while making portfolio investment decisions.

Each money manager makes decisions to buy or sell securities independently
from other managers. Thus, one money manager for a Fund may be selling a
security when another manager for the Fund (or for another Fund) is purchasing
the same security. Also, when a money manager's services are terminated, the
new money manager may significantly restructure an investment portfolio. These
practices may increase the Funds' portfolio turnover rates, realization of
gains or losses, brokerage commissions and other transaction costs. The annual
portfolio turnover rates for each of the Funds are shown in the Financial
Highlights tables in this Prospectus.

FRIMCo and the money managers arrange for the purchase and sale of the
Trust's securities and the selection of brokers and dealers (including
affiliates) ("Brokers") that, in the best judgment of FRIMCo and the money
managers, provide prompt and reliable execution at favorable prices and
reasonable commission rates. In addition to price and commission rates,
Brokers may be selected based on research, statistical or other services that
they provide. The Trust may pay commission rates that exceed rates that other
Brokers may have charged if the Trust concludes that the commissions are
reasonable in relation to the value of the brokerage and/or research services.

30
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS

<TABLE>
<CAPTION>
DECLARED PAYABLE FUNDS
-------- ------- -----
<C> <C> <S>
Monthly............. Early in the following month Diversified Bond, Volatility
Constrained Bond and
Multistrategy Bond Funds

Quarterly........... Mid: April, July, October and Diversified Equity, Special
December Growth, Equity Income,
Quantitative Equity and Real
Estate Securities Funds

Annually............ Mid-December International Securities and
Emerging Markets Funds
</TABLE>

CAPITAL GAINS DISTRIBUTIONS

The Board annually intends to declare capital gains distributions through
October 31 (excess of capital gains over capital losses), generally in mid-
December. To meet certain legal requirements, a Fund may declare special year-
end dividend and capital gains distributions during October, November or
December to shareholders of record in that month. These latter distributions
are deemed to have been paid by a Fund and received by you on December 31 of
the prior year, provided that you receive them by January 31. Capital gains
realized during November and December will be distributed to you during
February of the following year.

BUYING A DIVIDEND

AUTOMATIC REINVESTMENT

31
<PAGE>

TAXES

Each Fund has elected and intends to continue to qualify for taxation as a
regulated investment company under Subchapter M of the Code. Each Fund must
distribute substantially all of its net investment income and net capital
gains to shareholders and meet other requirements of the Code relating to the
sources of its income and diversification of assets. Accordingly, a Fund will
generally not be liable for federal income or excise taxes based on net income
except to the extent its earnings are not distributed or are distributed in a
manner that does not satisfy the requirements of the Code. The Emerging
Markets Fund may incur tax liability to the extent it invests in PFICs. See
"Portfolio Securities" and the SAI. The Funds may be subject to nominal, if
any, state and local taxes.

For federal income tax purposes, the dividends from net investment income
and any excess of net short-term capital gains over net long-term capital loss
that you receive from the Funds are considered ordinary income. However,
depending upon the relevant state tax rules, a portion of the dividends paid
by Diversified Bond, Volatility Constrained Bond and Multistrategy Bond Funds
attributable to direct US Treasury and agency obligations may be exempt from
state and local taxes. 28% and 20% capital gains distributions declared by the
Board are taxed at the respective capital gains rates regardless of the length
of time you have held the shares. Distributions of income and capital gains
are taxed in the manner described above, whether you receive them in cash or
reinvest them in additional shares of the Funds. Distributions paid in excess
of a Fund's earnings will be treated as a nontaxable return of capital.

A Fund will notify you of the source of its dividends and distributions at
the time they are paid. After the close of each calendar year, the Funds will
advise their shareholders of the amounts of: ordinary income dividends, 28%
capital gain dividends and 20% capital gain distributions, including any
amounts which are deemed paid on December 31 of the prior year;

. dividends which qualify for the 70% dividends-received deduction
available to corporations;

. any foreign taxes assessed against International Securities Diversified
Bond, Volatility Constrained Bond, Multistrategy Bond and Emerging
Markets Funds;

. income which is a tax preference item (if any) for alternative minimum
tax purposes; and

. the percentages of Diversified Bond, Volatility Constrained Bond and
Multistrategy Bond Funds' income attributable to US government, Treasury
and agency securities.

If you are a corporate investor, a portion of the dividends from net
investment income paid by Diversified Equity, Special Growth, Equity Income,
Quantitative Equity and Real Estate Securities Funds will generally qualify in
part for the corporate dividends-received deduction. However, the portion of
the dividend so qualified depends on the aggregate qualifying dividend income
received by each Fund from domestic (US) sources. Certain holding period and
debt financing restrictions may apply to corporate investors seeking to claim
the deduction. You should consult your tax adviser.

32
<PAGE>

The Diversified Bond, Volatility Constrained Bond and Multistrategy Bond
Funds may acquire zero coupon securities which were issued with original issue
discount. When holding these types of securities, the Funds will have to
include a portion of the original issue discount that accrues on the security
for the taxable year in taxable income. This requirement is imposed even if
the Funds receive no payment on the security during the year. Also, because
the Funds must distribute substantially all of their net investment income
annually, the Funds may be required to distribute a dividend that is greater
than the total amount of cash the Funds actually received in a particular
year. Those distributions will be made from a Fund's cash assets or from the
proceeds of sales of portfolio securities (if necessary). The Funds may
realize capital gains or losses from those sales, which could further increase
or decrease the Funds' dividends and distributions paid to shareholders.

Additional information on these and other tax matters relating to the Funds
and their shareholders is included in the section entitled "Taxes" in the SAI.

PERFORMANCE INFORMATION

From time to time, the Funds may advertise their 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 Class E shares
of each of the Funds are as follows:
<TABLE>
<CAPTION>
5 YEARS* 10 YEARS*
1 YEAR* ENDED ENDED
ENDED DEC. 31, DEC. 31,
DEC. 31, 1997 1997
1997 (ANNUALIZED) (ANNUALIZED)
-------- ------------ ------------
<S> <C> <C> <C>
Diversified Equity........................... 30.75% 19.22% 16.92%
Special Growth............................... 27.90% 16.72% 15.48%
Equity Income................................ 32.68% 19.85% 17.25%
Quantitative Equity.......................... 31.70% 20.25% 17.29%
International Securities..................... (0.41%) 10.55% 8.07%
Real Estate Securities....................... 18.20% 17.65% 13.92%**
Diversified Bond............................. 8.35% 7.01% 8.43%
</TABLE>
- ---------------------
* Effective May 18, 1998, these Funds do not charge a 0.40% distribution fee
which reduced performance results prior to that date. The results shown
have not been reduced to reflect the effect of the elimination of this fee.
** From inception on July 28, 1989 to December 31, 1997.

The Diversified Bond Fund also may from time to time advertise its yield.
Yield, which is based on historical earnings and is not intended to indicate
future performance, is calculated by dividing the net investment income per
share earned during the most recent 30-day (or one month) period by the
maximum offering price per share on the last day of the month. This income is
then annualized--the amount of income generated by the investment during that
30-day (or one month) period is assumed to be generated each month over a 12-
month period and is shown as a percentage of the investment. For purposes of
the yield calculation, interest income is

33
<PAGE>

computed based on the yield to maturity of each debt obligation and dividend
income is computed based upon the stated dividend rate of each security in a
Fund's portfolio. The calculation includes all recurring fees that are
charged. The 30-day yield for year ended December 31, 1997 for the Class E
Shares of the Diversified Bond was 5.16%.

Each Fund may also advertise non-standardized performance information which
is for periods in addition to those that are legally required by the SEC.

HOW NET ASSET VALUE IS DETERMINED

NET ASSET VALUE PER SHARE

The net asset value per share is calculated for shares of each class of each
Fund on each business day on which shares are offered or redemption orders are
tendered. For all Funds, a business day is one on which the NYSE is open for
trading. Net asset value per share is computed for Class E Shares of a Fund by
dividing the current value of the Fund's assets attributable to the Class E
Shares, less liabilities attributable to the Class E Shares, by the number of
Class E Shares of the Fund outstanding, and rounding to the nearest cent. All
Funds determine their net asset value as of the close of the NYSE (currently
4:00 p.m. Eastern time).

VALUATION OF PORTFOLIO SECURITIES

The Funds value securities for which market quotations are not readily
available at "fair value," as determined in good faith and in accordance with
procedures established by the Board.

34
<PAGE>

HOW TO PURCHASE SHARES

Russell Funds are generally available only through a select network of
qualified Financial Intermediaries. If you are not currently working with one
of these Financial Intermediaries, please call Russell Investor Services at
(800) RUSSEL4, (787-7354) for assistance in contacting an investment
professional near you.

Certain information noted below, including trade deadlines and payment
procedures, are included for informational purposes only. Contact your
Financial Intermediary for further details.

SHAREHOLDER SERVICES PLAN

The Trust has adopted a Shareholder Services Plan (the "Services Plan").
Under the Services Plan, the Trust may make payments to the distributor or any
investment advisers, banks, broker-dealers, financial planners or other
financial institutions that have entered into a Shareholder Services Agreement
with the distributor ("Servicing Agents"). Payments under the Services Plan
are calculated daily and paid quarterly by the Trust at an annual rate of
0.25% of the average daily net assets of a Fund's Class E Shares.

The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or savings and loan association) from being an underwriter or
distributor of most securities. In the event that the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Board will consider appropriate changes in the
services.

State securities laws governing the ability of depository institutions to
act as underwriters or distributors of securities may differ from the Glass-
Steagall Act. Therefore, banks and financial institutions may be required to
register as dealers under state law. In addition, some state securities laws
may require administrators to register as brokers and dealers.

PAYING FOR SHARES

Cash, third party checks and checks drawn on credit card accounts will not
be accepted.

All purchases must be made in U.S. dollars.

Checks and other negotiable bank drafts must be drawn on U.S. banks and made
payable to "Frank Russell Investment Company."

OFFERING DATES AND TIMES

Orders must be received by the Transfer Agent on any day when Fund shares
are offered, prior to the close of the NYSE (currently 4:00 p.m. Eastern
time).

35
<PAGE>

ORDER AND PAYMENT PROCEDURES

BY MAIL

BY FEDERAL FUNDS WIRE

BY AUTOMATED CLEARING HOUSE ("ACH")

AUTOMATED INVESTMENT PROGRAM

An investor can make regular investments (minimum $50) to Funds in an
established account on a monthly, quarterly, semiannual or annual basis by
automatic electronic funds transfer from a bank account. A separate transfer
is required for each Fund in which shares are purchased. An investor may
change the amount or stop the automatic purchase at any time. Contact your
Financial Intermediary for further information on this program and an
enrollment form.

THREE DAY SETTLEMENT PROGRAM

EXCHANGE PRIVILEGE

BY MAIL OR TELEPHONE

36
<PAGE>

only be exchanged for shares of a Fund offered by the Trust through another
prospectus under certain conditions and only in states where the exchange may
be legally made. For additional information, including prospectuses for other
Funds, contact your Financial Intermediary.

IN-KIND EXCHANGE OF SECURITIES

HOW TO REDEEM SHARES

REDEMPTION DATES AND TIMES

37
<PAGE>

BY MAIL OR TELEPHONE

SYSTEMATIC WITHDRAWAL PROGRAM

PAYMENT OF REDEMPTION PROCEEDS

BY CHECK

A check for the redemption proceeds will be sent to the shareholder(s) of
record at the address of record within seven days after receipt of a
redemption request in proper form.

BY WIRE

WRITTEN INSTRUCTIONS

PROPER FORM: Written instructions must include:

38
<PAGE>

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE

<TABLE>
<S> <C>
ACCOUNT TYPE REQUIREMENTS FOR WRITTEN REQUESTS
- --------------------------------------------------------------------------------
Individual, Joint Written instructions must be signed by each
Tenants, Tenants in shareholder, exactly as the names appear in the
Common account registration.
- --------------------------------------------------------------------------------
UGMA or UTMA (custodial Written instructions must be signed by the custodian
accounts for minors) in his/her capacity as it appears in the account
registration.
- --------------------------------------------------------------------------------
Corporation, Association Written instructions must be signed by authorized
person(s), stating his/her capacity as indicated by
the corporate resolution to act on the account.
A copy of the corporate resolution, certified within
the past 90 days, authorizing the signer to act.
- --------------------------------------------------------------------------------
Estate, Trust, Pension, Written instructions must be signed by all trustees.
Profit Sharing Plan
If the name of the trustee(s) does not appear in the
account registration, please provide a copy of the
trust document certified within the last 60 days.
- --------------------------------------------------------------------------------
Joint tenancy Written instructions must by signed by the surviving
shareholders whose tenant(s).
co-tenants are deceased A certified copy of the death certificate must
accompany the request.
</TABLE>

SIGNATURE GUARANTEE

ACCOUNT POLICIES

THIRD PARTY TRANSACTIONS

REDEMPTION IN-KIND

39
<PAGE>

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, INDEPENDENT ACCOUNTANTS, AND REPORTS

Russell Fund Distributors, Inc., a wholly owned subsidiary of FRIMCo, is the
principal distributor for Trust shares.

YEAR 2000

ORGANIZATION, CAPITALIZATION, AND VOTING

The Trust is organized and operates as a Massachusetts business trust.
Russell has the right to grant (and withdraw) the nonexclusive use of the name
"Frank Russell" or any variation.

The Trustees hold office for the life of the Trust. A Trustee may resign or
retire, and a Trustee may be removed by the Trustees or by shareholders at a
special meeting.

40
<PAGE>

In addition to offering Class E Shares, the Funds also offer beneficial
interests in Class S Shares, which are described in a separate prospectus.
Class S Shares are designed to meet different investor needs and are not
subject to a Rule 12b-1 distribution fee. To obtain more information about
Class S Shares, contact your Financial Intermediary, or write or telephone the
Trust.

At March 31, 1998, the following shareholders may be deemed by the 1940 Act
to "control" the Funds listed after their names because they own more than 25%
of the voting shares of the Funds: Huntington National Bank--Diversified
Equity, Special Growth, Equity Income, Quantitative Equity, International
Securities, Real Estate Securities and Diversified Bond Funds, Class E.

MONEY MANAGER PROFILES

DIVERSIFIED EQUITY FUND

Alliance Capital Management L.P., First Bank Place 601 2nd Ave. South, Suite
5000, Minneapolis, MN 55402-4322, a limited partnership whose (i) general
partner is a wholly owned subsidiary of The Equitable Companies Incorporated
("The Equitable") and (ii) majority unit holder is ACM, Inc., a wholly owned
subsidiary of The Equitable. As of March 1, 1995, 60.5% of The Equitable was
owned by Axa, a French insurance holding company.

Barclays Global Fund Advisors N. A., 45 Fremont Street, 17th Floor, San
Francisco, CA 94105, is an indirect, wholly-owned subsidiary of Barclays Bank
PLC.

Equinox Capital Management, Inc., 590 Madison Avenue, 41st Floor, New York,
NY 10022. Equinox is a registered investment adviser with majority ownership
held by Ron Ulrich.

INVESCO Capital Management, Inc., 1315 Peachtree Street N.E., Suite 500,
Atlanta, GA 30309, is a corporation whose indirect parent is AMVESCO, PLC, a
London-based financial services holding company.

Morgan Stanley Asset Management, Inc., 1221 Avenue of the Americas, New
York, NY 10020, is a wholly owned subsidiary of Morgan Stanley Dean Witter &
Co., a publicly held corporation.

41
<PAGE>

Trinity Investment Management Corporation, 75 Park Plaza, Boston, MA 02116,
is a corporation with seven shareholders, with Stanford M. Calderwood holding
majority ownership.

SPECIAL GROWTH FUND

Delphi Management, Inc., 50 Rowes Wharf, Suite 440, Boston, MA 02110, is
100% owned by Scott Black.

Jacobs Levy Equity Management, Inc., 280 Corporate Center, 3 ADP Boulevard,
Roseland, NJ 07068, is 100% owned by Bruce Jacobs and Kenneth Levy.

Sirach Capital Management, Inc., One Union Square, Suite 3323, 600 Union
Street, Seattle, WA 98101, is a wholly owned subsidiary of United Asset
Management Company, a publicly traded corporation.

EQUITY INCOME FUND

Brandywine Asset Management, Inc., Three Christina Centre, Suite 1200, 201
N. Walnut Street, Wilmington, DE 19801, is a wholly owned subsidiary of Legg
Mason, Inc.

Equinox Capital Management N.A., Inc., See: Diversified Equity Fund.

Trinity Investment Management Corporation, See: Diversified Equity Fund.

42
<PAGE>

QUANTITATIVE EQUITY FUND

Barclays Global Fund Advisors, See: Diversified Equity Fund.

J.P. Morgan Investment Management, Inc., 522 Fifth Ave., New York, NY 10036,
is a wholly owned subsidiary of J.P. Morgan & Co., Inc., a publicly held bank
holding company.

INTERNATIONAL SECURITIES FUND

J.P. Morgan Investment Management, Inc., See: Quantitative Equity Fund.

Oechsle International Advisors, One International Place, 23th Floor, Boston,
MA 02110, is a limited partnership which is 100% controlled by its general
partners. The general partners are: S. Dewey Keesler, Stephen P. Langer,
Walter Oechsle, L. Sean Roche, Steven H. Schaefer and Tetsuo Shiozumi.

The Boston Company Asset Management, Inc., One Boston Place, 14th Floor,
Boston, MA 02108-4402, is 100% owned by Mellon Bank Corporation, a publicly
held corporation.

43
<PAGE>

EMERGING MARKETS FUND

Genesis Asset Managers, Ltd. 21 Knights Bridge, London, SW1X 7LY, 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 International Ltd., is controlled 55% by
management and assorted interests, and the balance held by outside
shareholders, with the largest single holding being 15%.

J.P. Morgan Investment Management, Inc., See: Quantitative Equity Fund.

Montgomery Asset Management, LLC, 101 California Street, San Francisco, CA
94111, is a Delaware limited liability company with majority ownership held by
Commerzbank AG, a foreign banking organization.

REAL ESTATE SECURITIES FUND

Cohen & Steers Capital Management, 757 Third Avenue, New York, NY 10017, is
a corporation whose two principals, Robert H. Steers and Martin Cohen, control
the corporation within the meaning of the 1940 Act.

AEW Capital Management, L.P., 225 Franking Street, Boston, MA 02110-2803, is
a wholly owned affiliate of New England Investment Companies, L.P. ("NEIC").
NEIC is a publicly-held limited partnership. Metropolitan Life Insurance
Company, a publicly held corporation, owns approximately 53% of NEIC. AEW
Capital Management, Inc., a wholly-owned subsidiary of NEIC, is the general
partner, and NEIC is the sole limited partner, of AEW Capital Management, L.P.

DIVERSIFIED BOND FUND

Lincoln Capital Management Company, See: Diversified Equity Fund.

Standish, Ayer & Wood, Inc., One Financial Center, Boston, MA 02111, is a
company whose ownership is divided among seventeen directors, with no director
having more than a 25% ownership interest.

VOLATILITY CONSTRAINED BOND FUND

BlackRock Financial Management, 345 Park Ave., 31st Floor, New York, NY
10154, a wholly owned indirect subsidiary of PNC Bank.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

STW Fixed Income Management, Trinity Hall, 43 Cedar Avenue, Hamilton HM KX,
Bermuda, is a Bermuda exempted company. William H. Williams III is the sole
shareholder.

44
<PAGE>

MULTISTRATEGY BOND FUND

BEA Associates Inc., One CitiCorp. Center, 153 East 53rd Street, 58th Floor,
New York, NY 10022, is a general partnership of Credit Suisse Capital
Corporation ("CS Capital") and Basic Appraisals, Inc. ("Basic"). CS Capital is
an 80% partner, and is a wholly owned subsidiary of Credit Suisse Investment
Corporation, which is in turn a wholly-owned subsidiary of Credit Suisse, a
Swiss bank, which is in turn a subsidiary of CS Holding, a Swiss corporation.
No one person or entity possesses a controlling interest in Basic, the 20%
partner. BEA Associates is a registered investment adviser.

Pacific Investment Management Company, See: Diversified Bond Fund.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE FUNDS OR THE MONEY MANAGERS SINCE THE DATE HEREOF; HOWEVER, IF
ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

45
<PAGE>

GLOSSARY

Agreements -- Asset Management Services Agreements, which are between FRIMCo
and institutional investors and Financial Intermediaries.

Board -- The Board of Trustees of the Trust.

Cash reserves -- The Funds may invest their cash reserves (i.e., funds
awaiting investment in the specific types of securities to be acquired by the
Funds) in money market instruments and in debt securities of comparable
quality to each Fund's permitted investments. As an alternative to a Fund
directly investing in money market instruments, the Funds and their money
managers may elect to invest the Fund's cash reserves in the Trust's Money
Market Fund. To prevent duplication of fees, FRIMCo waives its management fee
on that portion of a Fund's assets invested in the Trust's Money Market Fund.

Code -- Internal Revenue Code of 1986, as amended.

Covered put option -- A put option is "covered" if the Fund has collateral
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security.

Custodian -- State Street Bank and Trust Company, the Trust's custodian and
portfolio accountant.

Distributor -- Russell Fund Distributors, Inc., the organization that sells
the shares of the Fund's under a contract with the Trust.

46
<PAGE>

Emerging market companies -- A company in an emerging market means (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.

Equity derivative securities -- These include, among other instruments,
options on equity securities, warrants and futures contracts on equity
securities.

Financial Intermediary -- Bank trust departments, registered investment
advisers, broker-dealers and other Eligible Investors that have entered into
Agreements with FRIMCo.

Fluctuating Funds -- The Funds offered by this Prospectus.

FNMA -- Federal National Mortgage Association.

Forward currency contracts -- This is a contract individually negotiated and
privately traded by currency traders and their customers and creates an
obligation to purchase or sell a specific currency for an agreed-upon price at
a future date. The Funds generally do not enter into forward contracts with
terms greater than one year, and they typically enter into forward contracts
only under two circumstances. First, if a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may
desire to "lock in" the US dollar price of the security by entering into a
forward contract to buy the amount of a foreign currency needed to settle the
transaction. Second, if the Fund's money managers believe that the currency of
a particular foreign country will substantially rise or fall against the US
dollar, the Fund may enter into a forward contract to buy or sell the currency
approximating the value of some or all of the Fund's portfolio securities
denominated in the currency. A Fund will not enter into a forward contract if,
as a result, it would have more than one-third of its assets committed to such
contracts (unless it owns the currency that it is obligated to deliver or has
caused the Custodian to segregate segregable assets having a value sufficient
to cover its obligations). Although forward contracts are used primarily to
protect a Fund from adverse currency movements, they involve the risk that
currency movements will not be accurately predicted.

FRIMCo -- Frank Russell Investment Management Company, the Trust's
administrator, manager and transfer and dividend paying agent.

Funds -- The 28 investment series of the Trust. Each Fund is considered a
separate registered investment company (or RIC) for federal income tax
purposes, and each Fund has its own investment objective, policies and
restrictions. Ten Funds are described in and offered by this Prospectus.

47
<PAGE>

against an anticipated increase in interest rates and a corresponding decline
in debt securities it owns. A Fund will have collateral assets equal to the
purchase price of the portfolio securities represented by the underlying
interest rate futures contracts it has an obligation to purchase.

GNMA -- Government National Mortgage Association.

IRS -- Internal Revenue Service.

Lending portfolio securities -- Each Fund may lend portfolio securities with
a value of up to 33 1/3% of each Fund's total assets. These loans may be
terminated at any time. A Fund will receive either cash (and agree to pay a
"rebate" interest rate), US government or US government agency obligations as
collateral in an amount equal to at least 102% (for loans of US securities) or
105% (for non-US securities) of the current market value of the loaned
securities. The collateral is daily "marked-to-market," 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. If the borrower
of the securities fails 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.

Moody's -- Moody's Investors Service, Inc., an NRSRO.

48
<PAGE>

to obtain funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities. Municipal
obligations may include project, tax anticipation, revenue anticipation, bond
anticipation, and construction loan notes; tax-exempt commercial paper; fixed
and variable rate notes; obligations whose interest and principal are
guaranteed or insured by the US government or fully collateralized by
US government obligations; industrial development bonds; and variable rate
obligations.

NASD -- National Association of Securities Dealers, Inc.

net asset value (NAV) -- The value of a Fund is determined by deducting the
Fund's liabilities from the total assets of the portfolio. The net asset value
per share is determined by dividing the net asset value of the Fund by the
number of its shares that are outstanding.

NRSRO -- A nationally recognized statistical rating organization, such as
S&P or Moody's.

NYSE -- New York Stock Exchange.

PFIC -- A passive foreign investment company. Emerging Markets Fund may
purchase interests in an issuer that is considered a PFIC under the Code.

Prime rate -- The interest rate charged by leading US banks on loans to
their most creditworthy customers.

REITs -- Real estate investment trusts.

49
<PAGE>

Russell 1000(R) Index -- The Russell 1000(R) Index consists of the 1,000
largest US companies by capitalization (i.e., market price per share times the
number of shares outstanding). The smallest company in the Index at the time
of selection has a capitalization of approximately $1 billion. The Index does
not include cross-corporate holdings in a company's capitalization. For
example, when IBM owned approximately 20% of Intel, only 80% of the total
shares outstanding of Intel were used to determine Intel's capitalization.
Also not included in the Index are closed-end investment companies, companies
that do not file a Form 10-K report with the SEC, foreign securities, and
American Depository Receipts. The Index's composition is changed annually to
reflect changes in market capitalization and share balances outstanding. The
Russell 1000(R) Index is used as the basis for Quantitative Equity Fund's
performance because FRIMCo believes it represents the universe of stocks in
which most active money managers invest and is representative of the
performance of publicly traded common stocks most institutional investors
purchase.

Russell -- Frank Russell Company, consultant to the Trust and to the Funds.

S&P -- Standard & Poor's Ratings Group, an NRSRO.

S&P 500 -- Standard & Poor's 500 Composite Price Index.

SAI -- The Trust's Statement of Additional Information, dated as noted on
the first page of this Prospectus.

SEC -- US Securities and Exchange Commission.

Servicing Agents -- Entities who provide ongoing personal services to
shareholders of the Funds (i.e., recordkeeping). Servicing Agents perform
these services under contract with the Funds' distributor.

Shares -- The Class E Shares in the Funds described in this prospectus. Each
Class E Share of a Fund represents a share of beneficial interest in the Fund.

Transfer Agent -- FRIMCo, in its capacity as the Trust's transfer and
dividend paying agent.

Trust -- Frank Russell Investment Company, an open-end management investment
company which is registered with the SEC.

US -- United States.

US government obligations -- These include US Treasury bills, notes, bonds
and other obligations issued or guaranteed by the US government, its agencies
or instrumentalities.

1940 Act -- The Investment Company Act of 1940, as amended. The 1940 Act
governs the operations of the Trust and the Funds.

1933 Act -- The Securities Act of 1933, as amended.

50
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

MONEY MANAGERS

DIVERSIFIED EQUITY
Alliance Capital Management L.P.
Barclays Global Fund Advisors
Equinox Capital Management, Inc.
INVESCO Capital Management, Inc.
Lincoln Capital Management Company
Morgan Stanley Asset Management, Inc.
Peachtree Asset Management
Schneider Capital Management
Suffolk Capital Management
Trinity Investment Management Corporation

SPECIAL GROWTH
Delphi Management, Inc.
Fiduciary International, Inc.
GlobeFlex Capital, L.P.
Jacobs Levy Equity Management, Inc.
Sirach Capital Management, Inc.
Wellington Management Company LLP

EQUITY INCOME
Brandywine Asset Management, Inc.
Equinox Capital Management, Inc.
Trinity Investment Management Corporation

QUANTITATIVE EQUITY
Barclays Global Advisors, N.A.
Franklin Portfolio Associates LLC
J.P. Morgan Investment Management, Inc.

INTERNATIONAL SECURITIES
J.P. Morgan Investment Management, Inc.
Marathon Asset Management Limited
Oechsle International Advisors
Rowe Price-Fleming International, Inc.
Sanford C. Bernstein & Co., Inc.
The Boston Company Asset Management, Inc.

EMERGING MARKETS
Genesis Asset Managers, Ltd.
J.P. Morgan Investment Management, Inc.
Montgomery Asset Management, LLC

REAL ESTATE SECURITIES
Cohen & Steers Capital Management
AEW Capital Management L.P.

DIVERSIFIED BOND
Lincoln Capital Management Company
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

VOLATILITY CONSTRAINED BOND
BlackRock Financial Management
Standish, Ayer & Wood, Inc.
STW Fixed Income Management

MULTISTRATEGY BOND
BEA Associates, Inc.
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment Management Company
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, Massachusetts 02109

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

OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) RUSSEL4
(800) 787-3754
In Washington (253) 627-7001

51
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

Real Estate Securities Fund Money Market Fund
Emerging Markets Fund US Government Money Market
Equity T Fund Fund
Limited Volatility Tax Free Fund Tax Free Money Market Fund

Each Fund has its own investment objective and policies designed to meet
different investment goals. As with all mutual funds, attainment of each
Fund's investment objective cannot be assured.

Frank Russell Investment Management Company ("FRIMCo") operates and
administers the Funds. Class S Shares are sold at their net asset value, with
no sales load, no commissions, no Rule 12b-1 fees and no exchange fees.
Although there is no specified minimum investment in the Funds described in
this Prospectus, these Funds are designed to be used as part of an allocated
investment portfolio in combination with Funds described in the Trust's
Russell Funds Prospectus or Institutional Funds Prospectus. Investments in the
Funds described in this Prospectus will be applied toward any applicable
minimum initial investment requirements with respect to other Funds.
Additionally, investors must qualify as Eligible Investors, as described in
this Prospectus.

INVESTMENTS IN MONEY MARKET FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE
US GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET FUND, US
GOVERNMENT MONEY MARKET FUND AND TAX FREE MONEY MARKET FUND (TOGETHER, THE
"MONEY MARKET FUNDS") WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH STATE OR OTHER JURISDICTION.

This Prospectus sets forth concisely the information about the Funds that
you should know before investing. Please read it before investing and retain
it for future reference. A Statement of Additional Information ("SAI"), dated
May 1, 1998 and supplemented June 15, 1998, has been filed with the Securities
and Exchange Commission ("SEC"). The SAI is incorporated into this Prospectus
by reference and is available without charge by writing to the address listed
above or by telephoning (800) 972-0700.

This Prospectus relates only to the Class S Shares of the Funds. Two Funds
- -- Real Estate Securities Fund and Emerging Markets Fund -- also offer
interests in another class of shares, the Class E Shares, through another
prospectus. For more information concerning Class E Shares, contact the person
or organization from whom you obtained this Prospectus, or write or telephone
the Trust.

PROSPECTUS DATED MAY 1, 1998
AS SUPPLEMENTED JUNE 15, 1998
<PAGE>

TABLE OF CONTENTS

CERTAIN TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE
GLOSSARY, WHICH BEGINS ON PAGE 42 OF THIS PROSPECTUS.

<TABLE>
<S> <C>
Summary..................................................................... 3
Annual Fund Operating Expenses.............................................. 5
Financial Highlights........................................................ 7
The Purpose of the Funds--Multi-Style, Multi-Manager Diversification........ 14
Eligible Investors.......................................................... 15
General Management of the Funds............................................. 16
Expenses of the Funds....................................................... 18
The Money Managers.......................................................... 18
Investment Objectives, Policies and Practices............................... 19
Portfolio Transaction Policies.............................................. 29
Dividends and Distributions................................................. 29
Taxes....................................................................... 30
Performance Information..................................................... 32
How Net Asset Value Is Determined........................................... 33
How to Purchase Shares...................................................... 34
How to Redeem Shares........................................................ 37
Additional Information...................................................... 40
Money Manager Profiles...................................................... 41
Glossary.................................................................... 43
</TABLE>

2
<PAGE>

SUMMARY

Each Fund seeks to achieve a specific investment objective by using distinct
investment strategies:

EQUITY T FUND -- Capital growth on an after-tax basis by investing primarily
in equity securities.

LIMITED VOLATILITY TAX FREE FUND -- A high level of federal tax-exempt
income consistent with the preservation of capital by investing primarily in
municipal obligations maturing in seven years or less from the date of
acquisition.

The Trust's Board of Trustees has approved, subject to the approval of the
Fund's shareholders, changing the Limited Volatility Tax Free Fund's
investment objective, as described in more detail under "Investment
Objectives, Policies and Practices, Limited Volatility Tax Free Fund."

MONEY MARKET FUND -- Maximum current income to the extent consistent with
the preservation of capital and liquidity, and the maintenance of a stable
$1.00 per share net asset value by investing exclusively in short-term, high-
grade, money market instruments.

US GOVERNMENT MONEY MARKET FUND -- Maximum current income to the extent
consistent with the preservation of capital and liquidity, and the maintenance
of a stable $1.00 per share net asset value by investing exclusively in US
government obligations.

TAX FREE MONEY MARKET FUND -- Maximum current income exempt from federal
income tax consistent with the preservation of capital and liquidity, and the
maintenance of a stable $1.00 per share net asset value by investing in short-
term municipal obligations. See "Investment Objectives, Policies and
Practices."

The Trust's Fund had aggregate net assets of approximately $13.6 billion on
April 1, 1998. The net assets of the Funds described in this Prospectus on
April 1, 1998 were:

<TABLE>
<S> <C>
Real Estate Securities.. $654,494,526
Emerging Markets........ $396,931,227
Equity T................ $161,655,014
Limited Volatility Tax
Free................... $103,089,120
</TABLE>
<TABLE>
<S> <C>
Money Market............ $236,323,157
US Government Money
Market................. $124,910,005
Tax Free Money Market... $167,923,946
</TABLE>

3
<PAGE>

All Class S Shares are sold without a sales charge, commission, or Rule 12b-
1 fee. Except as indicated below, Class S Shares are redeemed at net asset
value. You may also exchange shares of one Fund for shares of another Fund.
See "How to Purchase Shares" and "How to Redeem Shares."

You should be aware of the general risks associated with investments in
mutual funds. One or more Funds may make investments and engage in investment
practices and techniques that involve risks, including entering into
repurchase agreements, lending portfolio securities and entering into hedging
transactions. Also, foreign securities in which Emerging Markets Fund may
invest may be subject to certain risks in addition to those inherent in US
investments. These risks are described in "Risk Considerations" in "Investment
Objectives, Policies and Practices" and in the Glossary.

SHAREHOLDER TRANSACTION EXPENSES

You would pay the following charges when buying or redeeming Class S Shares
of a Fund:

<TABLE>
<CAPTION>
MAXIMUM SALES MAXIMUM SALES
LOAD IMPOSED LOAD IMPOSED ON DEFERRED REDEMPTION EXCHANGE
ON PURCHASES REINVESTED DIVIDENDS SALES LOAD FEES + FEES
------------- -------------------- ---------- ---------- --------
<S> <C> <C> <C> <C>
None None None Equity T Fund None
</TABLE>
- ---------------------
+ Equity T Fund only: When shares of the Equity T Fund are redeemed, a
redemption fee, calculated at 1% of the net asset value of the shares
redeemed, will be imposed. Your redemption proceeds are accordingly
reduced. The proceeds of this fee are retained by the Fund to offset tax
consequences to the Fund that result from the redemption of Fund shares.

4
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER EXPENSES# OPERATING
FEE (NET (AFTER EXPENSES# (AFTER
OF FEE REIMBURSEMENT REIMBURSEMENT,
WAIVERS) UNLESS NOTED) UNLESS NOTED)+
---------- --------------- ----------------
<S> <C> <C> <C>
Real Estate Securities Fund....... 0.85% 0.25% 1.10%
Emerging Markets Fund............. 1.20% 0.61% 1.81%
Equity T Fund*.................... 0.68% 0.32% 1.00%
Limited Volatility Tax Free
Fund**........................... 0.50% 0.21% 0.71%
Money Market Fund*................ 0.10% 0.06% 0.16%
US Government Money Market Fund*.. 0.03% 0.27% 0.30%
Tax Free Money Market Fund*....... 0.15% 0.13% 0.28%
</TABLE>
- ---------------------
+ Investors purchasing Class S Shares of the fund through a financial
intermediary, such as a bank or an investment adviser, may also pay
additional fees to the intermediary for services provided by the
intermediary. Such investors should contact the intermediary for
information concerning what additional fees, if any, will be charged.
# Restated to reflect changes to the Trust's Transfer and Dividend Paying
Agent agreement, which became effective June 8, 1998.
* FRIMCo has voluntarily agreed to waive a portion of its 0.75% management
fee for the Equity T Fund, up to the full amount of that fee, for all fund
expenses that exceed 1.00% of the average daily net assets on an annual
basis. FRIMCo has voluntarily agreed to waive a portion of its 0.25%
management fee for the US Government Money Market Fund, up to the full
amount of that fee, for all expenses that exceed 0.30% of the average
daily net assets on an annual basis. Additionally, FRIMCo has voluntarily
agreed to waive 0.15% of its 0.25%, and 0.10% of its 0.25% management fee
for the Money Market Fund, and the Tax Free Money Market Fund,
respectively. The waiver for each respective fund is intended to be in
effect for the current fiscal year, but may be revised or eliminated at
any time without notice to shareholders. The gross annual total operating
expenses absent the waivers would be 1.07%, 0.31%, 0.52% and 0.38% of
average net assets of the Equity T Fund, Money Market Fund, US Government
Money Market Fund and Tax Free Money Market Fund, respectively.
** The Board of Trustees has approved, subject to shareholder approval, which
will be sought at a shareholder meeting expected to be held during 1998,
reducing the management fee to 0.35%.

Beginning January 1, 1999, any shareholder account with respect to any Fund
described in this Prospectus with a balance of less than $5,000, except Equity
T Fund and any of the three Money Market Funds, will be subject to an account
maintenance fee of $12.50 per year. The fee will be deducted from dividends
payable to each applicable account or by liquidating shares in the account, or
both. The fees will be waived for: (i) accounts established before July 1,
1998; (ii) accounts held by retirement plans representing multiple
participants; (iii) accounts held by trustees, officers, employees, and
certain third-party contractors of the Trust and its affiliates; and (iv)
classes of accounts for which maintenance costs are absorbed by a third-party.
Investors considering an investment of less than $5,000 in any Fund described
in this Prospectus may wish to consider investing in the Trust's LifePoints
Funds, shareholder accounts of which are not subject to an account maintenance
fee. For more information see the Trust's LifePoints Funds Prospectus.

5
<PAGE>

EXAMPLE OF EXPENSES FOR THE FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Real Estate Securities Fund..................... $11 $35 $ 61 $138
Emerging Markets Fund........................... $18 $57 $100 $228
Equity T Fund +................................. $20 $63 $111 $252
Limited Volatility Tax Free Fund................ $ 7 $22 $ 39 $ 89
Money Market Fund............................... $ 2 $ 5 $ 9 $ 20
US Government Money Market Fund................. $ 4 $12 $ 22 $ 49
Tax Free Money Market Fund...................... $ 3 $ 9 $ 15 $ 35
</TABLE>
- ---------------------
+ You would pay the following expenses on an investment in Equity T Fund,
assuming no redemption: 1 year -- $10, 3 years -- $32, 5 years -- $55 and
10 years -- $126.

6
<PAGE>

FINANCIAL HIGHLIGHTS OF THE REAL ESTATE SECURITIES FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

REAL ESTATE SECURITIES FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR........... $ 29.19 $ 23.51 $ 22.53 $ 22.76 $ 21.50 $19.33 $14.99 $19.31 $20.00
------- ------- ------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 1.36 1.39 1.32 1.25 1.05 1.08 1.11 1.30 .42
Net realized and
unrealized gain (loss)
on investments........ 3.93 6.89 1.03 .40 2.68 2.16 4.36 (4.30) (.73)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total From Investment
Operations........... 5.29 8.28 2.35 1.65 3.73 3.24 5.47 (3.00) (.31)
------- ------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Net investment income.. (1.41) (1.34) (1.35) (1.23) (1.04) (1.07) (1.13) (1.32) (.38)
Net realized gain on
investments........... (2.21) (1.26) -- (.45) (1.43) -- -- -- --
In excess of net
realized gain on
investments........... -- -- -- (.20) -- -- -- -- --
Tax return of capital.. -- -- (.02) -- -- -- -- -- --
------- ------- ------- ------- ------- ------ ------ ------ ------
Total Distributions... (3.62) (2.60) (1.37) (1.88) (2.47) (1.07) (1.13) (1.32) (.38)
------- ------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE, END OF
YEAR................... $ 30.86 $ 29.19 $ 23.51 $ 22.53 $ 22.76 $21.50 $19.33 $14.99 $19.31
======= ======= ======= ======= ======= ====== ====== ====== ======
TOTAL RETURN (%)(a)..... 18.99 36.81 10.87 7.24 17.42 17.29 37.08 (15.92) (1.57)
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses, to
average net assets
(b)................... 1.02 1.04 1.04 1.05 1.11 1.20 1.31 1.60 .32
Net investment income
to average net
assets (b)............ 4.57 5.64 6.10 5.65 4.52 5.60 6.50 8.94 6.90
Portfolio turnover
(b)................... 49.40 51.75 23.49 45.84 58.38 19.72 13.28 12.11 8.74
Net assets, end of year
($000 omitted)........ 615,483 445,619 290,990 209,208 145,167 75,902 42,771 20,845 7,699
Average commission rate
paid per share of
security ($ omitted).. .0618 .0631 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
* See notes to Financial Statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
++ For the period July 28, 1989 (commencement of operations) to December 31,
1989.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended December 31, 1989 are annualized.

7
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EMERGING MARKETS FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR.............................. $ 12.35 $11.16 $12.25 $13.90 $10.00
------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. .14 .10 .11 .15 .07
Net realized and unrealized gain
(loss) on investments............ (.56) 1.26 (1.12) (1.24) 4.09
------- ------- ------- ------- ------
Total From Investment Opera-
tions........................... (.42) 1.36 (1.01) (1.09) 4.16
------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Net investment income............. (.05) (.08) (.03) (.10) (.07)
In excess of net investment in-
come............................. (.09) (.09) (.02) (.10) (.01)
Net realized gain on investments.. -- -- -- (.31) (.18)
In excess of net realized gain on
investments...................... -- -- (.03) (.05) --
------- ------- ------- ------- ------
Total Distributions.............. (.14) (.17) (.08) (.56) (.26)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF YEAR....... $ 11.79 $12.35 $11.16 $12.25 $13.90
======= ======= ======= ======= ======
TOTAL RETURN (%)(a)(c)............. (3.45) 12.26 (8.21) (5.83) 41.83
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to aver-
age net assets (b)(c)............ 1.64 1.71 1.75 .80 .80
Operating expenses, gross, to av-
erage net assets (b)(c).......... 1.64 1.72 1.80 .83 1.60
Net investment income to average
net assets (b)(c)................ .87 .77 .88 1.10 1.33
Portfolio turnover (b)............ 50.60 34.62 71.16 57.47 89.99
Net assets, end of year ($000
omitted)(d)...................... 333,052 271,490 172,673 127,271 65,457
Average commission rate paid per
share of security ($
omitted)(d)...................... .0012 .0007 N/A N/A N/A
</TABLE>
- ---------------------
* See notes to Financial Statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
++ For the period January 29, 1993 (commencement of operations) to December
31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended December 31, 1993, are annualized.
(c) For periods prior to April 1, 1995, fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of any investment services fees.
Management fees and investment services fees reduce performance; for
example, an investment services fee of 0.2% of average managed assets will
reduce a 10% return to 9.8%.
(d) In certain foreign markets the relationship between the translated US
dollar price per share and commission paid per share may vary from that of
domestic markets.

8
<PAGE>

FINANCIAL HIGHLIGHTS OF THE LIMITED VOLATILITY TAX FREE FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

LIMITED VOLATILITY TAX FREE FUND

9
<PAGE>

FINANCIAL HIGHLIGHTS OF THE MONEY MARKET FUND*

MONEY MARKET FUND

10
<PAGE>

FINANCIAL HIGHLIGHTS OF THE US GOVERNMENT MONEY MARKET FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

US GOVERNMENT MONEY MARKET FUND

11
<PAGE>

FINANCIAL HIGHLIGHTS OF THE TAX FREE MONEY MARKET FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

TAX FREE MONEY MARKET FUND

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $ 1.0000 $ 1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .0355 .0329 .0370 .0279 .0251 .0304 .0473 .0582 .0623 .0508
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income.. (.0355) (.0329) (.0370) (.0279) (.0251) (.0304) (.0473) (.0582) (.0623) (.0508)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $ 1.0000 $ 1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%)(a)..... 3.61 3.35 3.76 2.83 2.55 3.09 4.84 5.99 6.42 5.24
RATIOS (%)/SUPPLEMENTAL
DATA:
Operating expenses,
net, to average daily
net assets............ .28 .42 .48 .40 .43 .45 .45 .45 .45 .43
Operating expenses,
gross, to average
daily net assets...... .38 .42 .48 .40 .43 .45 .46 .52 .61 .50
Net investment income
to average daily net
assets................ 3.55 3.28 3.69 2.84 2.52 3.03 4.73 5.82 6.28 5.36
Net assets, end of year
($000 omitted)........ 130,725 102,207 78,000 100,819 68,154 73,203 61,288 59,892 30,873 39,165
</TABLE>
- ---------------------
* See notes to Financial Statements which appear in the Trust Annual Report
to Shareholders and which are incorporated by reference into the Statement
of Additional Information.
(a) Periods less than one year are not annualized.

12
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY T FUND*

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., Trust's independent
accountants. The 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. The information in the
table represents the Financial Highlights for the Fund's Class S Shares for
the periods shown. The table appears in the Fund's financial statements and
related notes, which are incorporated by reference into the Statement of
Additional Information and which appear, along with the report of Coopers &
Lybrand L.L.P. in the Fund's Annual Report to Shareholders. More detailed
information concerning the Fund's performance, including a complete portfolio
listing and audited financial statements, is available in the Fund's Annual
Report, which may be obtained without charge by writing or calling the Trust.

EQUITY T FUND

<TABLE>
<CAPTION>
1997 1996+
-------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.......................... $ 10.61 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .08 .03
Net realized and unrealized gain (loss) on investments.... 3.28 .61
-------- -------
Total Income From Investment Operations................. 3.36 .64
LESS DISTRIBUTIONS:
Net investment income..................................... (.07) (.03)
-------- -------
NET ASSET VALUE, END OF YEAR................................ $ 13.90 $ 10.61
======== =======
TOTAL RETURN (%)(a)(c)...................................... 31.73 6.10
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average net assets (b)(c)..... 1.00 1.00
Operating expenses, gross, to average net assets (b)(c)... 1.08 2.83
Net investment income to average net assets (b)(c)........ .92 1.62
Portfolio turnover (b).................................... 39.23 8.86
Net assets, end of year ($000 omitted).................... 109,735 19,931
Average commission rate paid per share of security ($
omitted)................................................. .0271 .0301
</TABLE>
- ---------------------
* See notes to Financial Statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.
+ For the period October 7, 1996 (commencement of operations) to December
31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the period October 7, 1996 (commencement of operations) to
December 31, 1996 are annualized.
(c) Fund performance, operating expenses, and net investment income are
reported net of investment management fees paid to the Manager or money
managers, but gross of any investment services fees.

13
<PAGE>

THE PURPOSE OF THE FUNDS--MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

Russell acts as consultant to the Funds. Russell was founded in 1936 and has
been providing comprehensive asset management consulting services for almost
30 years to institutional investors, principally large corporate employee
benefit plans. Russell and its affiliates have offices around the world -- in
Tacoma, New York, Toronto, London, Zurich, Paris, Sydney, Auckland and Tokyo.

Three functions form the core of Russell's consulting services:

. Objective Setting: Defining appropriate investment objectives and desired
investment returns, based on a client's unique situation and risk
tolerance.

. 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 a way most
likely to achieve the client's objectives and desired returns.

When this process is completed, a client's assets are invested using a
"multi-style, multi-manager diversification" technique. The goals of this
process are to reduce risk and to increase returns.

FRIMCo and Russell believe investors should seek to hold fully diversified
portfolios that reflect both the investors' individual investment time
horizons and their ability to accept risk. FRIMCo and Russell believe that for
many, this can be accomplished through strategically purchasing shares in one
or more of the Funds, which have been structured to provide access to specific
asset classes in a multi-style, multi-manager environment.

Capital market history shows that asset classes with greater risk will
generally outperform lower risk asset classes over time. For instance,
corporate equities over the past 50 years have outperformed corporate debt in
absolute terms. However, what is generally true of performance over extended
periods will not necessarily be true at any given time during a market cycle,
and from time to time, asset classes with greater risk may also underperform
lower risk asset classes, on either a risk adjusted or absolute basis.
Investors should select a mix of asset classes that reflects their ability to
withstand market fluctuations over their investment horizons.

14
<PAGE>

ELIGIBLE INVESTORS

Shares of the Funds are currently offered only to Eligible Investors.
Eligible Investors include:

. Institutions or individuals who have acquired shares through
institutional investors and Financial Intermediaries; and

. Trustees, officers, employees and certain third-party contractors of the
Trust and its affiliates.

Although there is currently no required minimum investment in the Funds
described in this Prospectus, the Funds are designed to be used as part of an
allocated investment portfolio in combination with Funds described in the
Trust's Russell Funds Prospectus or Institutional Funds Prospectus. Investment
in the Funds described in this Prospectus will be applied toward any
applicable required minimum initial investment with respect to other Funds.

The Funds generally do not offer their shares directly to individual (i.e.,
retail) investors, although they may choose to do so. Financial Intermediaries
which have entered into Service Agreements with FRIMCo may acquire shares of
the Funds for their customers. Under the Agreements, FRIMCo provides
objective-setting and asset-allocation assistance and services to Financial
Intermediaries, which in turn provide similar services to their customers.
Financial Intermediaries receive no compensation from FRIMCo or Class S Shares
of the Funds. However, Financial Intermediaries may charge their customers a
fee for providing these services and other trust or investment-related
services.

In the case of the Emerging Markets, Equity T and Money Market Funds, the
Agreement provides that a shareholder investment services fee (the "Services
Fee") may be paid to FRIMCo. The Services Fee is usually expressed as a
percentage of client assets invested in the Funds. The Services Fee may
include a fixed-dollar fee for certain specific services. The client and
FRIMCo agree to the Services Fee, which is determined by the amount of assets
the client expects to invest in the Funds, the nature and extent of services
that FRIMCo agrees to provide to the client, and other factors.

Either the client or FRIMCo may terminate an Agreement upon written notice.
FRIMCo does not anticipate terminating any Agreement unless a client does not
(i) promptly pay fees due to FRIMCo, or (ii) invest sufficient assets in the
Funds to compensate FRIMCo for its services. If an Agreement is terminated,
FRIMCo will no longer provide asset-allocation, objective-setting or other
services to the client.

15
<PAGE>

GENERAL MANAGEMENT OF THE FUNDS

FRIMCo:

. provides or supervises the general management and administration,
investment advisory and portfolio management, and distribution services
for the Funds;

. develops the investment programs, selects money managers, allocates
assets among money managers and monitors the money managers' investment
programs and results;

. manages, or hires money managers to manage the Funds' Liquidity
Portfolio; and

. provides the Funds with transfer agent, dividend disbursing and
shareholder recordkeeping services.

FRIMCo's officers and employees who oversee the money managers are:

. Randall P. Lert, who has been Chief Investment Officer of FRIMCo
since 1989.

. Mark D. Amberson, who has been a Portfolio Manager of FRIMCo since
January 1998. From 1991 to 1997, Mr. Amberson was a Portfolio Manager
in Russell's Money Market Trading Group. Mr. Amberson, jointly with
another portfolio manager identified herein, has primary
responsibility for management of the Fixed I, Diversified Bond, Fixed
II, Volatility Constrained Bond, Fixed III, and Multistrategy Bond
Funds.

. Randal C. Burge, who has been a Portfolio Manager of FRIMCo since
1995. From 1990 to 1995, Mr. Burge was a Client Executive for Frank
Russell Australia. Mr. Burge, jointly with another portfolio manager
identified herein, has primary responsibility for management of the
Fixed I, Diversified Bond, Fixed II, Volatility Constrained Bond,
Fixed III, Multistrategy Bond, and Emerging Markets Funds.

. Jean E. Carter, who has been a Portfolio Manager of FRIMCo since
1994. From 1990 to 1994, Ms. Carter was a Client Executive in
Russell's Investment Group. Ms. Carter, jointly with another
portfolio manager identified herein, has primary responsibility for
management of the International, and International Securities Funds.

. Ann Duncan, who has been a Portfolio Manager of FRIMCo since January
1998. From 1996 to 1997, Ms. Duncan was a Senior Equity Research
Analyst with Russell. From 1992 to 1995, Ms. Duncan was an equity
analyst and portfolio manager with Avatar Associates. Ms. Duncan,
jointly with another portfolio manager identified herein, has primary
responsibility for management of the International, and International
Securities Funds.

16
<PAGE>

. James M. Imhof, Manager of FRIMCo's Portfolio Trading, manages the Trust
on a day to day basis, and has been responsible for ongoing analysis and
monitoring of the money managers since 1989.

. Dennis J. Trittin, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1988 to 1996, Mr. Trittin, jointly with another
portfolio manager identified herein, has primary responsibility for
management of the Equity I, Diversified Equity, Equity II, Special
Growth, Equity III, Equity Income, Equity Q, Quantitative Equity, and
Equity T Funds.

. C. Nola Williams, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1994 to 1995, Ms. Williams was a member of the Alpha
Strategy Group. From 1988 to 1994, Ms. Williams was Senior Research
Analyst with Russell. Ms. Williams, jointly with another portfolio
manager identified herein, has primary responsibility for management of
the Equity I, Diversified Equity, Equity II, Special Growth, Equity III,
Equity Income, Equity Q, Quantitative Equity, and Equity T Funds.

Russell provides to the Funds and FRIMCo the asset management consulting
services -- including objective-setting and asset-allocation technology, and
money manager research and evaluation assistance -- that Russell provides to
its other consulting clients. Russell does not receive any compensation from
the Funds for its consulting services.

Under its Management Agreement with the Trust, FRIMCo receives a management
fee from each Fund for FRIMCo's services. From this fee, FRIMCo, as the
Trust's agent, pays the money managers for their investment selection
services. The remainder of the management fee is retained by FRIMCo as
compensation for the services described above and to pay expenses. The annual
rate of management fees, payable to FRIMCo monthly on a pro rata basis, are
the following percentages of each Fund's average daily net assets: Real Estate
Securities Fund, 0.85%; Emerging Markets Fund, 1.20%; Equity T Fund, 0.75%;
Limited Volatility Tax Free Fund, 0.50%; Money Market Fund, 0.25%; US
Government Money Market Fund, 0.25%; and Tax Free Money Market Fund, 0.25%.

The fees for Real Estate Securities and Emerging Markets Funds may be higher
than the fees charged by some mutual funds with similar objectives that use
only a single money manager.

17
<PAGE>

It is also proposed that the services which FRIMCo provides to the Funds
under the present Management Agreement will be divided into two components.
Those services which are investment advisory in nature will be provided
pursuant to a new Advisory Agreement. Other services which are administrative
in nature will be provided pursuant to a new Administrative Agreement. It is
not anticipated that this restructuring of services provided to the Funds will
materially affect the costs of these services to the Funds, or affect FRIMCo's
current voluntary fee waivers.

EXPENSES OF THE FUNDS

. the management, transfer agent and recordkeeping fees payable to FRIMCo;

. fees for custody, preparing tax records, and portfolio accounting,
payable to the Custodian;

. fees for independent auditing and legal services; and

. filing and registration fees payable to the SEC.

THE MONEY MANAGERS

From its management fees, FRIMCo, as the Trust's agent, pays fees to the
money managers for their investment selection services. Quarterly, each money
manager is paid the pro rata portion of an annual fee, based on the average of
all the assets allocated to the manager for the quarter. For the year ended
December 31, 1997, management fees paid to the money managers were equivalent
to the following annual rates, expressed as a percentage of each Fund's
average daily net assets: Real Estate Securities Fund, 0.29%; Emerging Markets
Fund,

18
<PAGE>

0.68%; Equity T Fund, 0.31%; Limited Volatility Tax Free Fund, 0.25%; Money
Market Fund, 0.00%; US Government Money Market Fund, 0.00%; and Tax Free Money
Market Fund, 0.10%.

Equity T Fund is managed by J.P. Morgan Investment Management, Inc.
("Morgan"). The individual responsible for the management of the Fund is James
C. Weiss, who is a Vice President and Portfolio Manager in the US Structured
Equity area. Mr. Weiss joined Morgan in 1992; prior to that, he was a stock
index arbitrageur at Oppenheimer & Company.

Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund. At the same time, however, each money
manager must operate within the Fund's investment objectives, restrictions and
policies, and the more specific strategies developed by FRIMCo. Although the
money managers' activities are subject to general oversight by the Board and
the Trust's officers, neither the Board, the officers, FRIMCo (except with
respect to Money Market Fund and US Government Money Market Fund), nor Russell
evaluate the investment merits of the money managers' individual security
selections.

INVESTMENT OBJECTIVES, POLICIES AND PRACTICES

SUMMARY COMPARISON OF THE FUNDS

<TABLE>
<CAPTION>
ANTICIPATED MAXIMUM
EQUITY DEBT
FUND EXPOSURE EXPOSURE FOCUS
- ---- ----------- -------- -----
<S> <C> <C> <C>
Real Estate Securities Fund.... 65-100% 35% Total return
Emerging Markets Fund.......... 65-100% 35% Maximum total return
Equity T Fund.................. 65-100% 35% Capital growth
Limited Volatility Tax Free
Fund.......................... --% 100% Federal tax-exempt income
Money Market Fund.............. --% 100% Maximum current income
US Government Money Market
Fund.......................... --% 100% Maximum current income
Tax Free Money Market Fund..... --% 100% Maximum current income
</TABLE>

INVESTMENT OBJECTIVES

19
<PAGE>

REAL ESTATE SECURITIES FUND

Real Estate Securities Fund's objective is to generate a high level of total
return through above average current income, while maintaining the potential
for capital appreciation. The Fund seeks to achieve its objective by investing
primarily in the equity securities of companies in the real estate industry.

Except for temporary defensive purposes, the Fund will only invest in real
estate related securities. These include securities of companies which
generate at least 50% of their revenues from the ownership, construction,
financing, management or sale of commercial, industrial or residential real
estate. Under normal circumstances, the Fund will invest at least 65% of its
total assets in income-oriented equity securities of real estate companies.
These may include shares of real estate investment trusts ("REITs"),
partnership units of master limited partnerships, common and preferred stock,
and convertible debt securities believed to have attractive equity
characteristics. The Fund may invest up to 35% of its total assets in other
debt securities of real estate companies. For information on risks, see "Risk
Considerations."

The Fund will attempt to be fully invested at all times. However, the Fund
is permitted to hold up to 20% of Fund assets in liquid investments to meet
redemption requests.

EMERGING MARKETS FUND

Emerging Markets Fund's 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.

20
<PAGE>

and equity derivative securities, such as convertible securities, rights,
units, warrants and American Depository Receipts and European Depository
Receipts ("Depository Receipts"). The Fund's equity securities will primarily
be denominated in foreign currencies and may be held outside the United
States.

Certain emerging markets are closed in whole or in part to equity
investments by foreigners. The Fund may be able to invest in those markets
solely or primarily through governmentally authorized investment vehicles. For
information on risks, see "Risk Considerations."

EQUITY T FUND

Equity T Fund's objective is to provide capital growth on an after-tax basis
by investing principally in equity securities.

The Fund may invest in common and preferred stocks, rights and warrants, and
convertible securities. Generally, the Fund seeks to invest primarily in
domestic equity securities that the Fund's money manager believes to be
undervalued on a long-term basis. To be fully exposed to the equity markets,
the Fund may purchase S&P 500 Index futures contracts. These contracts may be
considered to be derivative securities.

Most stock mutual funds are managed to maximize pre-tax total return,
without regard to the shareholder tax consequences of portfolio activity that
may result in taxable distributions. In contrast, the Fund seeks to achieve
its investment objective while minimizing shareholder tax consequences in
connection with the Fund's portfolio investment income and realized capital
gains. The Fund is designed for taxable investors who seek to minimize the
impact of taxes on their investment returns by participating on a long-term
basis in a broadly-diversified investment portfolio of equity securities. The
Fund is not recommended for either short-term investors, or for assets that
are already tax-deferred (such as assets held in IRAs and 401(k) plans).

In pursuing the Fund's objective, the money manager utilizes distinct
investment strategies and tax-efficient management techniques in an effort to
minimize the impact of taxes on the Fund's shareholders. The Fund will attempt
to limit short-term capital gains, and to minimize the realization of net
long-term capital gains and subsequent distribution of such gains, to
shareholders. While the Fund may sell portfolio securities whenever the money
manager deems it appropriate, the Fund will typically buy stocks with the
intention of holding the stocks for a period of time to qualify for the more
favorable tax treatment (i.e., a long-term capital gain).

When the money manager decides to sell a particular appreciated security,
the manager will generally select for sale those share lots with the highest
cost basis to minimize capital gains. The money manager will also sell
securities in order to realize capital losses. These losses can be used to
offset realized capital gains (whether long or short-term) and thereby reduce
capital gains distributions to shareholders.

The Fund intends to remain as fully invested as possible to enhance the
potential for attractive total returns. While the Fund is permitted to invest
its cash reserves in money market instruments, US government obligations and
high-quality debt securities, the money manager will seek to be fully invested
in equity securities.

21
<PAGE>

The Fund retains a redemption fee equal to 1% of the value of the shares
redeemed from all redemptions (other than redemptions in kind). The redemption
fee is intended to offset the potentially negative impact that redemptions can
have on the Fund's portfolio strategy and to contain costs. The fee will
indirectly help to offset tax costs that investors bear when the Fund is
forced to realize capital gains as a result of shareholder redemptions or
investment activity. By being paid directly to the Fund, the fee tends to be
advantageous to long-term investors and disadvantageous to short-term
investors.

LIMITED VOLATILITY TAX FREE FUND

Limited Volatility Tax Free Fund's objective is to provide a high level of
federal tax-exempt income consistent with the preservation of capital by
investing primarily in municipal obligations maturing in seven years or less
from the date of acquisition. The Board has approved, subject to shareholder
approval at the 1998 Shareholder Meeting, changing the Fund's investment
objective to state that the Fund seeks to provide a high level of federal tax-
exempt current income by investing primarily in a diversified portfolio of
investment grade municipal securities. In conjunction with these and other
changes, the Fund also proposes to change its name to Tax Free Bond Fund. The
Fund seeks to invest 100%, and will always invest not less than 80%, of its
net assets in municipal obligations, including variable rate obligations.

The Fund may purchase from financial institutions (such as banks and
insurance companies) participation interests in variable rate obligations.
Each participation interest is backed by an irrevocable letter of credit or
guarantee of a bank or insurance policy of an insurance company that the money
manager concludes meets the Fund's quality standards. The Fund may sell the
participation certificate back to the institution and draw on the letter of
credit or insurance on demand after 30 days' notice, for all or any part of
the full principal amount of the Fund's participation interest in the security
plus accrued interest. The Fund intends to exercise its right to demand
payment only on (i) a default under the terms of the municipal obligations,
(ii) when necessary to provide liquidity to meet redemptions, or (iii) to
maintain the required portfolio quality.

The Fund may purchase municipal obligations with a "put" or "standby
commitment." A put or "standby commitment" obligates the seller to buy the
underlying municipal obligation from the Fund at an agreed upon price and
time. If the seller does not honor the put or standby commitment for financial
reasons, the Fund may be a general creditor of the seller.

For information on risks, see "Risk Considerations."

MONEY MARKET FUND

Money Market Fund's objectives are to maximize current income to the extent
consistent with the preservation of capital and liquidity, and the maintenance
of a stable $1.00 per share net asset value, by investing in short-term, high-
grade money market instruments.

The instruments in which the Fund invests include (1) US government
obligations; (2) instruments of US and foreign banks and branches ("bank
instruments"); (3) commercial paper of US and foreign companies; (4) corporate
obligations; (5) variable amount master demand notes; and (6) US government
securities which are subject to repurchase agreements, provided that the Fund
will not invest in repurchase agreements maturing in

22
<PAGE>

more than seven days if, as a result thereof, such repurchase agreements,
together with all other illiquid securities, equal more than 10% of the Fund's
total assets taken at current market value. See "Portfolio Securities" and
"Risk Considerations."

US GOVERNMENT MONEY MARKET FUND

US Government Money Market Fund's objective is to provide the maximum
current income that is consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value by
investing exclusively in US government obligations. The Fund may purchase US
government obligations on a forward commitment basis. See "Portfolio
Securities."

TAX FREE MONEY MARKET FUND

Tax Free Money Market Fund's objective is to provide the maximum current
income exempt from federal income tax that is consistent with the preservation
of capital and liquidity, and the maintenance of a $1.00 per share net asset
value by investing in short-term municipal obligations. The Fund intends to
invest 100% and will always invest 80% of its total assets in municipal
obligations. The Fund may invest up to 10% of its net assets in securities
subject to legal or contractual restrictions on disposition or for which no
readily available market exists.

The Fund will purchase municipal obligations with demand features only when
the demand instrument and the underlying municipal obligations meet the Fund's
quality standards. The Fund may purchase municipal obligations with a put or
standby commitment. See "Portfolio Securities" and "Risk Considerations."

FUND INVESTMENT SECURITIES

In pursuing their investment objectives, the Funds described in this
Prospectus may invest principally in the securities described below.

DEBT SECURITIES

The Funds may purchase debt securities that complement their respective
investment objectives. The Funds, except Emerging Markets Fund, do not invest
in debt securities rated less than BBB by S&P or Baa by Moody's, or in unrated
securities judged by the money managers to be of a lesser credit quality than
those designations. Securities rated BBB by S&P or Baa by Moody's and above
are considered to be "investment grade" securities, although Moody's and S&P
consider securities rated Baa and BBB, respectively, to have some speculative
characteristics. The Funds, other than Emerging Markets Fund, will sell
securities whose ratings drop below these minimum ratings, in a prudent manner
as determined by the money managers. The market value of debt securities
generally varies inversely with interests rates.

DEPOSITORY RECEIPTS

Emerging Markets Fund may invest in Depository Receipts. These are
securities traded in the United States that are issued typically in connection
with a US or foreign bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. These securities may
not necessarily be denominated in the same currency as the securities into
which they may be connected.

23
<PAGE>

EQUITY SECURITIES

Real Estate Securities, Emerging Markets and Equity T Funds invest primarily
in equity securities, and Emerging Markets and Equity T Funds may invest in
common stock equivalents. The following constitute common stock equivalents:
rights and warrants, convertible securities and Depository Receipts. Common
stock equivalents may be converted into or provide the holder with the right
to common stock. The Emerging Markets and Equity T Funds may also invest in
other types of equity securities, including preferred stocks and equity
derivative securities.

INVESTMENT COMPANY SECURITIES

Each Fund may invest up to 10% of its total assets in shares of other
investment companies that invest in securities in which a Fund may otherwise
invest. Each Fluctuating Fund may invest its cash reserves in the Money Market
Fund. Because of restrictions on direct investment by US entities in certain
countries, other investment companies may provide the most practical or only
way for Emerging Markets Fund to invest in certain markets. These investments
may involve the payment of substantial premiums above the net asset value of
those investment companies' portfolio securities and are subject to
limitations under the 1940 Act. Emerging Markets Fund also may incur tax
liability to the extent it invests in the stock of a foreign issuer that is a
"passive foreign investment company" ("PFIC"), regardless of whether the PFIC
makes distributions to the Fund. See "Taxes" in this Prospectus and in the
SAI.

US GOVERNMENT OBLIGATIONS

24
<PAGE>

The following table illustrates the investments that the Funds primarily
invest in or are permitted to invest in:

<TABLE>
<CAPTION>
US
REAL LIMITED GOVERNMENT TAX FREE
ESTATE EMERGING VOLATILITY MONEY MONEY MONEY
SECURITIES MARKETS EQUITY T TAX FREE MARKET MARKET MARKET
TYPE OF PORTFOLIO SECURITY FUND FUND FUND FUND FUND FUND FUND
- -------------------------- ---------- -------- -------- ---------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stocks........... X X X
Common stock equivalents
(warrants)............. X X X
Common stock equivalents
(options).............. X X X
Common stock equivalents
(convertible debt
securities)............ X X X
Common stock equivalents
(depository receipts).. X
Preferred stocks........ X X X
Equity derivative secu-
rities................. X X X
Debt securities (below
investment grade or
junk bonds)............ X
US government securi-
ties................... X X X X X X X
Municipal obligations... X
Investment company secu-
rities................. X X X X X X X
Foreign securities...... X X X
</TABLE>

OTHER INVESTMENT PRACTICES

<TABLE>
<CAPTION>
US
REAL LIMITED GOVERNMENT TAX FREE
ESTATE EMERGING VOLATILITY MONEY MONEY MONEY
SECURITIES MARKETS EQUITY T TAX FREE MARKET MARKET MARKET
TYPE OF PRACTICE FUND FUND FUND FUND FUND FUND FUND
---------------- ---------- -------- -------- ---------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash reserves........... X X X X
Repurchase
agreements(1).......... X X X X X X
When-issued and forward
commitment securities.. X X X X X X
Reverse repurchase
agreements............. X X X X X X X
Lending portfolio
securities, not to
exceed 33 1/3% of total
Fund assets............ X X X X X
Illiquid securities
(limited to 15% of
Fund's net assets)..... X X X X
Illiquid securities
(limited to 10% of
Fund's net assets)..... X X X
Forward currency
contracts(2)........... X
Write (sell) call and
put options on
securities, securities
indexes and foreign
currencies(3).......... X X
Purchase options on
securities, securities
indexes, and
currencies(3).......... X X X
Interest rate futures
contracts, stock index
futures contracts,
foreign currency
contracts and options
on futures(4).......... X X X
Credit and liquidity
enhancements........... X X
Liquidity portfolio..... X X X
</TABLE>

25
<PAGE>

- ---------------------
(1) Under the 1940 Act, repurchase agreements are considered to be loans by a
Fund and must be fully collateralized by collateral assets. If the seller
defaults on its obligations to repurchase the underlying security, a Fund
may experience delay or difficulty in exercising its rights to realize
upon the security, may incur a loss if the value of the security declines
and may incur disposition costs in liquidating the security.
(2) Emerging Markets Fund may not invest more than one-third of its assets in
these contracts.
(3) A Fund will only engage in options where the options are traded on a
national securities exchange or in an over-the-counter market. A Fund may
invest up to 5% of its net assets, represented by the premium paid, in
call and put options. A 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.
(4) A Fund does not enter into any futures contracts or related options if the
sum of initial margin deposits on futures contracts, related options
(including options on securities, securities indexes and currencies) and
premiums paid for any such related options would exceed 5% of its total
assets. A Fund does not purchase futures contracts or related options if,
as a result, more than one-third of its total assets would be so invested.

Money Market, US Government Money Market and Tax Free Money Market
Funds. Each of the Money Market Funds seeks to maintain a stable net asset
value of $1.00 per share for purposes of purchases and redemptions by valuing
its portfolio securities at "amortized cost" in compliance with the 1940 Act's
Rule 2a-7 (the "Rule"). Each Money Market Fund maintains a dollar-weighted
average portfolio maturity of 90 days or less, and invests only in securities
with a remaining maturity, as determined under the Rule, of 397 days or less.
The Money Market Funds limit their investments to those securities that their
money managers determine present minimal credit risks, in accordance with
Board-adopted procedures.

The Money Market Funds will invest in money market instruments (and in the
case of Tax Free Money Market Fund, in municipal obligations) that have been
rated in the highest rating category by two NRSROs, such as S&P and Moody's. A
"Tier 1" security is one that has been rated by either S&P or Moody's in the
highest rating category, or, if unrated, is of comparable quality. A "Tier 2"
security is one that has been rated in the second highest rating category by
either S&P or Moody's, or, if unrated, is of comparable quality. Up to 5% of
the total assets of a Money Market Fund may be invested in a single Tier 1
security (other than US government obligations). The Money Market Fund does
not invest in Tier 2 securities. See the SAI for a description of the NRSROs.

RISK CONSIDERATIONS

Concentration in Real Estate Industry. Real Estate Securities Fund will
concentrate more than 25% of its total assets in the real estate and real
estate related industries. The Fund is subject to the risks associated with
direct ownership of real estate. Additional risks include declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in neighborhood values, the appeal of properties
to tenants and increases in interest rates. The value of securities of
companies that service the real estate industry may also be affected by such
risks.

26
<PAGE>

Municipal Obligations. The Tax Free Funds may invest in municipal
obligations, which involve certain risks. Municipal obligations may be
affected by economic, business or political developments. These securities may
be subject to the provisions of litigation, bankruptcy, and other laws
affecting the rights and remedies of creditors, or may become subject to
future laws extending the time for payment of principal and/or interest, or
limiting the rights of municipalities to levy taxes. For instance, legislative
proposals are introduced, from time to time, to restrict or eliminate the
federal income tax exemption for municipal obligations' interest. If
legislation is adopted, the Board will reevaluate the Tax Free Funds'
investment objectives and may submit possible changes in the structure of the
Funds to their shareholders.

Credit and Liquidity Enhancements. Money Market and Tax Free Money Market
Funds may invest in securities supported by credit and liquidity enhancements
from third parties. These enhancements are generally letters of credit from
foreign or domestic banks. Adverse changes in the banks' credit quality could
cause losses to the Funds and may affect their net asset values.

Investment in Foreign Securities. The Funds, other than the Money Market
Funds, may invest in foreign securities traded on US or foreign exchanges or
in the over-the-counter market. Investing in securities issued by foreign
governments and corporations involves considerations and risks not typically
associated with investing in obligations issued by the US 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 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 US 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 each 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 US dollar will result in a corresponding change in the US
dollar value of a Fund's foreign securities. In addition, some emerging market
countries may have fixed or managed currencies which are not free-floating
against the US dollar. Further, certain emerging market countries' currencies
may not be internationally traded. Certain of these currencies have
experienced a steady devaluation relative to the US dollar. Many emerging
market 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 countries.

27
<PAGE>

The Money Market Fund may invest in bank instruments, which include European
certificates of deposit ("ECDs"), European time deposits ("ETDs") and Yankee
certificates of deposit ("Yankee CDs"). ECDs, ETDs and Yankee CDs are subject
to somewhat different risks from the obligations of domestic banks. ECDs are
dollar denominated certificates of deposit issued by foreign branches of US
and foreign banks; ETDs are US dollar denominated time deposits in a foreign
branch of a US bank or a foreign bank; and Yankee CDs are certificates of
deposit issued by a US branch of a foreign bank denominated in US dollars and
held in the United States. Different risks may also exist for ECDs, ETDs and
Yankee CDs because the banks issuing these instruments, or their domestic or
foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing and recordkeeping, and the
public availability of information. These factors will be carefully considered
by the money manager when evaluating credit risk in the selection of
investments for the Money Market Fund.

High Risk Bonds. Emerging Markets Fund 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.
While this debt may have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions. Emerging Markets Fund's money managers will seek to reduce the
risks associated with investing in lower-rated debt securities by limiting the
Fund's holding in the securities and by the depth of the managers' credit
analysis. For additional information, refer to the SAI.

Hedging and Risk Management Practices. In seeking to protect against the
effect of adverse changes in financial markets or against currency exchange
rate or interest rate changes that are adverse to the present or prospective
positions of the Funds, each of the Funds (except the Money Market Funds) may
employ certain risk management practices using certain derivative securities
and techniques (known as "derivatives"). Markets in some countries currently
do not have instruments available for hedging transactions. To the extent that
such instruments do not exist, a money manager may not be able to hedge a
Fund's investment effectively in such countries. Furthermore, a Fund engages
in hedging activities only when its money managers deem it to be appropriate,
and does not necessarily engage in hedging transactions with respect to each
investment.

Borrowing. The Funds are authorized to borrow from banks to obtain cash to
pay redemption requests. Currently, each Fund may borrow up to 5% of its total
assets. The Board has approved, subject to approval by the shareholders of the
respective Funds at the 1998 Shareholders Meeting, a proposal to revise the
Funds' fundamental policy on borrowing. If approved by shareholders, this
limit would be increased to up to 33 1/3% of the current value of the Funds'
total assets. Please see the SAI for a more complete discussion of the Funds'
permissible borrowing activities.

28
<PAGE>

PORTFOLIO TRANSACTION POLICIES

Money managers make decisions to buy and sell securities for the Fund assets
assigned to them. FRIMCo makes determinations for any other Fund assets. The
other Funds, except Limited Volatility Tax Free Fund and Equity T Fund, do not
seek to realize long-term (rather than short-term) capital gains while making
portfolio investment decisions. Limited Volatility Tax Free Fund seeks to
realize long-term (rather than short-term) capital gains when making portfolio
management decisions. Equity T Fund seeks to minimize the impact of taxes on
its shareholders' returns. These factors will effect the two Funds' portfolio
turnover rates.

Each money manager makes decisions to buy or sell securities independently
from other managers. Thus, one money manager for a Fund may be selling a
security when another money manager for the Fund (or for another Fund) is
purchasing the same security. Also, when a money manager's services are
terminated, the new money manager may significantly restructure an investment
portfolio. These practices may increase the Funds' portfolio turnover rates,
realization of gains or losses, brokerage commissions and other transaction
costs. The strategy of minimizing the impact of taxes on shareholders'
investment returns and avoiding the recognition of capital gains may constrain
the ability of FRIMCo to change money managers of Equity T Fund. The annual
portfolio turnover rates for the Funds (other than the Money Market Funds) are
shown in the Financial Highlights tables in this Prospectus.

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS

Each Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year. The amount and frequency of
distributions are not guaranteed--all distributions are at the Board's
discretion. Currently, the Board intends to declare dividends from net
investment income and, in the case of the Money Market Funds, net short-term
capital gains (if any), according to the following schedule:

<TABLE>
<CAPTION>
DECLARED PAYABLE FUNDS
-------- ------- -----
<S> <C> <C>
Daily................... 1st business day of following month Money Market Funds
Monthly................. Early in the following month Limited Volatility Tax Free Fund
Quarterly............... Mid: April, July, October and December Real Estate Securities Fund
Annually................ Mid-December Emerging Markets and Equity T Funds
</TABLE>

29
<PAGE>

The Money Market Funds determine net investment income immediately prior to
the determination of their net asset values. This occurs at the close of the
New York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern time) on each
business day. Net investment income is credited daily to the accounts of
shareholders of record prior to the net asset value calculation. The income is
paid monthly.

CAPITAL GAINS DISTRIBUTIONS

The Board annually intends to declare capital gains distributions through
October 31 (excess of capital gains over capital losses), generally in mid-
December. To meet certain legal requirements, a Fund may declare special year-
end dividend and capital gains distributions during October, November or
December to shareholders of record in that month. These latter distributions
are deemed to have been paid by a Fund and received by you on December 31 of
the prior year, provided that you receive them by January 31. Capital gains
realized during November and December will be distributed to you during
February of the following year.

BUYING A DIVIDEND

AUTOMATIC REINVESTMENT

TAXES

Each Fund has elected and intends to continue to qualify for taxation as a
regulated investment company under Subchapter M of the Code. Each Fund must
distribute substantially all of its net investment income and net capital
gains to shareholders and meet other requirements of the Code relating to the
sources of its income and diversification of assets. Accordingly, a Fund will
generally not be liable for federal income or excise taxes based on net income
except to the extent its earnings are not distributed or are distributed in a
manner that does not satisfy the requirements of the Code. Emerging Markets
Fund may incur tax liability to the extent it invests in PFICs. See "Portfolio
Securities" and the SAI. The Funds may be subject to nominal, if any, state
and local taxes.

For federal income tax purposes, the dividends from net investment income
(except those of the Tax Free Funds) and any excess of net short-term capital
gains over net long-term capital loss that you receive from the Funds are
considered ordinary income. However, depending upon the relevant state tax
rules, a portion of the dividends paid by Money Market and US Government Money
Market Funds attributable to direct US Treasury and agency obligations may be
exempt from state and local taxes. 28% or 20% capital gains distributions

30
<PAGE>

declared by the Board are taxed at the respective capital gains rates
regardless of the length of time you have held the shares. Distributions of
income and capital gains are taxed in the manner described above, whether you
receive them in cash or reinvest them in additional shares of the Funds.
Distributions paid in excess of a Fund's earnings will be treated as a
nontaxable return of capital.

A Fund will notify you of the source of its dividends and distributions at
the time they are paid. After the close of each calendar year, the Funds will
advise their shareholders of the amounts of:

. ordinary income dividends, 28% capital gains dividends, and 20% capital
gains distributions, including any amounts which are deemed paid on
December 31 of the prior year;

. dividends which qualify for the 70% dividends-received deduction
available to corporations;

. any foreign taxes assessed against Emerging Markets Fund;

. the Tax Free Funds' dividends subject to federal tax (if any) and
attributable to each state;

. income which is a tax preference item (if any) for alternative minimum
tax purposes; and

. the percentages of Money Market and US Government Money Market Funds'
income attributable to US government, Treasury and agency securities.

While Equity T Fund is managed to minimize the amount of capital gains
realized during a particular year, the realization of capital gains is not
entirely within the Fund's or its money manager's control. Shareholder
purchase and redemption activity, as well as the Fund's performance, will
impact the amount of capital gains realized. Capital gains distributions by
Equity T Fund may vary considerably from year to year.

If you are a corporate investor, a portion of the dividends from net
investment income paid by Real Estate Securities or Equity T Funds may qualify
in part for the corporate dividends-received deduction. However, the portion
depends on the aggregate qualifying dividend income received by either Fund
from domestic (US) sources. Certain holding period and debt financing
restrictions may apply to corporate investors seeking to claim the deduction.
You should consult your tax adviser.

The sale of shares of a 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). Except for shareholders of the Tax
Free Funds, any loss incurred on the sale or exchange of a 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. For
shareholders of the Tax Free Funds, any loss incurred on the sale or exchange
of the Funds' shares, held for six months or less, will be disallowed to the
extent of exempt-interest dividends (described below) paid with respect to the
shares. Any loss not disallowed will be treated as a long-term capital loss to
the extent of capital gain dividends received with respect to such shares.

The Tax Free Funds intend to continue to qualify to pay "exempt-interest
dividends" to their shareholders by maintaining, as of the close of each
quarter of their taxable years, at least 50% of the value of their total
assets in municipal obligations. If the Funds satisfy this requirement,
distributions from net investment income to shareholders will be exempt from
federal income taxation to the extent net investment income is represented by
interest on municipal obligations. However, to the extent dividends are
derived from taxable income from temporary investments, short-term capital
gains, or income derived from the sale of bonds purchased with market
discount, the dividends are treated as ordinary income, whether paid in cash
or reinvested in additional shares.

31
<PAGE>

Additional information on these and other tax matters relating to the Funds
and their shareholders is included in the section entitled "Taxes" in the SAI.

PERFORMANCE INFORMATION

From time to time, the Funds may publish their total return and average
annual total return and, in the case of certain Funds, current yield and tax
equivalent yield, in advertisements and investor communications. Total return
information generally will include a Fund's average annual compounded rate 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. The average
annual total returns for Class S Shares of the Funds are as follows:

<TABLE>
<CAPTION>
5 YEARS 10 YEARS
1 YEAR ENDED ENDED
ENDED DEC. 31, DEC. 31, INCEPTION TO
DEC. 31, 1997 1997 DEC. 31 1997 INCEPTION
1997 (ANNUALIZED) (ANNUALIZED) (ANNUALIZED) DATE
-------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Real Estate Securi-
ties................... 18.99% 17.84% -- 14.03% 07/28/89
Emerging Markets*....... (3.45) -- -- 5.95 01/29/93
Equity T**.............. 31.73 -- -- 31.31 10/07/96
Limited Volatility Tax
Free................... 4.92 4.33 5.34% 5.48 09/05/85
Money Market*........... 5.79 5.13 6.21 7.40 10/15/81
US Government Money Mar-
ket.................... 5.59 4.74 5.72 5.90 09/05/85
Tax Free Money Market... 3.61 3.22 4.16 4.21 05/08/87
</TABLE>
- ---------------------
* The performance for Emerging Markets and Money Market Funds prior to April
1, 1995 is reported gross of management fees. For periods after that date,
performance results are reported net of management fees, but gross of any
shareholder investment services fees. Descriptions of these shareholder
investment services fees can be obtained from FRIMCo upon request.
** Equity T commenced operations on October 7, 1996.

Limited Volatility Tax Free Fund also may from time to time advertise its
yield. Yield, which is based on historical earnings and is not intended to
indicate future performance, is calculated by dividing the net investment
income per share earned during the most recent 30-day (or one month) period by
the maximum offering price per share on the last day of the month. This income
is then annualized -- the amount of income generated by the investment during
that 30-day (or one month) period is assumed to be generated each month over a
12-month period and is shown as a percentage of the investment. For purposes
of the yield calculation, interest income is computed based on the yield to
maturity of each debt obligation and dividend income is computed based on the
stated dividend rate of each security in the Fund's portfolio. The calculation
includes all recurring fees that are charged. The 30-day yield for the year
ended December 31, 1997 for the Class S shares of Limited Volatility Tax Free
Fund was 3.53%.

32
<PAGE>

Limited Volatility Tax Free Fund may also utilize tax equivalent yields
computed in the same manner as yield, with adjustment for a stated income tax
rate. The 30-day tax equivalent yield for Class S shares of the Fund for the
year ended December 31, 1997, based on a tax rate of 39.6%, was 5.85%.

The Money Market Funds also may advertise their yields and effective yields.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The yield of a Money Market Fund refers to the
income generated by an investment in the Money Market Fund over a 7-day period
(the period will be stated in the advertisement). The yield is calculated by
determining the net change, excluding capital changes, in the value of a
hypothetical preexisting account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base return.
This income is then annualized -- the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in a Money Market Fund is assumed to be reinvested. The effective
yield will be slightly higher than the current yield because of the
compounding effect of this assumed reinvestment. The following are the current
and effective yields for Class S shares of the Money Market Funds during 1997
for the 7-day (and 30-day, in the case of Tax Free Money Market Fund) periods
ended:

<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ----------------- -----------------
CURRENT EFFECTIVE CURRENT EFFECTIVE CURRENT EFFECTIVE CURRENT EFFECTIVE
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market............ 5.58% 5.74% 5.76% 5.93% 5.70% 5.86% 5.73% 5.90%
US Government Money Mar-
ket.................... 5.48% 5.63% 5.57% 5.73% 5.44% 5.59% 5.50% 5.65%
Tax Free Money Market 7
day Period............. 3.32% 3.37% 3.87% 3.94% 3.85% 3.92% 3.89% 3.96%
30 day period........... 3.18% 3.23% 3.70% 3.77% 3.66% 3.73% 3.70% 3.76%
</TABLE>

The Tax Free Money Market Fund may also utilize tax equivalent yields,
computed in the same manner as yield, with adjustment for a stated income tax
rate. The following are the current and effective tax equivalent yields for
Class S shares of Tax Free Money Market Fund, based on a tax rate of 39.6%,
during 1997 for the 7-day and 30-day periods ended:

<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ----------------- -----------------
CURRENT EFFECTIVE CURRENT EFFECTIVE CURRENT EFFECTIVE CURRENT EFFECTIVE
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax Free Money Market 7
day period............. 5.49% 5.58% 6.41% 6.53% 6.37% 6.49% 6.44% 6.56%
30 day period........... 5.27% 5.35% 6.13% 6.24% 6.07% 6.17% 6.13% 6.23%
</TABLE>

Each Fund may also advertise nonstandardized performance information that is
for periods in addition to those that are legally required by the SEC.

HOW NET ASSET VALUE IS DETERMINED

NET ASSET VALUE PER SHARE

The net asset value per share is calculated for shares of each class of each
Fund on each business day on which shares are offered or redemption orders are
tendered. For Real Estate Securities, Emerging Markets, Equity T and Limited
Volatility Tax Free Funds, a business day is one on which the NYSE is open for
trading.

33
<PAGE>

A business day for the Money Market Funds includes any day on which the NYSE
is open for trading and the Boston Federal Reserve Bank is open. Net asset
value per share is computed for a Fund by dividing the current value of the
Fund's assets attributable to the Class S Shares, less liabilities
attributable to the Class S Shares, by the number of Class S Shares of the
Fund outstanding, and rounding to the nearest cent. All Funds determine their
net asset value as of the close of the NYSE (currently 4:00 p.m. Eastern
time).

VALUATION OF PORTFOLIO SECURITIES

With the exceptions noted below, the Funds value their portfolio securities
at "fair market value." This generally means that equity securities and fixed-
income securities listed and principally traded on any national securities
exchange are valued on the basis of the last sale price or, if there were no
sales, at the closing bid price, on the primary exchange on which the security
is traded. US 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 the last sale price.

Because many fixed-income securities do not trade each day, last sale or bid
prices often are not available. As a result, these securities may be valued
using prices provided by a pricing service when the prices are believed to be
reliable -- that is, when the prices reflect the fair market value of the
securities.

The Money Market Funds' portfolio investments are valued using the amortized
cost method. Under this method, a portfolio instrument is initially valued at
cost, and thereafter a constant accretion/amortization to maturity of any
discount or premium is assumed. The Money Market Funds utilize the amortized
cost valuation method in accordance with the Rule. Money market instruments
maturing within 60 days of the valuation date held by the Fluctuating Funds
are also valued at "amortized cost" unless the Board determines that amortized
cost does not represent fair value. While amortized cost provides certainty in
valuation, it may result in periods when the value of an instrument is higher
or lower than the price a Fund would receive if it sold the instrument.

Municipal obligations are appraised or priced by an independent pricing
source, approved by the Board, which utilizes relevant information, such as
bond transactions, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities.

The Funds value securities for which market quotations are not readily
available at "fair value," as determined in good faith and in accordance with
procedures established by the Board.

HOW TO PURCHASE SHARES

The Funds are generally available only through a select network of qualified
Financial Intermediaries. If you are not currently working with one of these
Financial Intermediaries, please call Russell Investor Services at (800)
RUSSEL4 (787-7354) for assistance in contacting an investment professional
near you.

Certain information noted below, including trade deadlines and payment
procedures, are included for informational purposes only. Contact your
Financial Intermediary for further detail.

34
<PAGE>

PAYING FOR SHARES

Cash, third party checks and checks drawn on credit card accounts will not
be accepted.

All purchases must be made in U.S. dollars.

Checks and other negotiable bank drafts must be drawn on U.S. banks and made
payable to "Frank Russell Investment Company."

OFFERING DATES AND TIMES

Orders must be received by the Transfer Agent on any day when Fund shares
are offered, prior to the following designated times:

<TABLE>
<S> <C>
Close of the NYSE (cur- Real Estate Securities, Emerging Markets,
rently 4:00 p.m. Eastern Equity T, Money Market and Limited Volatility
Time) Tax Free Funds
11:45 a.m. Eastern Time Tax Free Money Market Fund
12:15 p.m. Eastern Time US Government Money Market Fund
</TABLE>

Orders for the Funds placed in proper form and prior to the deadlines noted
above can be accepted for pricing and investment, and will begin earning
income on the day of purchase. Orders for the Funds received after the
designated times shown above will not be accepted for pricing and investment
until the next business day.

ORDER AND PAYMENT PROCEDURES

BY MAIL

35
<PAGE>

BY FEDERAL FUNDS WIRE

BY AUTOMATED CLEARING HOUSE ("ACH")

AUTOMATED INVESTMENT PROGRAM

THREE DAY SETTLEMENT PROGRAM

EXCHANGE PRIVILEGE

BY MAIL OR TELEPHONE

An exchange is a redemption of shares and is treated as a sale for income
tax purposes. Thus, capital gain or loss may be realized. Please consult your
tax adviser for more information. 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). Exchanges from the Equity T Fund will
be considered to be redemptions and will be subject to a redemption fee (see
the section on "How to Redeem Shares" in this Prospectus).

36
<PAGE>

IN-KIND EXCHANGE OF SECURITIES

HOW TO REDEEM SHARES

When shares of the Equity T Fund are redeemed, a redemption fee, calculated
as a 1% discount of the net asset value of the shares redeemed, will be
imposed. The redemption fee is retained by the Equity T Fund. See "Investment
Objectives and Practices -- Equity T Fund" in this Prospectus for additional
information.

REDEMPTION DATES AND TIMES

Redemption requests must be placed by a Financial Intermediary and received
by the Transfer Agent prior to the following designated times. Requests can be
made by mail or telephone on any day when Fund shares are offered, or through
the Systematic Withdrawal Program.

37
<PAGE>

BY MAIL OR TELEPHONE

SYSTEMATIC WITHDRAWAL PROGRAM

In view of its investment objective and management strategies, shareholders
of the Equity T Fund are not able to participate in the systematic withdrawal
program.

PAYMENT OF REDEMPTION PROCEEDS

BY CHECK

A check for the redemption proceeds will be sent to the shareholder(s) of
record at the address of record within seven days after receipt of a
redemption request in proper form.

BY WIRE

WRITTEN INSTRUCTIONS

PROPER FORM: Written instructions must include:

38
<PAGE>

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE

<TABLE>
<CAPTION>
ACCOUNT TYPE REQUIREMENTS FOR WRITTEN REQUESTS
- --------------------------------------------------------------------------------
<S> <C>
Individual, Joint Written instructions must be signed by each
Tenants, Tenants in shareholder, exactly as the names appear in the
Common account registration.
- --------------------------------------------------------------------------------
UGMA or UTMA (custodial Written instructions must be signed by the custodian
accounts for minors) in his/her capacity as it appears in the account
registration.
- --------------------------------------------------------------------------------
Corporation, Association Written instructions must be signed by authorized
person(s), stating his/her capacity as indicated by
the corporate resolution to act on the account.
A copy of the corporate resolution, certified within
the past 90 days, authorizing the signer to act.
- --------------------------------------------------------------------------------
Estate, Trust, Pension, Written instructions must be signed by all trustees.
Profit Sharing Plan
If the name of the trustee(s) does not appear in the
account registration, please provide a copy of the
trust document certified within the last 60 days.
- --------------------------------------------------------------------------------
Joint tenancy Written instructions must by signed by the surviving
shareholders whose tenant(s).
co-tenants are deceased A certified copy of the death certificate must
accompany the request.
</TABLE>

SIGNATURE GUARANTEE

ACCOUNT POLICIES

THIRD PARTY TRANSACTIONS

REDEMPTION IN-KIND

39
<PAGE>

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, INDEPENDENT ACCOUNTANTS, AND REPORTS

YEAR 2000

The services provided to the Trust and the shareholders by FRIMCo, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact of handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no
adverse impact on the Trust. FRIMCo, the Distributor, the Transfer Agent and
the Custodian have advised the Trust that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will
be adapted in time for that event. The obligation to make such adaptations, if
any, would be the responsibility of the service provider that maintains the
system. Therefore, the Trust does not expect to incur any material expense in
that regard.

ORGANIZATION, CAPITALIZATION, AND VOTING

The Trust is organized and operates as a Massachusetts business trust.
Russell has the right to grant (and withdraw) the nonexclusive use of the name
"Frank Russell" or any variation.

The Trustees hold office for the life of the Trust. A Trustee may resign or
retire, and a Trustee may be removed by the Trustees or by shareholders at a
special meeting.

40
<PAGE>

In addition to offering Class S Shares, Emerging Markets and Real Estate
Securities Funds offer beneficial interests in Class E Shares, which are
described in a separate prospectus. Class E Shares are designed to meet
different investor needs and are subject to a shareholder servicing fee. This
fee may affect the performance of the Class E Shares. To obtain more
information about Class E Shares, contact your Financial Intermediary, or
write or telephone the Trust.

At March 31, 1998, the following shareholders may be deemed by the 1940 Act
to "control" the Funds listed after their names because they own more than 25%
of the voting shares of the indicated Funds: Citizens Bank--Tax Free Money
Market Fund.

MONEY MANAGER PROFILES

The money managers identified below, other than the money manager for Money
Market and US Government Money Market Funds, have no other affiliations with
the Funds, FRIMCo, or with Russell. Each money manager has been in business
for at least three years and is principally engaged in managing institutional
investment accounts. The money managers may also serve as managers or advisers
to other Funds in the Trust, or to other clients of Russell, including its
wholly-owned subsidiary, Frank Russell Trust Company.

REAL ESTATE SECURITIES FUND

AEW Capital Management, L.P., 225 Franklin Street, Boston, MA 02110-2803, is
a wholly-owned affiliate of New England Investment Companies, L.P. ("NEIC").
NEIC is a publicly-held limited partnership. Metropolitan Life Insurance
Company, a publicly held corporation, owns approximately 53% of NEIC. AEW
Capital Management, Inc., a wholly-owned subsidiary of NEIC, is the general
partner, and NEIC is the sole limited partner, of AEW Capital Management, L.P.

EMERGING MARKETS FUND

Genesis Asset Managers, Ltd., 21 Knights Bridge, London, SW1X 7LY, 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 International Ltd. is controlled 55% by management
and assorted interests, and the balance held by outside shareholders, with the
largest single holding being 15%.

J.P. Morgan Investment Management Inc., 522 Fifth Avenue, 14th Floor, New
York, NY 10036, is a wholly-owned subsidiary of J.P. Morgan and Co.
Incorporated, a publicly held bank holding company.

Montgomery Asset Management LLC, 101 California Street, San Francisco, CA
94111, is a Delaware limited liability company with majority ownership held by
Commerzbank AG, a foreign banking organization.

41
<PAGE>

EQUITY T FUND

J.P. Morgan Investment Management Inc. See: Emerging Markets Fund.

LIMITED VOLATILITY TAX FREE FUND

MFS Institutional Advisors, Inc., 500 Boylston Street, Boston, MA 02116, is
a wholly-owned, indirect subsidiary of Sun Life Assurance Company of Canada
(US), a mutual insurance company.

T. Rowe Price Associates, Inc., 100 E. Pratt Street, Baltimore, MD 21202, is
a company whose stock is publicly traded, and a large portion of its stock is
held by active employees.

MONEY MARKET FUND

Frank Russell Investment Management Company, 909 A Street, Tacoma, WA 98402,
is a registered investment adviser wholly-owned by Frank Russell Company.

US GOVERNMENT MONEY MARKET FUND

Frank Russell Investment Management Company. See: Money Market Fund.

TAX FREE MONEY MARKET FUND

Weiss, Peck & Greer, L.L.C., One New York Plaza, 30th Floor, New York, NY
10004, is a registered investment adviser which is wholly-owned by its
principals.

NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATIONS THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUNDS OR
THE MONEY MANAGERS SINCE THE DATE HEREOF; HOWEVER, IF ANY MATERIAL CHANGE
OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

42
<PAGE>

GLOSSARY

Agreements -- Asset Management Services Agreements, which are between FRIMCo
and institutional investors and Financial Intermediaries.

Board -- The Board of Trustees of the Trust

Cash reserves -- The Fluctuating Funds may invest their cash reserves (i.e.,
funds awaiting investment) in money market instruments and in debt securities
of comparable quality to each Fund's permitted investments. As an alternative
to a Fund directly investing in money market instruments, the Funds and their
money managers may elect to invest the Funds' cash reserves in the Trust's
Money Market Fund. To prevent duplication of fees, FRIMCo waives its
management fee on that portion of a Fund's assets invested in the Trust's
Money Market Fund.

Code -- Internal Revenue Code of 1986, as amended

Covered put option -- A put option is "covered" if the Fund has collateral
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security.

Custodian -- State Street Bank and Trust Company, the Trust's custodian and
portfolio accountant.

Distributor -- Russell Fund Distributors, Inc., the organization that sells
the shares of the Funds under a contract with the Trust.

43
<PAGE>

Equity derivative securities -- These include, among other instruments,
options on equity securities, warrants and futures contracts on equity
securities.

Financial Intermediary -- Bank trust departments, registered investment
advisers, broker-dealers and other Eligible Investors that have entered into
Service Agreements with FRIMCo.

Fluctuating Funds -- Real Estate Securities, Emerging Markets, Equity T and
Limited Volatility Tax Free Funds, each a Portfolio of the Trust. The
Fluctuating Funds have fluctuating net asset values, in contrast to the Money
Market Funds, which seek to maintain a stable net asset value of $1 per share.

FNMA -- Federal National Mortgage Association.

Forward currency contracts -- This is a contract individually negotiated and
privately traded by currency traders and their customers and creates an
obligation to purchase or sell a specific currency for an agreed-upon price at
a future date. Emerging Markets Fund generally does not enter into forward
contracts with terms greater than one year, and typically enters into forward
contracts only under two circumstances. First, if the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the US dollar price of the security by
entering into a forward contract to buy the amount of a foreign currency
needed to settle the transaction. Second, if a Fund's money managers believe
that the currency of a particular foreign country will substantially rise or
fall against the US dollar, a Fund may enter into a forward contract to buy or
sell the currency approximating the value of some or all of the Fund's
portfolio securities denominated in the currency. Emerging Markets Fund will
not enter into a forward contract if, as a result, it would have more than
one-third of its assets committed to such contracts (unless it owns the
currency that it is obligated to deliver or has caused the Custodian to
segregate segregable assets having a value sufficient to cover its
obligations). Although forward contracts are used primarily to protect
Emerging Markets Fund from adverse currency movements, they involve the risk
that currency movements will not be accurately predicted.

FRIMCo -- Frank Russell Investment Management Company, the Trust's
administrator, manager and transfer and dividend paying agent.

44
<PAGE>

Funds -- The 28 investment series of the Trust. Each Fund is considered a
separate registered investment company (or RIC) for federal income tax
purposes, and each Fund has its own investment objective, policies and
restrictions. Seven Funds are described in and offered by this Prospectus.

GNMA -- Government National Mortgage Association.

Illiquid securities -- Real Estate Securities, Emerging Markets, Equity T
and Limited Volatility Tax Free Funds will not purchase or otherwise acquire
any security if, as a result, more than 15% of a Fund's net assets (taken at
current value) would be invested in securities, including repurchase
agreements maturing in more than seven days, that are illiquid because of the
absence of a readily available market or because of legal or contractual
resale restrictions. In the case of the Money Market Funds, this restriction
is 10% of each Fund's net assets. No Fund will invest more than 10% of its
respective net assets (taken at current value) in securities of issuers that
may not be sold to the public without registration under 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.

IRS -- Internal Revenue Service.

Lending portfolio securities -- Real Estate Securities, Emerging Markets,
Equity T, Money Market and US Government Money Market Funds may lend portfolio
securities with a value of up to 33 1/3% of each Fund's total assets. These
loans may be terminated at any time. A Fund will receive either cash (and
agree to pay a "rebate" interest rate), US government or US government agency
securities as collateral in an amount equal to at least 102% (for loans of US
securities) and 105% (for Non-US securities), of the current market value of
loaned securities. The collateral is daily "marked-to-market," and the
borrower will furnish additional collateral in the event that the value of the
collateral drops below the respective percentages set forth above. If the
borrower of the securities fails 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.

Liquidity portfolio -- FRIMCo will manage or will select a money manager to
exercise investment discretion for approximately 5%-15% of Real Estate
Securities, Emerging Markets and Equity T Funds' assets assigned to a
Liquidity portfolio. The Liquidity portfolio will be used to temporarily
create an equity exposure for cash balances until those balances are invested
in securities or used for Fund transactions.

45
<PAGE>

Moody's -- Moody's Investors Service, Inc., an NRSRO.

NASD -- National Association of Securities Dealers, Inc.

NRSRO -- A nationally recognized statistical rating organization, such as
S&P or Moody's.

NYSE -- New York Stock Exchange.

PFIC -- A passive foreign investment company. Emerging Markets Fund may
purchase interests in an issuer that is considered a PFIC under the Code.

Prime rate -- The interest rate charged by leading US banks on loans to
their most credit-worthy customers.

REITs -- Real estate investment trusts.

Repurchase agreements -- Each 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 the 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 "Illiquid Securities" in this Glossary, a Fund will
not invest more than 15% (10%, in the case of each Money Market Fund) of its
net assets (taken at current market value) in repurchase agreements maturing
in more than seven days.

46
<PAGE>

The Rule -- Rule 2a-7 under the 1940 Act, which governs the operations of
the Money Market Funds

Russell -- Frank Russell Company, consultant to the Trust and to the Funds

S&P -- Standard & Poor's Ratings Group, an NRSRO

S&P 500 -- Standard & Poor's 500 Composite Price Index

SAI -- The Trust's Statement of Additional Information, dated as noted on
the first page of this Prospectus

SEC -- US Securities and Exchange Commission

Services Fee -- The quarterly investment services fee that may be assessed
in the future by Emerging Markets, Equity T and Money Market Funds, and which
would be paid to FRIMCo

Shares -- The Class S Shares in the Funds described in this prospectus. Each
Class S Share of a Fund represents a share of beneficial interest in the Fund.

Tax Free Funds -- Limited Volatility Tax Free and Tax Free Money Market
Funds

Transfer Agent -- FRIMCo, in its capacity as the Trust's transfer and
dividend paying agent

Trust -- Frank Russell Investment Company, an open-end management investment
company which is registered with the SEC

US -- United States

US government securities -- These include US Treasury bills, notes, bonds
and other obligations issued or guaranteed by the US government, its agencies
or instrumentalities.

1940 Act -- The Investment Company Act of 1940, as amended. The 1940 Act
governs the operations of the Trust and the Funds.

1933 Act -- The Securities Act of 1933, as amended.

47
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

MONEY MANAGERS
REAL ESTATE SECURITIES FUND
Cohen & Steers Capital Management
AEW Capital Management, L.P.

EMERGING MARKETS FUND
Genesis Asset Managers, Ltd.
J.P. Morgan Investment Management Inc.
Montgomery Asset Management, L.P.

EQUITY T FUND
J.P. Morgan Investment Management Inc.

LIMITED VOLATILITY TAX FREE FUND
MFS Institutional Advisors, Inc.
T. Rowe Price Associates, Inc.

MONEY MARKET FUND
Frank Russell Investment Management Company

US GOVERNMENT MONEY MARKET FUND
Frank Russell Investment Management Company

TAX FREE MONEY MARKET FUND
Weiss, Peck & Greer, L.L.C.

MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment Management Company
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, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098

OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) 832-6688
(800) RUSSEL4
In Washington, (253) 627-7001

48
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET, TACOMA, WA 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

Frank Russell Investment Company (the "Investment Company") is a "series
mutual fund" with 28 different investment portfolios referred to as the
"Funds." This Prospectus describes and offers shares of beneficial interest in
the Class D and Class E Shares of the five Funds listed below (the "LifePoints
Funds"). Each of the LifePoints Funds invests in different combinations of
other Funds (the "Underlying Funds") which, in turn, invest in different
combinations of stocks, bonds and cash equivalents. The Investment Company
believes that these combinations offer varying degrees of potential risk and
reward.

Equity Balanced Strategy Fund Moderate Strategy Fund
Aggressive Strategy Fund Conservative Strategy Fund
Balanced Strategy Fund

Frank Russell Investment Management Company ("FRIMCo") operates and
administers all of the Funds which comprise the Investment Company. FRIMCo is
a wholly owned subsidiary of Frank Russell Company ("Russell"), which
researches and recommends to FRIMCo, and to the Investment Company, one or
more investment management organizations to manage the portfolio of each of
the Underlying Funds in which the LifePoints Funds may invest.

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.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH STATE OR OTHER JURISDICTION.

The Investment Company is organized as a Massachusetts business trust under
an amended 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, which interests may be offered in one
or more classes. 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 Class D and Class E Shares of its five LifePoints Funds that a
prospective investor ought to know before investing. The Investment Company
has filed a Statement of Additional Information dated May 1, 1998, and
supplemented June 15, 1998, with the Securities and Exchange Commission (the
"SEC") which contains additional information regarding the LifePoints Funds.
The Statement of Additional Information is incorporated herein by reference.
The Statement of Additional Information, or a paper copy of this Prospectus,
if you have received your Prospectus electronically, 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. This Prospectus relates
only to the Class D and Class E Shares of the LifePoints Funds. The LifePoints
Funds also have authorized Class S shares which are not offered at the date of
this Prospectus for public investment.

The Statement of Additional Information, material incorporated by reference
into this Prospectus, and other information regarding the Investment Company
and the Funds is maintained electronically with the SEC at its Internet Web
site (http://www.sec.gov).

PROSPECTUS DATED MAY 1, 1998
AS SUPPLEMENTED THROUGH JUNE 15, 1998
<PAGE>

Each LifePoints Fund diversifies its assets by investing, at present, in the
Class S Shares of several Underlying Funds. Allocation decisions reflect
FRIMCo's outlook for the economy, financial markets and the relative
valuations of the Underlying Funds. Each LifePoints Fund seeks to achieve a
specific investment objective by investing in different combinations of the
Underlying Funds. Each LifePoints Fund and its investment objective are set
forth below. An investor can select investments in one or more LifePoints
Funds appropriate to the present investment aims, lifestyle and economic
status of the investor or the investor's clients, and can use reallocation of
assets among LifePoints Funds to reflect changes in these factors which occur
over time.

EQUITY BALANCED STRATEGY FUND seeks to achieve high, long-term capital
appreciation, while recognizing the possibility of high fluctuations in year-
to-year market values.

AGGRESSIVE STRATEGY FUND seeks to achieve high, long-term capital
appreciation with low current income, while recognizing the possibility of
substantial fluctuations in year-to-year market values.

BALANCED STRATEGY FUND seeks to achieve a moderate level of current income
and, over time, above-average capital appreciation with moderate risk.

MODERATE STRATEGY FUND seeks to achieve moderate long-term capital
appreciation with high current income, while recognizing the possibility of
moderate fluctuations in year-to-year market values.

CONSERVATIVE STRATEGY FUND seeks to achieve moderate total rate of return
through low capital appreciation and reinvestment of a high level of current
income.

This Prospectus describes and offers both Class D and Class E Shares of the
five LifePoints Funds. The LifePoints Funds had aggregate net assets of
approximately $174,310,970.55 on April 1, 1998. The net assets of these Funds
on April 1, 1998 were as follows:

<TABLE>
<S> <C>
Equity Balanced Strategy..................................... $48,575,181
Aggressive Strategy.......................................... $25,165,326
Balanced Strategy............................................ $94,747,682
Moderate Strategy............................................ $ 5,147,631
Conservative Strategy........................................ $ 675,151
</TABLE>

2
<PAGE>

HIGHLIGHTS AND TABLE OF CONTENTS

ANNUAL FUND OPERATING EXPENSES OF THE CLASS D AND CLASS E SHARES OF THE
LIFEPOINTS FUNDS summarizes the fees paid by shareholders and provides an
example showing the effect of these fees together with the indirect expenses
of the Underlying Funds on a $1,000 investment over time without the manager
waiver in effect. PAGE 6.

THE PURPOSE OF THE LIFEPOINTS FUNDS is to provide a simple and effective
means for an Eligible Investor to employ a diversified mutual fund investment
allocation program suited to pursuing the long-term investment goals of the
investor or its clients. The LifePoints Funds are especially useful for
participants in tax-deferred retirement plans. The LifePoints Funds take
advantage of FRIMCo's asset allocation technology, as well as the Underlying
Funds' use of FRIMCo's and Frank Russell Company's "multi-style, multi-manager
diversification" techniques and money manager evaluation services, on an
economical and efficient basis. PAGE 15.

FRANK RUSSELL COMPANY -- CONSULTANT TO THE FUNDS 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 "multi-style,
multi-manager diversification." PAGE 15.

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. Each LifePoints Fund
provides an additional layer of "multi-asset" diversification by allocating
its assets among several Underlying Funds, most of which employ multiple money
managers in pursuit of their investment objectives. PAGE 15.

INVESTMENT OBJECTIVES AND ASSET ALLOCATION FRAMEWORKS OF THE LIFEPOINTS
FUNDS are designed to meet the investment goals of long-term Eligible
Investors. While the LifePoints Funds invest primarily in the Underlying
Funds, each LifePoints Fund pursues a different investment objective by
allocating its assets among a number of Underlying Funds which together pursue
a variety of investment objectives. PAGE 16.

INVESTMENT POLICIES, RESTRICTIONS AND RISKS OF THE LIFEPOINTS FUNDS should
be considered in deciding whether to invest in a LifePoints Fund.
"Fundamental" investment objectives, policies, and restrictions may not be
changed without the approval of a majority of the shareholders of an affected
LifePoints Fund. While the LifePoints Funds' principal investment will be in
the Class S Shares of Underlying Funds, they may also invest in other types of
securities. Risks associated with certain investment policies of the
Underlying Funds should be considered when investing in the LifePoints Funds.
PAGE 19.

ELIGIBLE INVESTORS are principally institutional investors and those
financial intermediaries which have entered into an Asset Management Services
Agreement with FRIMCo and institutions or individuals who have acquired shares
through such institutions or financial intermediaries. Institutions and
financial intermediaries selling Class E Shares of the LifePoints Funds may
only offer to sell Class E Shares to certain of their clients. PAGE 21.

GENERAL MANAGEMENT OF THE UNDERLYING FUNDS AND THE LIFEPOINTS FUNDS is
provided by FRIMCo, which employs the officers and staff required to manage
and administer the Underlying Funds and the LifePoints Funds on a day-to-day
basis. All services necessary for the operation of the LifePoints Funds
(including accounting, custody, auditing, legal and shareholder servicing) are
arranged for by FRIMCo pursuant to the

3
<PAGE>

Special Services Agreement (the "Services Agreement") between FRIMCo and each
LifePoints Fund and each Underlying Fund in which it invests. Frank Russell
Company ("Russell") provides to the Underlying Funds and FRIMCo comprehensive
consulting and money manager evaluation services. PAGE 22.

OPERATING EXPENSES OF THE LIFEPOINTS FUNDS are allocated among and borne by
the Underlying Funds in which the LifePoints Funds invest or by FRIMCo, in
either case pursuant to the Services Agreement. Except as to a 0.25%
management fee and a 0.25% Shareholder Service Fee applicable to the Class D
and Class E Shares and a 0.25% Rule 12b-1 distribution fee applicable only to
the Class D Shares, the LifePoints Funds are not subject to any operating
expenses, because each LifePoints Fund's operating expense will be paid by the
Underlying Funds to the extent that the Underlying Funds receive an economic
benefit. Any operating expense of a LifePoints Fund in excess of the economic
benefit realized by the Underlying Funds will be paid by FRIMCo. As noted
above, each LifePoints Fund has agreed to pay FRIMCo a management fee equal to
0.25% of the Fund's average daily net assets for providing investment
supervisory services. Currently, this fee is being voluntarily waived by
FRIMCo. In addition to the management fee, the LifePoints Funds will
indirectly bear their proportionate share of operating expenses that include
the management fees paid by the Underlying Funds in which they invest. While a
shareholder of a LifePoints Fund will also bear a proportionate part of
management fees paid by an Underlying Fund, each of the management fees paid
is based upon the services received by the respective Fund. PAGE 24.

THE MONEY MANAGERS FOR THE UNDERLYING FUNDS are evaluated and recommended by
FRIMCo and Russell. The money managers have complete discretion to purchase
and sell portfolio securities for their segment of an Underlying Fund
consistent with the Underlying Fund's investment objectives, policies and
restrictions, and the specific strategies developed by Russell and FRIMCo. The
LifePoints Funds do not employ money managers, other than FRIMCo, and
therefore, do not pay management fees. The determination of how the LifePoints
Funds' assets will be allocated among the Underlying Funds is made by FRIMCo
pursuant to each LifePoints Fund's investment objectives and policies. The
LifePoints Funds, as shareholders of the Underlying Funds, benefit from the
multi-style, multi-manager services provided to the Underlying Funds. PAGE 25.

INVESTMENT OBJECTIVES, POLICIES AND RISKS OF THE UNDERLYING FUNDS should be
considered when deciding whether to invest in a LifePoints Fund. "Fundamental"
investment objectives, policies and restrictions may not be changed without
the approval of a majority of the shareholders of an affected Underlying Fund.
Risks associated with certain investment policies of the Underlying Funds,
such as market volatility risk, political risk, and credit risk, are disclosed
in connection with a description of the policies giving rise to such risks.
PAGE 26.

DIVIDENDS AND DISTRIBUTIONS may be reinvested in additional shares or
received in cash. Dividends from net investment income are declared quarterly
by each of the LifePoints Funds. All LifePoints Funds declare distributions
from net realized capital gains, if any, at least annually. PAGE 32.

INCOME TAXES PAID BY THE LIFEPOINTS FUNDS should be nominal. Taxable
shareholders of the LifePoints Funds will be subject to federal taxes on
dividends and capital gains distributions and may also be subject to state or
local taxes. PAGE 33.

LIFEPOINTS FUND PERFORMANCE, including yields and total return information,
is calculated in accordance with formulas prescribed by the Securities and
Exchange Commission. PAGE 34.

VALUATION OF LIFEPOINTS FUND SHARES occurs each business day. Class D and
Class E Shares are purchased or redeemed based upon the next computed net
asset value per share of each LifePoints Fund. Unless otherwise indicated,
"shares" in this Prospectus refers to the Class D and Class E Shares of the
LifePoints Funds. PAGE 35.

4
<PAGE>

PURCHASE OF LIFEPOINTS FUND SHARES may be accomplished on each business day.
The Class D Shares are presently subject to a management fee of 0.25%, a Rule
12b-1 distribution fee of 0.25% and a Shareholder Service Fee of 0.25%. The
Class E Shares are presently subject to a management fee of 0.25%, and a
Shareholder Service Fee of 0.25%. PAGE 36.

REDEMPTION OF LIFEPOINTS FUND SHARES may be requested on any business day.
There is no redemption charge. The redemption price is the next computed net
asset value after receipt of the redemption request. The LifePoints Funds
reserve the right to redeem in kind any portion of a redemption request. PAGE
39.

ADDITIONAL INFORMATION is also included in this Prospectus concerning the:
Distributor, Custodian, Independent Accountants and Reports; Organization,
Capitalization and Voting; and Money Manager Profiles. PAGE 42.

The LifePoints Funds are authorized to offer one other class of shares, the
Class S Shares, which is designed to meet different investor needs. Class S
Shares of the LifePoints Funds are not, as of the date of this Prospectus,
being offered for public investment. PAGE 43.

5
<PAGE>

ANNUAL FUND OPERATING EXPENSES OF THE CLASS D AND CLASS E
SHARES OF THE LIFEPOINTS FUNDS

The purpose of the following table is to assist the investor in
understanding the various costs and expenses that an investor in the Class D
and Class E Shares of the LifePoints Funds will bear directly or indirectly.
Each LifePoints Fund will indirectly bear its pro rata share of the expenses
of the Underlying Funds in which the LifePoints Fund invests. 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.

CLASS D SHARES

<TABLE>
<CAPTION>
EQUITY
BALANCED AGGRESSIVE BALANCED MODERATE CONSERVATIVE
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
FUND FUND FUND FUND FUND
-------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
CLASS D SHARES SHAREHOLDER
TRANSACTION EXPENSES:
Sales Load Imposed on
Purchases................ None None None None None
Sales Load Imposed on
Reinvested Dividends..... None None None None None
Deferred Sales Load....... None None None None None
Redemption Fees........... None None None None None
Exchange Fees............. None None None None None
ANNUAL CLASS D SHARES
OPERATING EXPENSES:#
(as a percentage of
average net assets)
Management Fees After Fee
Waivers##................ 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 Fees*............... 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (After Fee
Waivers and
Reimbursement)**
Custodian Fees (After
Reimbursement)**......... None None None None None
Transfer Agent Fees (After
Reimbursement)**......... None None None None None
Other Fees (After
Reimbursement)+**........ 0.25% 0.25% 0.25% 0.25% 0.25%
Total Other Expenses
(After Fee Waivers and
Reimbursement)**......... 0.25% 0.25% 0.25% 0.25% 0.25%
Total Class D Operating
Expenses (After Fee
Waivers and
Reimbursement)** ***
##....................... 0.50% 0.50% 0.50% 0.50% 0.50%
</TABLE>
- --------------------
# Annual Class D Shares operating expenses are based on average net assets
expected to be invested during the fiscal year ending December 31, 1998.
During the course of this period, expenses may be more or less than the
amount shown.
## FRIMCo has voluntarily agreed to waive its Management Fee of 0.25% of
average net assets. This waiver is intended to be in effect through
December 31, 1998 but may be revised or eliminated at any time without
notice to shareholders.
* Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc. See "Distribution and Shareholder
Services Plans."
** The LifePoints Funds' operating expenses will be paid by the Underlying
Funds and/or FRIMCo, as more fully described below. If there were no
waiver of Management Fees or reimbursement of operating expenses by the
Underlying Funds or FRIMCo, the estimated "Total Other Expenses" would be
5.59% for the Equity Balanced Strategy Fund, 4.91% for the Aggressive
Strategy Fund, 0.76% for the Balanced Strategy Fund, 3.97% for the
Moderate Strategy Fund, and 4.15% for the Conservative Strategy Fund, and
the "Total Class D Operating Expenses" would have been 6.09% for the
Equity Balanced Strategy Fund, 5.41% for the Aggressive Strategy Fund,
1.26% for the Balanced Strategy Fund, 4.47% for the Moderate Strategy
Fund, and 4.65% for the Conservative Strategy Fund.
+ Class D Shares of each LifePoints Fund pay 0.25% of average net assets as
a Shareholder Service Fee.
*** Investors purchasing Class D Shares of the LifePoints Funds through a
financial intermediary, such as a bank, broker or an investment adviser,
may also be required to pay additional fees to the financial intermediary
for services provided by the intermediary. Such investors should contact
the intermediary for information concerning what additional fees, if any,
will be charged by the intermediary.

6
<PAGE>

CLASS E SHARES

<TABLE>
<CAPTION>
EQUITY
BALANCED AGGRESSIVE BALANCED MODERATE CONSERVATIVE
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
FUND FUND FUND FUND FUND
-------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
CLASS E SHARES SHAREHOLDER
TRANSACTION EXPENSES:
Sales Load Imposed on
Purchases................ None None None None None
Sales Load Imposed on
Reinvested Dividends..... None None None None None
Deferred Sales Load....... None None None None None
Redemption Fees........... None None None None None
Exchange Fees............. None None None None None
ANNUAL CLASS E SHARES
OPERATING EXPENSES:#
(as a percentage of
average net assets)
Management Fees After Fee
Waivers## 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 Fees................ None None None None None
Other Expenses (After Fee
Waivers and
Reimbursement)*:
Custodian Fees (After
Reimbursement)*.......... None None None None None
Transfer Agent Fees (After
Reimbursement)*.......... None None None None None
Other Fees (After
Reimbursement)+* 0.25% 0.25% 0.25% 0.25% 0.25%
Total Other Expenses
(After Fee Waivers and
Reimbursement)*.......... 0.25% 0.25% 0.25% 0.25% 0.25%
Total Class E Operating
Expenses (After Fee
Waivers and
Reimbursement)* ** ##.... 0.25% 0.25% 0.25% 0.25% 0.25%
</TABLE>
- ---------------------
# Annual Class E Shares operating expenses are based on average net assets
expected to be invested during the year ending December 31, 1998. During
the course of this period, expenses may be more or less than the amount
shown.
## FRIMCo has voluntarily agreed to waive its Management Fee of 0.25% of
average net assets. This waiver is intended to be in effect through
December 31, 1998 but may be revised or eliminated at any time without
notice to shareholders.
* The LifePoints Funds' operating expenses will be paid by the Underlying
Funds and/or FRIMCo, as more fully described below. If there were no waiver
of Management Fees or reimbursement of operating expenses by the Underlying
Funds or FRIMCo, the estimated "Total Other Expenses" would be 5.59% for
the Equity Balanced Strategy Fund, 4.91% for the Aggressive Strategy Fund,
0.76% for the Balanced Strategy Fund, 3.97% for the Moderate Strategy Fund,
and 4.15% for the Conservative Strategy Fund, and the "Total Class E
Operating Expenses" would have been 5.84% for the Equity Balanced Strategy
Fund, 5.16% for the Aggressive Strategy Fund, 1.01% for the Balanced
Strategy Fund, 4.22% for the Moderate Strategy Fund, and 4.40% for the
Conservative Strategy Fund.
+ Class E Shares of each LifePoints Fund pay 0.25% of average net assets as a
Shareholder Service Fee.
** Investors purchasing Class E Shares of the LifePoints Funds through a
financial intermediary, such as a bank, broker or an investment adviser,
may also be required to pay additional fees to the financial intermediary
for services provided by the intermediary. Such investors should contact
the intermediary for information concerning what additional fees, if any,
will be charged by the intermediary.

7
<PAGE>

Although Class D and Class E Shares of the LifePoints Funds will be subject
to a 0.25% management fee and a 0.25% Shareholder Service Fee and the Class D
Shares will be subject to an additional 0.25% Rule 12b-1 distribution fee,
neither class will bear any operating expenses. The operational expenses will
be paid by the Underlying Funds in which the LifePoints Funds invest to the
extent that an Underlying Fund receives a net reduction in its otherwise
anticipated operating expenses as a result of the LifePoints Funds' investment
in that Underlying Fund's shares. The operating expense savings that are
expected to be realized by the Underlying Funds from the LifePoints Funds
result primarily from the assumed reduction in the number of accounts that
each Underlying Fund has to maintain due to the existence of the LifePoints
Funds (i.e., one account per investor as opposed to one for each Underlying
Fund per investor if the investor duplicated a LifePoints Fund's investment
program by investing directly in the Underlying Funds) and from the assumed
reductions in investor trading activity. Any LifePoints Funds operating
expenses that are in excess of the estimated savings to the Underlying Funds
will be borne by FRIMCo, an arrangement that can be terminated at any time by
FRIMCo in its sole discretion without notice to shareholders but which will
not be terminated prior to April 30, 1999. (See "Expenses of the LifePoints
Funds" for an explanation of the Special Services Agreement under which the
LifePoints Funds' operating expenses are allocated among and borne by the
Underlying Funds in which the LifePoints Funds invest.) However, while the
LifePoints Funds are expected to operate without expense (except as to the
management fee and any Rule 12b-1 and Shareholder Services Fees), shareholders
in a LifePoints Fund will bear indirectly the proportionate expenses of the
Underlying Funds in which the LifePoints Fund invests. The following table
provides the expense ratios for each of the Underlying Funds in which the
LifePoints Funds may invest (based on information as of December 31, 1997).
Where applicable, expense ratios are restated to reflect current fees. As
explained in this Prospectus, each LifePoints Fund intends to invest in some,
but not all, of the Underlying Funds.

<TABLE>
<CAPTION>
TOTAL OPERATING
UNDERLYING FUND EXPENSE RATIOS*
--------------- ---------------
<S> <C>
Diversified Equity Fund...................................... .95%
Special Growth Fund.......................................... 1.20%
Quantitative Equity Fund..................................... .94%
International Securities Fund................................ 1.30%
Diversified Bond Fund........................................ .59%
Volatility Constrained Bond Fund............................. .74%
Multistrategy Bond Fund...................................... .80%
Real Estate Securities Fund.................................. 1.10%
Emerging Markets Fund........................................ 1.81%
</TABLE>
- ---------------------
* Restated to reflect changes to the Trust's Transfer and Dividend Paying
Agent agreement, which became effective June 8, 1998.

8
<PAGE>

The following table illustrates the indirect expense ratio that each
LifePoints Fund would have incurred based on its allocation strategy in the
Underlying Funds for the year ended December 31, 1997 if it had been
operational:

<TABLE>
<CAPTION>
INDIRECT
LIFEPOINTS FUND EXPENSE RATIOS*
--------------- ---------------
<S> <C>
Equity Balanced Strategy Fund................................ 1.09%
Aggressive Strategy Fund..................................... 1.07%
Balanced Strategy Fund....................................... .93%
Moderate Strategy Fund....................................... .84%
Conservative Strategy Fund................................... .79%
</TABLE>
- ---------------------
* Restated to reflect changes to the Trust's Transfer and Dividend Paying
Agent agreement, which became effective June 8, 1998.

EXAMPLE:

You would pay the following expenses on a $1,000 investment in the Class D
and Class E Shares of each of the LifePoints Funds including the indirect
expenses of the Underlying Funds, assuming at any time during the periods
noted below (1) 5% annual return and (2) redemption at the end of each time
period:

<TABLE>
<CAPTION>
CLASS D SHARES: 1 YEAR 3 YEARS
--------------- ------ -------
<S> <C> <C>
Equity Balanced Strategy Fund................................. $16 $50
Aggressive Strategy Fund...................................... $16 $49
Balanced Strategy Fund........................................ $14 $45
Moderate Strategy Fund........................................ $13 $42
Conservative Strategy Fund.................................... $13 $41
<CAPTION>
CLASS E SHARES 1 YEAR 3 YEARS
-------------- ------ -------
<S> <C> <C>
Equity Balanced Strategy Fund................................. $13 $42
Aggressive Strategy Fund...................................... $13 $41
Balanced Strategy Fund........................................ $12 $37
Moderate Strategy Fund........................................ $11 $34
Conservative Strategy Fund.................................... $10 $33
</TABLE>

9
<PAGE>

FINANCIAL HIGHLIGHTS OF THE EQUITY BALANCED STRATEGY FUND +

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Trust's independent
accountants. The table includes selected data for a share outstanding
throughout the period ended December 31, and other performance information
derived from the financial statements. The information in the table represents
the Financial Highlights for the Fund's Class E Shares for the periods shown.
No Class D Shares were issued during the periods shown. The table appears in
the Fund's financial statements and related notes, which are incorporated by
reference into the Statement of Additional Information and which appear, along
with the report of Coopers & Lybrand L.L.P. in the Fund's Annual Report to
Shareholders. More detailed information concerning the Fund's performance,
including a complete portfolio listing and audited financial statements, is
available in the Fund's Annual Report, which may be obtained without charge by
writing or calling the Investment Company.

<TABLE>
<CAPTION>
1997*
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................. .09
Capital gain distributions from Underlying Funds...................... 2.73
Net realized and unrealized gain (loss) on investments................ (3.06)
------
Total Income From Investment Operations........................... (.24)
------
LESS DISTRIBUTIONS:
Net investment income................................................. (.09)
In excess of net investment income.................................... (.24)
Net realized gain on investments...................................... (.60)
------
Total Distributions............................................... (.93)
------
NET ASSET VALUE, END OF PERIOD.......................................... $ 8.83
======
TOTAL RETURN(%)(a)...................................................... (2.42)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted).............................. 2,985
Ratios of average net assets(%):
Operating expenses, net(b)(c)....................................... .25
Operating expenses, gross(c)(d)..................................... 3.58
Net investment income(d)............................................ .45
Portfolio turnover rate(%)(b)......................................... 48.30
</TABLE>
- ---------------------
* For the period September 30, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period September 30, 1997 (commencement of operations)
to December 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio has not been annualized due to the Fund's short period of
operation.
+ See the notes to financial statements which appear in the Trust's Annual
Report to Shareholders and which are incorporated by reference into the
Statement of Additional Information.

10
<PAGE>

FINANCIAL HIGHLIGHTS OF THE AGGRESSIVE STRATEGY FUND +

The following table contains important financial information relating to the
Fund and has been audited by Coopers & Lybrand L.L.P., the Investment
Company's independent accountants. The table includes selected data for a
share outstanding throughout the period ended December 31, and other
performance information derived from the financial statements. The information
in the table represents the Financial Highlights for the Fund's Class E Shares
for the periods shown. No Class D Shares were issued during the periods shown.
The table appears in the Fund's financial statements and related notes, which
are incorporated by reference into the Statement of Additional Information and
which appear, along with the report of Coopers & Lybrand L.L.P. in the Fund's
Annual Report to Shareholders. More detailed information concerning the Fund's
performance, including a complete portfolio listing and audited financial
statements, is available in the Fund's Annual Report, which may be obtained
without charge by writing or calling the Investment Company.

<TABLE>
<CAPTION>
1997*
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................. .10
Capital gain distributions from Underlying Funds...................... 1.66
Net realized and unrealized gain (loss) on investments................ (1.77)
------
Total Income From Investment Operations........................... (.01)
LESS DISTRIBUTIONS:
Net investment income................................................. (.10)
In excess of net investment income.................................... (.21)
Net realized gain on investments...................................... (.54)
------
Total Distributions............................................... (.85)
------
NET ASSET VALUE, END OF PERIOD.......................................... $ 9.14
======
TOTAL RETURN(%)(a)...................................................... (.19)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted).............................. 5,307
Ratios of average net assets(%):
Operating expenses, net(b)(c)....................................... .25
Operating expenses, gross(c)(d)..................................... 2.88
Net investment income(d)............................................ .97
Portfolio turnover rate(%)(b)......................................... 56.88
</TABLE>
- ---------------------
* For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period September 16, 1997 (commencement of operations)
to December 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio has not been annualized due to the Fund's short period of
operation.
+ See the notes to financial statements which appear in the Investment
Company's Annual Report to Shareholders and which are incorporated by
reference into the Statement of Additional Information.

11
<PAGE>

FINANCIAL HIGHLIGHTS OF THE BALANCED STRATEGY FUND +

<TABLE>
<CAPTION>
1997
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................. .09
Capital gain distributions from Underlying Funds...................... .85
Net realized and unrealized gain (loss) on investments................ (.83)
------
Total Income From Investment Operations............................. .11
------
LESS DISTRIBUTIONS:
Net investment income................................................. (.09)
In excess of net investment income.................................... (.15)
Net realized gain on investments...................................... (.41)
------
Total Distributions................................................. (.65)
------
NET ASSET VALUE, END OF PERIOD.......................................... $ 9.46
======
TOTAL RETURN(%)(a)...................................................... 1.04
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted).............................. 3,554
Ratios of average net assets(%):
Operating expenses, net(b)(c)....................................... .25
Operating expenses, gross(c)(d)..................................... 4.03
Net investment income(d)............................................ 1.30
Portfolio turnover rate(%)(b)......................................... 29.58
</TABLE>
- ---------------------
* For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period September 16, 1997 (commencement of operations)
to December 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio has not been annualized due to the Fund's short period of
operation.
+ See the notes to financial statements which appear in the Investment
Company's Annual Report to Shareholders and which are incorporated by
reference into the Statement of Additional Information.

12
<PAGE>

FINANCIAL HIGHLIGHTS OF THE MODERATE STRATEGY FUND+

<TABLE>
<CAPTION>
1997*
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................. .07
Capital gain distributions from Underlying Funds...................... .38
Net realized and unrealized gain (loss) on investments................ (.46)
------
Total Income From Investment Operations........................... (.01)
------
LESS DISTRIBUTIONS:
Net investment income................................................. (.07)
In excess of net investment income.................................... (.07)
Net realized gain on investments...................................... (.24)
------
Total Distributions............................................... (.38)
------
NET ASSET VALUE, END OF PERIOD.......................................... $ 9.61
======
TOTAL RETURN(%)(a)...................................................... (.06)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted).............................. 385
Ratios of average net assets(%):
Operating expenses, net(b)(c)....................................... .25
Operating expenses, gross(c)(d)..................................... --
Net investment income(e)............................................ 1.01
Portfolio turnover rate(%)(b)......................................... 9.66
</TABLE>
- ---------------------
* For the period October 3, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period October 3, 1997 (commencement of operations) to
December 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio is not meaningful due to the Fund's short period of operation.
(e) The ratio has not been annualized due to the Fund's short period of
operation.
+ See the notes to financial statements which appear in the Investment
Company's Annual Report to Shareholders and which are incorporated by
reference into the Statement of Additional Information.

13
<PAGE>

FINANCIAL HIGHLIGHTS OF THE CONSERVATIVE STRATEGY FUND+

<TABLE>
<CAPTION>
1997*
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................. .07
Capital gain distributions from Underlying Funds...................... .23
Net realized and unrealized gain (loss) on investments................ (.16)
------
Total Income From Investment Operations........................... .14
------
LESS DISTRIBUTIONS:
Net investment income................................................. (.07)
In excess of net investment income.................................... (.03)
Net realized gain on investments...................................... (.16)
------
Total Distributions............................................... (.26)
------
NET ASSET VALUE, END OF PERIOD.......................................... $ 9.88
======
TOTAL RETURN(%)(a)...................................................... 1.36
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted).............................. 23
Ratios of average net assets(%):
Operating expenses, net(b)(c)....................................... .25
Operating expenses, gross(c)(d)..................................... --
Net investment income(e)............................................ .67
Portfolio turnover rate(%)(b)......................................... 0.00
</TABLE>
- ---------------------
* For the period November 8, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period November 8, 1997 (commencement of operations) to
December 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio is not meaningful due to the Fund's short period of operation.
(e) The ratio has not been annualized due to the Fund's short period of
operation.
+ See the notes to financial statements which appear in the Investment
Company's Annual Report to Shareholders and which are incorporated by
reference into the Statement of Additional Information.

14
<PAGE>

THE PURPOSE OF THE LIFEPOINTS FUNDS

The LifePoints Funds have been organized to provide a simple and effective
means for Eligible Investors to structure a diversified mutual fund investment
allocation program that is suited to the long-term investment goals of the
investor, and that permits an investor to access and use FRIMCo's and
Russell's "multi-style, multi-manager diversification" method of investment.
The LifePoints Funds, by investing in the Class S Shares of the Underlying
Funds, obtain FRIMCo's and Russell's money manager evaluation services, on a
pooled and cost-effective basis.

FRANK RUSSELL COMPANY--CONSULTANT TO THE FUNDS

Russell, 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. Russell and its
affiliates have offices in Tacoma, New York, Toronto, London, Zurich, Paris,
Sydney, Auckland and Tokyo, and have approximately 1350 associates.

Three functions are at the core of Russell 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" investment method with the goals
of reducing risk and increasing returns.

MULTI-STYLE, MULTI-MANAGER DIVERSIFICATION

FRIMCo and Russell believe investors should seek to hold fully diversified
portfolios that reflect both the investors' individual investment time
horizons and their ability to accept risk. FRIMCo and Russell believe that for
many this can be accomplished through strategically purchasing shares in one
or more of the Funds which have been structured to provide access to specific
asset classes in a multi-style, multi-manager environment.

Studies have shown that no one investment style within an asset class will
consistently outperform competing styles. For instance, investment styles
favoring securities growth characteristics may outperform styles favoring
income producing securities, and vice versa. It is largely for this reason
that no single manager has consistently outperformed the market over extended
periods. While performance cycles tend to repeat themselves, they do not do so
predictably.

15
<PAGE>

The advantages of diversifying among a mixture of investment styles and
money managers are potentially even greater with the LifePoints Funds, where
each LifePoints Fund will typically invest in shares of several Underlying
Funds. The LifePoints Funds have been created in response to increasing demand
by mutual fund investors for a simple and effective means of structuring a
diversified mutual fund investment program suited to their general needs. The
proliferation of mutual funds has left many investors confused and in search
of a simpler means to manage their investments. FRIMCo has long stressed the
value of diversifying investments in a number of mutual funds (e.g., a money
market fund for liquidity and price stability, a growth fund for long-term
appreciation, an income fund for current income and relative safety of
principal, an international fund for greater potential diversification, etc.),
and has offered its advisory expertise in assisting investors to determine
such issues as which mutual funds to select, how much of their assets to
commit to each fund, and when to reallocate their selections.

INVESTMENT OBJECTIVES AND ASSET ALLOCATION FRAMEWORKS
OF THE LIFEPOINTS FUNDS

The investment objectives of the LifePoints Funds are subject to the
investment restrictions and asset allocation policies described in this
Prospectus. The investment objective of each LifePoints Fund is as follows:

. EQUITY BALANCED STRATEGY FUND seeks to achieve high, long-term capital
appreciation, while recognizing the possibility of high fluctuations in
year-to-year market values.

. AGGRESSIVE STRATEGY FUND seeks to achieve high, long-term capital
appreciation with low current income, while recognizing the possibility
of substantial fluctuations in year-to-year market values.

. BALANCED STRATEGY FUND seeks to achieve a moderate level of current
income and, over time, above-average capital appreciation with moderate
risk.

. MODERATE STRATEGY FUND seeks to achieve moderate long-term capital
appreciation with high current income, while recognizing the possibility
of moderate fluctuations in year-to-year market values.

. CONSERVATIVE STRATEGY FUND seeks to achieve moderate total rate of return
through low capital appreciation and reinvestment of a high level of
current income.

16
<PAGE>

The investment objectives of the LifePoints Funds are summarized below in a
chart that illustrates the degree to which each LifePoints Fund seeks to
obtain capital appreciation, income, and stability of principal:

<TABLE>
<CAPTION>
POSSIBILITY
CAPITAL OF
LIFEPOINTS FUND APPRECIATION INCOME FLUCTUATION
--------------- ------------ -------- -----------
<S> <C> <C> <C>
Equity Balanced Strategy Fund................. High Low High
Aggressive Strategy Fund...................... High Low High
Balanced Strategy Fund........................ Moderate Moderate Moderate
Moderate Strategy Fund........................ Moderate High Moderate
Conservative Strategy Fund.................... Low High Low
</TABLE>

There is no assurance that a LifePoints Fund will achieve its stated
objective. The investment objective of each LifePoints Fund is fundamental and
cannot be changed without the approval of a majority of shareholders of the
particular LifePoints Fund.

Each of the LifePoints Funds allocates its assets by investing in shares of
a diversified group of Underlying Funds. The allocation of a LifePoints Fund's
assets among Underlying Funds may be changed at anytime by FRIMCo. Each of the
LifePoints Funds generally will adjust its investments within set limits based
on FRIMCo's outlook for the economy, financial markets generally and relative
market valuation of the asset classes represented by each Underlying Fund.
However, the LifePoints Funds may deviate from set limits when, in FRIMCo's
opinion, it is necessary to do so to pursue a LifePoints Fund's investment
objective. However, amounts allocated to each Underlying Fund by each
LifePoints Fund are expected to generally vary only within 10% of the ranges
specified below:

<TABLE>
<CAPTION>
EQUITY
BALANCED AGGRESSIVE BALANCED MODERATE CONSERVATIVE
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
UNDERLYING FUND FUND FUND FUND FUND FUND
--------------- -------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Diversified Equity Fund.... 30% 21% 16% 11% 5%
Special Growth Fund........ 10% 11% 5% 2% --%
Quantitative Equity Fund... 30% 21% 16% 11% 6%
International Securities
Fund...................... 20% 19% 14% 9% 5%
Diversified Bond Fund...... --% --% 25% 27% 18%
Volatility Constrained Bond
Fund...................... --% --% --% 33% 60%
Multistrategy Bond Fund.... --% 18% 16% --% --%
Real Estate Securities
Fund...................... 5% 5% 5% 5% 5%
Emerging Markets Fund...... 5% 5% 3% 2% 1%
</TABLE>

17
<PAGE>

[PIE CHART]

30% Quantitative Equity
30% Diversified Equity
20% International Securities
10% Special Growth
5% Emerging Markets
5% Real Estate Securities

EQUITY BALANCED STRATEGY FUND

[PIE CHART]

33% Volatility Constrained
27% Diversified Bond
11% Diversified Equity
11% Quantitative Equity
9% International Securities
5% Real Estate Securities
2% Special Growth
2% Emerging Markets

MODERATE STRATEGY FUND

[PIE CHART]

21% Quantitative Equity
21% Diversified Equity
19% International Securities
18% Multistrategy Bond
11% Special Growth
5% Real Estate Securities
5% Emerging Markets

AGGRESSIVE STRATEGY FUND

[PIE CHART]

60% Volatility Constrained
18% Diversified Bond
6% Quantitative Equity
5% Diversified Equity
5% International Securities
5% Real Estate Securities
1% Emerging Markets

CONSERVATIVE STRATEGY FUND

[PIE CHART]

25% Diversified Bond
16% Multistrategy Bond
16% Diversified Equity
16% Quantitative Equity
14% International Securities
5% Special Growth
5% Real Estate Securities
3% Emerging Markets

BALANCED STRATEGY FUND

18
<PAGE>

INVESTMENT POLICIES, RESTRICTIONS
AND RISKS OF THE LIFEPOINTS FUNDS

Each LifePoints Fund's investment policies and practices are subject to
further restrictions and risks which are described in the Statement of
Additional Information. The LifePoints Funds will not make a material change
in their investment objectives or their fundamental policies without obtaining
shareholder approval. The LifePoints Funds' allocation ranges, as described in
the previous section, unless otherwise specified, are not fundamental policies
and may be changed without shareholder approval. Shareholders will be notified
of any material change in such investment programs.

Cash Reserves. Each LifePoints Fund is authorized to invest its cash
reserves (i.e., funds awaiting investment in the Underlying Funds) in money
market instruments and in debt securities which are at least comparable in
quality to the permitted investments of the Underlying Funds which may be
acquired by that LifePoints Fund. Each LifePoints Fund may also invest its
cash reserves in the Investment Company's Money Market Fund. The Investment
Company's Money Market Fund, described in a separate prospectus, seeks to
maximize current income to the extent consistent with the preservation of
capital and liquidity, and the maintenance of a stable $1.00 per share net
asset value by investing solely in short-term, high-grade, money market
instruments. A LifePoints Fund investing in the Money Market Fund will
indirectly bear its proportionate share of the management fee and other
expenses incurred by the Money Market Fund.

Repurchase Agreements. Each LifePoints 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
the next business day). If the party agreeing to repurchase the securities
should default and if the value of the securities held by the LifePoints Fund
as collateral (102% of the amount of cash paid by the LifePoints Fund to such
party at time of the agreement) should fall below the repurchase price, the
LifePoints Fund could incur a loss. Subject to the overall limitations
described in "Illiquid Securities" below, no LifePoints Fund will invest more
than 15% of its net assets (taken at current market value) in repurchase
agreements maturing in more than seven days.

Reverse Repurchase Agreements. Each LifePoints Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by FRIMCo to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby a
LifePoints Fund transfers possession of a portfolio security to a bank or
broker-dealer in return for a percentage of the portfolio security's market
value. The LifePoints Fund retains record ownership of the security involved,
including the right to receive interest and principal payments. At an agreed
upon future date, the LifePoints Fund repurchases the security by paying an
agreed upon purchase price plus interest. Liquid assets of the LifePoints 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 limitations described in "Investment Policies--Illiquid
Securities."

Illiquid Securities. The LifePoints Funds will not purchase or otherwise
acquire any security if, as a result, more than 15% of a Fund's 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 addition, the LifePoints Funds will not invest more
than 15% of their respective 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"). There

19
<PAGE>

may be undesirable delays in selling illiquid securities at prices
representing their fair value. Investing in illiquid securities that are
considered to be Rule 144A securities could have the effect of increasing the
level of a LifePoints Fund's illiquidity to the extent that qualified
institutional buyers became, for a time, uninterested in purchasing such
securities.

Diversification. Each LifePoints Fund is a "nondiversified" investment
company for purposes of the Investment Company Act of 1940, as amended (the
"1940 Act") because it invests in the securities of a limited number of
issuers (i.e., the Underlying Funds). Each of the Underlying Funds in which
the LifePoints Funds may invest is a diversified investment company. Each
LifePoints Fund intends to qualify as a diversified investment company for
purposes of Subchapter M of the Internal Revenue Code.

INVESTMENT RESTRICTIONS OF THE LIFEPOINTS FUNDS

The LifePoints Funds have fundamental investment restrictions which cannot
be changed without shareholder approval. The principal restrictions are the
following, which, unless otherwise noted, apply on a Fund-by-Fund basis at the
time an investment is being made. No LifePoints Fund will:

1. Invest in any security if, as a result of such investment, less than 75%
of its total assets would be represented by cash; cash items; securities
of the US government, its agencies, or instrumentalities; securities of
other investment companies (including the Underlying Funds); and other
securities limited in respect of each issuer to an amount not greater in
value than 5% of the total assets of such LifePoints Fund.

2. Invest 25% or more of the value of the LifePoints Fund's total assets in
the securities of companies primarily engaged in any one industry (other
than the US government, its agencies and instrumentalities, and shares
of the Underlying Funds).

3. Acquire more than 5% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer, as noted below, except with
respect to shares of Funds that are investment portfolios of the
Investment Company.

4. Borrow amounts in excess of 5% of its total assets taken at cost or at
market value, whichever is lower, and then only from banks as a
temporary measure for extraordinary or emergency purposes (reverse
repurchase agreements are not deemed to be borrowings for the purposes
of this limitation).

5. Invest more than 15% of its net assets in illiquid securities, provided
that each LifePoints Fund will not invest more than 5% of its net assets
in restricted securities (other than securities eligible for resale
under Rule 144A of the 1933 Act).

SPECIAL RISKS AND CONSIDERATIONS OF THE LIFEPOINTS FUNDS

Investors should consider the following factors when investing in the
LifePoints Funds:

. The investments of each LifePoints Fund will consist primarily of shares
of the Underlying Funds, so each LifePoints Fund's investment
performance is directly related to the investment performances of the
Underlying Funds in which the LifePoints Fund invests.

. As a matter of policy, the LifePoints Funds will generally allocate
their investments among the Underlying Funds within certain ranges. As a
result, the LifePoints Funds may have less flexibility to invest than a
mutual fund without such constraints.

20
<PAGE>

. In addition to their principal investments, some or all of the
Underlying Funds may: invest varying percentages of their assets in
foreign securities; enter into forward currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; engage in options
transactions; make short sales; purchase zero coupon bonds and payment-
in-kind bonds; and engage in various other investment practices which
result in market risk, currency risk, and the risks of investing in
foreign securities.

. The officers, the Trustees, and FRIMCo (the investment manager of the
LifePoints Funds) presently serve as officers, Trustees and investment
manager of the Underlying Funds. Therefore, conflicts may arise as those
persons and FRIMCo fulfill their fiduciary responsibilities to the
LifePoints Funds and to the Underlying Funds.

. Some of the LifePoints Funds may invest in the Emerging Markets Fund,
and the Aggressive Strategy Fund may invest in the Multistrategy Bond
Fund. The Emerging Markets Fund may invest up to 5% of its net assets,
and the Multistrategy Bond Fund may invest up to 25% of its net assets,
in lower-rated securities, which are subject to the risks resulting from
high yield investing.

ELIGIBLE INVESTORS

Shares of the LifePoints Funds are currently offered only to Eligible
Investors. These investors are principally institutional investors and
financial intermediaries that have entered into asset management services
agreements ("Agreements," and each, an "Agreement") with FRIMCo or
distribution agreements with the Investment Company's distributor, and
institutions or individuals who acquire shares through such institutions or
financial intermediaries. Eligible Investors include trustees, officers,
employees and certain third-party contractors of the Trust and its affiliates.

There is no minimum investment in Class E Shares of the LifePoints Funds.
Although the initial minimum aggregate investment in the Class D Shares of any
combination of the LifePoints Funds is $5 million, that initial required
minimum investment is waived until further notice. FRIMCo, on behalf of each
Fund, reserves the right to change, as to any Fund or any class thereof, the
categories of investors eligible to purchase shares of that Fund or class.
Trustees, officers, employees, and certain third-party contractors of the
Trust and its affiliates are not subject to any initial minimum investment
requirement.

Shares of the Funds generally are not offered or "retailed" directly to or
allowed to be exchanged by, individual investors, although FRIMCo may enter
into Agreements with individual investors. Bank trust departments, registered
investment advisors, broker-dealers and other Eligible Investors ("Financial
Intermediaries") which have entered into Agreements with FRIMCo may acquire
shares of the Funds for their customers. FRIMCo 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 may charge their customers a fee for
providing these and possibly other trust or investment-related services.
LifePoints Funds may be made available to investors other than under the terms
of an Agreement, for instance, pursuant to a distribution agreement with the
Investment Company's distributor.

21
<PAGE>

GENERAL MANAGEMENT OF THE UNDERLYING FUNDS AND THE
LIFEPOINTS FUNDS

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

FRIMCo: (i) provides or oversees the provision of all general management and
administration, investment advisory and portfolio management, and distribution
services for the Funds; (ii) provides the Funds with office space, equipment
and personnel necessary to operate and administer the Funds' business, and to
supervise the provision of services by third parties such as the money
managers and custodian; (iii) develops the investment programs, recommends
money managers to the Board, allocates assets among money managers and
monitors the money managers' investment programs and results; (iv) is
authorized to select and hire portfolio managers to select individual
portfolio securities held in the Underlying Funds' Liquidity Portfolio or as
cash reserves for the Funds; and (v) provides the Funds with transfer agent,
dividend disbursing and shareholder recordkeeping services. FRIMCo bears the
expenses it incurs in providing these services (other than transfer agent,
dividend disbursing and shareholder recordkeeping) as well as a portion of the
costs of preparing and distributing explanatory materials concerning the
Funds.

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

. Randall P. Lert, who has been Chief Investment Officer of FRIMCo since
1989.

. Randal C. Burge, who has been a Portfolio Manager of FRIMCo since 1995.
From 1990 to 1995, Mr. Burge was a Client Executive for Frank Russell
Australia. Mr. Burge, jointly with another portfolio manager identified
herein, has primary responsibility for management of the Fixed I,
Diversified Bond, Fixed II, Volatility Constrained Bond, Fixed III,
Multistrategy Bond, and Emerging Markets Funds.

22
<PAGE>

. James M. Imhof, Manager of FRIMCo's Portfolio Trading, manages the Trust
on a day to day basis, and has been responsible for ongoing analysis and
monitoring of the money managers since 1989.

. Dennis J. Trittin, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1988 to 1996, Mr. Trittin was director of Russell's
U.S. Equity Manager Research Department. Mr. Trittin, jointly with
another portfolio manager identified herein, has primary responsibility
for management of the Equity I, Diversified Equity, Equity II, Special
Growth, Equity III, Equity Income, Equity Q, Quantitative Equity, and
Equity T Funds.

. C. Nola Williams, who has been a Portfolio Manager of FRIMCo since
January 1996. From 1994 to 1995, Ms. Williams was a member of the Alpha
Strategy Group. From 1988 to 1994, Ms. Williams was Senior Research
Analyst with Russell. Ms. Williams, jointly with another portfolio
manager identified herein, has primary responsibility for management of
the Equity I, Diversified Equity, Equity II, Special Growth, Equity III,
Equity Income, Equity Q, Quantitative Equity, Equity T, and Multi-Style
Funds.

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

George F. Russell, Jr., Chairman of the Board of the Investment Company, is
the chairman of the board and controlling shareholder of Russell. FRIMCo is a
wholly owned subsidiary of Russell.

The Investment Company has received an exemptive order from the SEC which
permits the Investment Company, with the approval of the Board, to engage and
terminate money managers without a shareholder vote and to disclose, on an
aggregate basis, the fees paid to the money managers of each Underlying Fund.
The Investment Company received shareholder approval to operate under the
order at a special meeting of the shareholders held on January 22, 1996.

For its investment supervisory services, FRIMCo receives a management fee
from each LifePoints Fund at the annual rate of 0.25% of the average daily net
assets of each Fund, payable to FRIMCo monthly on a pro rata basis. Currently,
FRIMCo has voluntarily agreed to waive its fee for each Fund to which it is
entitled. In addition to the management fee payable by the LifePoints Funds,
the LifePoints Funds will indirectly bear a proportionate share of operating
expenses that include the management fees paid by the Underlying Funds in
which they invest. While a shareholder of a LifePoints Fund will also bear a
proportionate part of management fees paid by an Underlying Fund, each of the
management fees paid is based upon the services received by the respective
Fund. As noted above, FRIMCo receives a management fee from each Underlying
Fund. From this fee, FRIMCo, acting as agent for the Investment Company, is
responsible for paying the money managers for their investment selection
services. The remainder is retained by FRIMCo as compensation for the services
described above and to pay expenses. The annual rate of the management fees,
payable to FRIMCo monthly on a pro rata basis, are

23
<PAGE>

the following percentages of the average daily net assets of each Underlying
Fund: Diversified Equity Fund 0.78%, Special Growth Fund 0.95%, Quantitative
Equity Fund 0.78%, International Securities Fund 0.95%, Diversified Bond Fund
0.45%, Volatility Constrained Bond Fund 0.50%, Multistrategy Bond Fund 0.65%,
Real Estate Securities Fund 0.85%, and Emerging Markets Fund 1.20%. The fees
of the Underlying Funds, other than the Diversified Bond, Volatility
Constrained Bond, and Multistrategy Bond Funds, may be higher than the fees
charged by some mutual funds with similar objectives which use only a single
money manager. FRIMCo has voluntarily agreed to waive all or a portion of its
management fee with respect to certain Underlying Funds.

It is also proposed that the services which FRIMCo provides to the Funds
under the present Management Agreement will be divided into two components.
Those services which are investment advisory in nature will be provided
pursuant to a new Advisory Agreement. Other services which are administrative
in nature will be provided pursuant to a new Administrative Agreement. It is
not anticipated that this restructuring of services provided to the Funds will
materially affect the costs of these services to the Funds, or affect FRIMCo's
current voluntary fee waivers.

OPERATING EXPENSES OF THE LIFEPOINTS FUNDS

Each LifePoints Fund seeks to operate at a low operating expense ratio.
While each LifePoints Fund will incur its pro rata share of the fees and
expenses of an Underlying Fund in which it invests, each Underlying Fund has
agreed to pay a pro rata share of the operating expenses of the LifePoints
Funds that invest in the Underlying Funds, but only to the extent that the
Underlying Funds receive a net reduction in its otherwise anticipated expenses
from maintaining numerous investor accounts and from investor trading
activity. This arrangement is subject to a Special Service Agreement (the
"Service Agreement") between FRIMCo, each LifePoints Fund and the Underlying
Funds in which it invests, as well as to certain voluntary expense
reimbursement undertakings made by FRIMCo, which can be terminated by FRIMCo
in its sole discretion, but which will not be terminated prior to April 30,
1999. Each LifePoints Fund has entered into an Investment Management Agreement
with FRIMCo, as well as a Portfolio Management Agreement which governs the
providing of sub-advisory services.

24
<PAGE>

The Service Agreement is entered into, on a yearly basis, between FRIMCo,
the LifePoints Funds and the Underlying Funds. The Service Agreement provides
that all services necessary for the operation of a LifePoints Fund ((including
expenses for Fund accounting, custody, auditing, legal and transfer agent
services (collectively, "Operating Expenses")) (but not including services
covered by the management fee and any Rule 12b-1 distribution fee or
Shareholder Service Fees which will be borne directly by the LifePoints Funds)
will be paid by the Underlying Funds in which the LifePoints Fund invests
and/or FRIMCo. In consideration of the benefits derived by the Underlying
Funds from the establishment and operation of the LifePoints Funds, each of
the Underlying Funds will agree to pay a portion of the LifePoints Fund
operating expenses. The operating expenses will be allocated among and borne
by the Underlying Funds in proportion to the average daily value of shares of
the Underlying Funds owned by each LifePoints Fund, but in no event will any
Underlying Fund bear operating expenses in excess of its estimated cost
savings. Such savings are expected to result primarily from the elimination of
numerous separate shareholder accounts which would have been established to
hold the LifePoints Funds' assets if they had been invested directly in the
Underlying Funds and the resulting reduction in shareholder servicing costs
from less investor trading activity. Although such cost savings cannot be
computed precisely at this time, the estimated savings to the Underlying Funds
generated by the operation of the LifePoints Funds, and the consequent
payments by the Underlying Funds, are expected to be sufficient to offset
most, if not all, of the operating expenses incurred by the LifePoints Funds.
Under the Service Agreement, FRIMCo has agreed to pay any operating expenses
of the LifePoints Funds which exceed the estimated savings to each of the
Underlying Funds.

THE MONEY MANAGERS FOR THE UNDERLYING FUNDS

The assets of each Underlying Fund are allocated currently among the money
managers listed in the section "Money Manager Profiles." THE ALLOCATION OF AN
UNDERLYING FUND'S ASSETS AMONG MONEY MANAGERS MAY BE CHANGED AT ANY TIME BY
FRIMCO. THE MONEY MANAGERS MAY BE EMPLOYED OR THEIR SERVICES MAY BE TERMINATED
AT ANY TIME BY FRIMCO, SUBJECT TO APPROVAL BY THE BOARD OF THE INVESTMENT
COMPANY.

From its management fees, FRIMCo, as agent for the Investment Company, pays
all fees to the money managers for their services to the Underlying Funds.
Quarterly, each money manager is paid the pro rata portion of an annual fee,
based on the quarterly average of all the assets allocated to the money
manager. For the fiscal year ended December 31, 1997, management fees paid to
the money managers were equivalent to the following annual rates expressed as
a percentage of the average daily net assets of each Underlying Fund:
Diversified Equity Fund 0.23%, Special Growth Fund 0.40%, Quantitative Equity
Fund 0.19%, International Securities Fund 0.39%, Diversified Bond Fund 0.08%,
Volatility Constrained Bond Fund 0.17%, Multistrategy Bond Fund 0.21%, Real
Estate Securities Fund 0.29%, and Emerging Markets Fund 0.68%.

Fees paid to the money managers are not affected by any voluntary expense
limitations. Some money managers may receive investment research prepared by
Russell as additional compensation, or may receive brokerage commissions for
executing portfolio transactions for the Underlying Funds through broker-
dealer affiliates. Each money manager has agreed that once the Investment
Company has advanced fees to FRIMCo as agent to make payment of the money
manager's fee, the money manager will look only to FRIMCo for the payment of
its fee.

The money managers are selected for the Underlying Funds based primarily
upon the research and recommendations of Russell, which evaluates
quantitatively and qualitatively the manager's skills and results in

25
<PAGE>

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 a money manager.

Each money manager has complete discretion to purchase and sell portfolio
securities for its segment of an Underlying Fund within the Underlying Fund's
investment objectives, restrictions and policies, and the more specific
strategies developed by Russell and FRIMCo. Although the money managers'
activities are subject to general oversight by the Board and officers of the
Investment Company, NEITHER THE BOARD, THE OFFICERS, FRIMCO, NOR RUSSELL
EVALUATE THE INVESTMENT MERITS OF THE MONEY MANAGERS' INDIVIDUAL SECURITY
SELECTIONS.

INVESTMENT OBJECTIVES, POLICIES AND RISKS
OF THE UNDERLYING FUNDS

Each Underlying Fund has certain "fundamental" investment objectives,
restrictions and policies which may be changed only with the approval of a
majority of the Underlying Fund's shareholders. Other policies reflect current
practices of the Underlying Funds, and may be changed by the Underlying Funds
without the approval of shareholders. Certain of the objectives, policies, and
risks are described in this section, and further information about the
Underlying Funds is contained in the Statement of Additional Information as
well as in the prospectuses of the Underlying Funds. Because the LifePoints
Funds invest in the Underlying Funds, investors of the LifePoints Funds will
be affected by the Underlying Funds' investment policies in direct proportion
to the amount of assets each LifePoints Fund allocates to the Underlying Fund
pursuing such policies. To request a copy of a prospectus for an Underlying
Fund, contact the Investment Company at 800/972-0700 (in Washington, 253/627-
7001).

Each Underlying Fund's objective is "fundamental," as are the types of
securities in which it will invest. Ordinarily, each Underlying Fund will
invest more than 65% of its total assets in the types of securities identified
in its statement of objectives. However, the Underlying Funds may hold assets
as cash reserves for temporary and defensive purposes when their money
managers deem that a more conservative approach is desirable or when suitable
purchase opportunities do not exist.

DIVERSIFIED EQUITY FUND

The Diversified Equity Fund's objective is to provide income and capital
growth by investing principally in equity securities. The Fund may invest in
common and preferred stocks, securities convertible into common stocks, rights
and warrants.

SPECIAL GROWTH FUND

The Special Growth Fund's objective is to maximize total return primarily
through capital appreciation and by assuming a higher level of volatility than
is ordinarily expected from the Diversified Equity Fund, by investing in
equity securities. Current income is a secondary consideration in selecting
securities. The Fund may invest in common and preferred stock, convertible
securities, rights and warrants. The Fund's investments may include companies
whose securities have been publicly traded for less than five years and
smaller companies, such as companies not listed in the Russell 1000(R) Index.

26
<PAGE>

QUANTITATIVE EQUITY FUND

The Quantitative Equity Fund's objectives are to provide a total return
greater than the total return of the US stock market as measured by the
Russell 1000(R) Index over a market cycle of four to six years, while
maintaining volatility and diversification similar to the Index by investing
in equity securities. The Fund will maintain industry weights and economic
sector weights near those of the Index. Over time, the Fund's average
price/earnings ratio, yield and other fundamental characteristics are expected
to be near the averages for the Index. However, the Fund's money managers may
temporarily deviate from Index characteristics based upon the managers'
investment judgment that this will increase the Fund's total return. The money
managers of the Fund generally make stock selections from the set of stocks
comprising the Russell 1000(R) Index. The Fund will attempt to be fully
invested in common stock at all times. However, the Fund reserves the right to
hold up to 20% of Fund assets in liquid reserve for redemption needs.

INTERNATIONAL SECURITIES FUND

The International Securities Fund's objectives are to provide favorable
total return and additional diversification for US investors by investing
primarily in equity and fixed-income securities of non-US companies, and
securities issued by non-US governments. The Fund invests primarily in equity
securities issued by companies domiciled outside of the United States. The
Fund may also invest in fixed-income securities, including instruments issued
by non-US governments and their agencies, and in US companies which derive, or
are expected to derive, a substantial portion of their revenues from
operations outside the United States.

The Fund may invest in equity and debt securities denominated in other than
US dollars and gold-related equity investments, including gold mining stocks
and gold-backed debt instruments. However, as a matter of fundamental policy,
the Fund will not invest more than 20% of its net assets in gold-related
investments.

EMERGING MARKETS FUND

The Emerging Markets Fund's 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.

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 up to 5% of its net assets in debt securities that are
rated below "investment grade" (i.e., rated lower than BBB by Standard &
Poor's Rating Group ("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's")) or in unrated securities judged by the money managers of the Fund
to be of comparable quality. These lower rated debt securities may include
obligations that are in default or that face the risk of default with respect
to principal or interest. Such securities are sometimes referred to as "junk
bonds." For additional information on the ratings used by S&P and Moody's and
a description of lower rated debt securities, see "Investment Policies and
Risks of the Underlying Funds -- High Risk Bonds" and refer to the Statement
of Additional Information.

27
<PAGE>

REAL ESTATE SECURITIES FUND

The Real Estate Securities Fund's objective is to generate a high level of
total return through above average current income, while maintaining the
potential for capital appreciation by investing primarily in the equity
securities of companies in the real estate industry. Under normal
circumstances, the Fund will invest at least 65% of its total assets in
income-oriented equity securities of real estate companies, which include
shares of real estate investment trusts, partnership units of master limited
partnerships, common and preferred stock, and convertible debt securities
believed to have attractive equity characteristics. Up to 35% of the Fund's
total assets may be invested in other debt securities of real estate
companies.

The Fund will concentrate more than 25% of its total assets in the real
estate and real estate related industries. The Fund will therefore be subject
to the risks associated with the direct ownership of real estate. Additional
risks include declines in the value of real estate, risks related to general
and local economic conditions, over-building and increased competition,
increases in property taxes and operating expenses, changes in neighborhood
values, the appeal of properties to tenants and increases in interest rates.
The value of securities of companies that service the real estate industry may
also be affected by such risks.

The Fund will attempt to be invested fully at all times. However, the Fund
reserves the right to hold up to 20% of the Fund's assets in liquid reserves
for redemption needs.

DIVERSIFIED BOND FUND

The Diversified Bond Fund's objectives are to provide effective
diversification against equities and a stable level of cash flow by investing
in fixed-income securities.

The Fund's portfolio will consist primarily of conventional debt
instruments, including bonds, debentures, US government and US government
agency securities, preferred and convertible preferred stocks, and variable
amount demand master notes. (These notes represent a borrowing arrangement
under a letter agreement between a commercial paper issuer and an
institutional lender, such as the Fund.) Investment selections will be based
on fundamental economic, market, and other factors leading to valuation by
sector, maturity, quality and such other criteria as are appropriate to meet
the stated objectives. The Fund will ordinarily invest at least 65% of its net
assets in securities rated no less than A or A-2 by S&P or A or Prime-2 by
Moody's, or judged by the money manager to be of at least equal credit quality
to those designations.

VOLATILITY CONSTRAINED BOND FUND

The Volatility Constrained Bond Fund's objectives are the preservation of
capital and the generation of current income consistent with the preservation
of capital by investing primarily in fixed-income securities with low-
volatility characteristics. The Fund will invest primarily in fixed-income
securities, emphasizing those which

28
<PAGE>

mature in two years or less from the date of acquisition or which have similar
volatility characteristics. To minimize credit risk and fluctuations in net
asset value per share, the Fund intends to maintain an average portfolio
maturity of less than five years. The Fund's money managers will seek to
identify and invest in a managed portfolio of high-quality debt securities
denominated in the US dollar and a range of foreign currencies.

The Fund will invest in debt securities denominated in currencies of
countries whose governments are considered by it to be stable (or, when the
Fund invests in countries considered unstable or undeveloped, it will only do
so when it believes it is able to hedge substantially the risk of a decline in
the currency in which the Fund's portfolio securities are denominated).

In selecting particular investments for the Fund, the money managers will
seek to minimize investment risk by limiting their portfolio investments to
debt securities of high-quality issuers.

MULTISTRATEGY BOND FUND

The Multistrategy Bond Fund's objective is to provide maximum total return,
primarily through capital appreciation and by assuming a higher level of
volatility than is ordinarily expected from broad fixed-income market
portfolios, by investing in fixed-income securities. The Fund will invest
primarily in fixed-income securities, including: US government securities;
obligations of foreign governments or their subdivisions, agencies and
instrumentalities; securities of international agencies or supranational
agencies; corporate debt securities; loan participations; corporate commercial
paper; indexed commercial paper; variable and floating rate and zero coupon
securities; mortgage and other asset-backed securities; municipal obligations;
variable amount demand master notes; bank certificates of deposit, fixed time
deposits and bankers' acceptances; repurchase agreements and reverse
repurchase agreements; and foreign currency exchange related securities.

The Fund may invest up to 25% of its net assets in debt securities that are
rated below "investment grade" or in unrated securities judged by the money
managers of the Fund to be of comparable quality. For a description of lower
rated debt securities, see "Investment Policies and Risks of the Underlying
Funds -- High Risk Bonds" and refer to the Statement of Additional
Information.

INVESTMENT POLICIES AND RISKS OF THE UNDERLYING FUNDS

Investment in Foreign Securities. The Underlying Funds may invest in foreign
securities traded on US or foreign exchanges or in 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 US 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 to
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,

29
<PAGE>

changes in governmental administration or economic or monetary policy (in the
United States or abroad) or changed circumstances in dealings between nations.
Costs are 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.

Depository Receipts. The Underlying Funds may invest in securities of
foreign issuers in the form of American Depository Receipts ("ADRs") or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a US bank or trust company evidencing ownership of the underlying
securities. Generally, ADRs in registered form are designed for use in US
securities markets.

Forward Foreign Currency Exchange Contracts ("forward currency
contracts"). The International Securities, Diversified Bond, Volatility
Constrained Bond, Multistrategy Bond and Emerging Markets Funds may enter into
forward currency contracts, which are agreements to exchange one currency for
another -- for example, to exchange a certain amount of US 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 an
Underlying Fund enters into a contract. The Underlying Funds may engage in
forward contracts that involve a currency whose changes in value are
considered to be linked (a proxy) to a currency or currencies in which some or
all of the Funds' portfolio securities are 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 Underlying Funds may,
however, enter into forward currency contracts containing either or both
deposit requirements and commissions. In order to assure that the Underlying
Funds' forward currency contracts are not used to achieve investment leverage,
the Funds will segregate liquid assets in an amount at all times equal to or
exceeding the Funds' commitment with respect to these contracts.

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 an Underlying Fund's portfolio securities or adversely affect the
price of securities which the Funds intend to purchase at a later date. The
amount the Underlying Funds may invest in forward currency contracts is
limited to the amount of the Funds' aggregate investments in foreign
currencies.

Options. The Underlying Funds 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
Underlying Funds may also purchase and sell put and call options on foreign
currencies.

An Underlying Fund may invest up to 5% of its net assets, represented by the
premium paid, in call and put options. An Underlying 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.

30
<PAGE>

The purchase and writing of options involves certain risks. If a put or call
option purchased by an Underlying 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 an Underlying 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 an Underlying 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 an Underlying
Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, an Underlying
Fund may be unable to close out a position.

Futures Contracts and Options on Futures Contracts. The Underlying Funds 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.

Each Underlying 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 an Underlying Fund and the hedging
vehicle so that the portfolio return might have been greater had hedging not
been attempted.

High Risk Bonds. The Emerging Markets Fund may invest up to 5% of its net
assets, and the Multistrategy Bond Fund may invest up to 25% of its net
assets, in lower rated securities or in unrated securities judged by their
money managers to be of comparable quality. While lower rated securities
generally offer a higher yield than that available from higher grade issues,
lower rated debt securities also 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 fluctuations in response to changes in
interest rates. For additional information, refer to the Statement of
Additional Information.

Borrowing. The Funds are authorized to borrow from banks to obtain cash to
pay redemption requests. Currently, each Fund may borrow up to 5% of its total
assets. The Board has approved, subject to approval by the shareholders of the
respective Funds at the 1998 Shareholders Meeting, a proposal to revise the
Funds' fundamental policy on borrowing. If approved by shareholders, this
limit would be increased to up to 33 1/3 % of the current value of the Funds'
total assets. The Lifepoints Funds do not expect to borrow to pay redemption
request except in unusual circumstances. Please see the SAI for a more
complete discussion of the Funds' permissible borrowing activities.

31
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS

The Board presently intends that dividends will be declared from net
investment income and net short-term capital gains, if any, for each
LifePoints Fund on a quarterly basis, with payment being made in: April, July,
October and December.

Dividends paid by a LifePoints Fund with respect to its Class D and Class E
Shares are calculated in the same manner and at the same time. Both Class D
and Class E Shares will share proportionally in any investment income and
expenses of a LifePoints Fund, except that the per share dividends of Class D
Shares will ordinarily be less than the per share dividends of Class E Shares
as a result of the Rule 12b-1 distribution fees charged to Class D Shares.

CAPITAL GAINS DISTRIBUTIONS

The Board intends that distributions will be declared annually, generally in
mid-December, from capital gains through October 31 (excess of capital gains
over capital losses). In addition, in order to satisfy certain distribution
requirements, a LifePoints 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 a LifePoints Fund
and received by shareholders on December 31 of the prior year. Capital gains
realized during November and December will be distributed during the month of
February of the following year.

In addition, the LifePoints Funds receive capital gains distributions from
the Underlying Funds. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, the LifePoints Funds
may generate capital gains through rebalancing the portfolios to meet the
Funds' allocation percentages.

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. Investors should also be aware
that all shareholders, new and old alike, will share in and be taxed on
distributions of gain realized by a LifePoints Fund on the sale of securities
that have increased in value.

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 LifePoints Fund paying the dividend or making the
distribution, 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 (the "Transfer Agent"), at Operations Department,
P.O. Box 1591, Tacoma, WA 98401.

32
<PAGE>

TAXES

Each LifePoints Fund intends to qualify for taxation as a "regulated
investment company" under the Internal Revenue Code (the "Code"). By
distributing substantially all of its net investment income and capital gains
to shareholders and meeting certain other requirements, a LifePoints Fund will
generally not be liable for federal income or excise taxes. The LifePoints
Funds may be subject to nominal, if any, state and local taxes.

For taxable shareholders: Dividends from net investment income and short-
term capital gains will be taxable as ordinary dividends, whether paid in cash
or reinvested in additional shares. 28% and 20% capital gains distributions
declared by the Investment Company's Board are taxed at the respective capital
gains rates regardless of the length of time a shareholder has held such
shares. Distributions paid in excess of a LifePoints Fund's earnings will be
treated as a non-taxable return of capital. Dividends and distributions may
otherwise also be subject to state or local taxes.

The sale of shares of a LifePoints 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 a LifePoints 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.

Shareholders of the LifePoints Funds will be notified after each calendar
year of the amounts of ordinary income dividends, and 28% and 20% capital
gains distributions, including any amounts which are deemed paid on December
31 of the prior year.

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

Shareholders who are not US persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the
applicability of income, estate or other taxes (including income tax
withholding) on their investment in a LifePoints Fund or on dividends and
distributions received by them from a LifePoints Fund and the application of
foreign tax laws.

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 a LifePoints Fund and distributions and redemption proceeds
received from a LifePoints Fund.

Additional information on these and other tax matters relating to the
LifePoints Funds and their shareholders is included in the section entitled
"Taxes" in the Statement of Additional Information.

33
<PAGE>

CALCULATION OF FUND PERFORMANCE

From time to time, the LifePoints Funds may advertise their 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.

Performance will be calculated separately for Class D and Class E Shares of
the LifePoints Funds. The Class D Shares have different expenses from the
Class E Shares which may affect performance. The average annual total returns
for Class E shares of each of the Funds are as follows:

<TABLE>
<CAPTION>
INCEPTION TO
DECEMBER 31, 1997 INCEPTION DATE
----------------- --------------
<S> <C> <C>
Equity Balanced Strategy Fund............... (2.42)% 09/30/97
Aggressive Strategy Fund.................... (0.19)% 09/16/97
Balanced Strategy Fund...................... 1.04 % 09/16/97
Moderate Strategy Fund...................... (0.06)% 10/03/97
Conservative Strategy Fund.................. 1.36 % 11/08/97
</TABLE>

No Class D shares had been issued as of December 31, 1997 and therefore no
performance is reported for Class D shares.

The Moderate and Conservative Strategy Funds also may from time to time
advertise their yields. Yield, which is based on historical earnings and is
not intended to indicate future performance, is calculated by dividing the net
investment income per share earned during the most recent 30-day (or one
month) period by the maximum offering price per share on the last day of the
month. This income is then annualized. That is, the amount of income generated
by the investment during that 30-day (or one month) period is assumed to be
generated each month over a 12-month period and is shown as a percentage of
the investment. For purposes of the yield calculation, interest income is
computed based on the yield to maturity of each debt obligation and dividend
income is computed based upon the stated dividend rate of each security in a
LifePoints Fund's portfolio. The calculation includes all recurring fees that
are charged to all shareholder accounts.

Each LifePoints Fund may also advertise non-standardized performance
information which is for periods in addition to those required to be
presented.

FRIMCO'S HISTORICAL PERFORMANCE

Since the LifePoints Funds are new portfolios, there is information
regarding only their recent investment performance. However, FRIMCo has a
longer history of investment performance managing model investment portfolios
with investment objectives, strategies, policies, and restrictions
substantially similar to those of the LifePoints Funds. Set forth below are
historical performance data provided by FRIMCo pertaining to those model
investment portfolios. The data is provided to illustrate FRIMCo's past
performance in managing similar portfolios. The results presented are not
intended to predict or suggest the return to be experienced by any LifePoints
Fund or the return an individual investor might achieve by investing in a
LifePoints Fund. A LifePoints Fund's investment returns may differ from those
of the relevant model portfolio because, among other things, the LifePoints
Fund's fees and expenses may differ from those of the applicable portfolio.

34
<PAGE>

PERCENTAGE TOTAL RETURNS

PERIODS ENDING DECEMBER 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
ANNUALIZED
-------------------------------------
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS TO DATE DATE
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
FRANK RUSSELL INVESTMENT COMPANY ASSET
ALLOCATION MODEL:
EQUITY BALANCED MODEL
FRIC Equity Balanced Fund comparable.. 22.44 17.14 14.88 15.11 10/01/85
AGGRESSIVE STRATEGY MODEL
FRIC Aggressive Strategy Fund compara-
ble.................................. 18.78 14.89 13.68 14.16 10/01/85
BALANCED STRATEGY MODEL
FRIC Balanced Strategy Fund compara-
ble.................................. 16.13 12.81 12.22 12.85 10/01/85
MODERATE STRATEGY MODEL
FRIC Moderate Strategy Fund compara-
ble.................................. 12.76 10.89 10.72 11.43 10/01/85
CONSERVATIVE STRATEGY MODEL
FRIC Conservative Strategy Fund compa-
rable................................ 9.55 -- -- 8.83 10/01/96
</TABLE>

Performance is calculated based on the SEC standardized method. Periods of
12 months and over are annualized. Total returns of model portfolios are
presented gross of fees and expenses, and do not reflect deductions of any
management fees and Rule 12b-1 distribution fees or Shareholder Service
fees, which are deducted from net asset value of the Class D or Class E
Shares of the LifePoints Funds. The performance for a model portfolio would
have been reduced if such fees had been deducted. Model portfolio
performance is based upon the actual mix of Underlying Funds recommended at
each specific point in time, which may differ slightly from the current
mix. Detail of the changes is available upon request. The Underlying Funds
in existence for less than the time periods shown were added to the mix on
the following dates: Quantitative Equity Fund, 07/01/87; Real Estate
Securities Fund, 01/01/90; Multistrategy Bond Fund, 02/01/93; and Emerging
Markets Fund, 04/01/95 (Fund performance for the Emerging Markets Fund is
calculated gross of investment services fees, descriptions of which can be
obtained from FRIMCo. Investment services fees will reduce performance).
Equity Income Fund was removed from the Conservative, Moderate, Balanced,
and Aggressive model portfolios as of January 1, 1996.

VALUATION OF LIFEPOINTS FUND SHARES

NET ASSET VALUE PER SHARE

The net asset value per share is calculated for shares of each class of each
LifePoints Fund on each business day on which shares are offered or orders to
redeem are tendered. For all Funds, 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 Class D and Class E Shares by dividing the current value of the
LifePoints Fund's assets (i.e., shares of the Underlying Funds plus any other
assets held in the portfolio) attributable to a particular class, less
liabilities attributable to that class, by the number of shares of the class
outstanding, and rounding to the nearest cent. All Funds determine net asset
value as of the close of the New York Stock Exchange (currently 4:00 p.m.
Eastern time). The determination is made by appraising each LifePoints Fund's
underlying investments on each business day (i.e., the Underlying Funds at the
current net asset value per share of such Underlying Fund).

35
<PAGE>

VALUATION OF PORTFOLIO SECURITIES

Money market instruments held by a LifePoints Fund and maturing within 60
days of the valuation date are valued on the basis of amortized cost, a method
by which each portfolio instrument is initially valued at cost, and thereafter
a constant accretion/amortization to maturity of any discount or premium is
assumed. The LifePoints Funds utilize the amortized cost valuation method in
accordance with Rule 2a-7 of the 1940 Act. Such money market instruments are
valued at "amortized cost" unless the Board determines that amortized cost
does not represent fair value. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the LifePoints Fund would
receive if it sold the instrument.

HOW TO PURCHASE LIFEPOINTS FUND SHARES

Russell Funds are generally available through a select network of qualified
Financial Intermediaries. If you are not currently working with one of these
Financial Intermediaries, please call Russell Investor Services at (800)
RUSSEL4 (787-7354) for assistance in contacting an investment professional
near you.

Certain information noted below, including trade deadlines and payment
procedures, are included for informational purposes only. Contact your
Financial Intermediary for further details.

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS

Under a distribution plan (the "Distribution Plan") for the Class D Shares,
the Investment Company may pay to the distributor, or any banks, broker-
dealers or other financial institutions that have entered into sales support
agreements ("Selling Agents"), an amount (the "12b-1 Fee") for the Selling
Agents' activities or expenses primarily intended to result in the sale of the
Class D Shares of the LifePoints Funds subject to the Distribution Plan. The
12b-1 Fee payments are calculated daily and paid quarterly by the Investment
Company, at an annual rate of up to 0.75% of the average daily net assets of a
LifePoints Fund's Class D Shares. The Board has, at the present time,
determined to limit payments under the Distribution Plan to 0.25% of average
daily net assets. The 12b-1 Fee may only be increased when the Board
determines that it is in the best interests of shareholders of the Class D
Shares of the LifePoints Funds to do so.

The 12b-1 Fees may be used to compensate (a) Selling Agents for sales
support services provided, and related expenses incurred with respect to,
Class D Shares, by such Selling Agents, and (b) the distributor for
distribution services provided by it, and related expenses incurred, including
payments by the distributor to compensate Selling Agents for providing support
services. The Distribution Plan is a compensation-type plan. As such, the
Investment Company makes no payments to the distributor except as described
above. Therefore, the Investment Company does not pay for unreimbursed
expenses of the distributor, including amounts expended by the distributor in
excess of amounts received by it from the Investment Company, interest,
carrying or other financing charges in connection with excess amounts
expended, or the distributor's overhead expenses. However, the distributor may
be able to recover such amount or may earn a profit from future payments made
by the Investment Company under the Distribution Plan.

In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments to the distributor or
any investment advisors, banks, broker-dealers, financial planners or other
financial institutions ("Servicing Agents") for any activities or expenses
primarily intended to

36
<PAGE>

assist, support or service the Servicing Agents' clients who beneficially own
Class D or Class E Shares of the LifePoints Funds. Payments under the Services
Plan are calculated daily and paid quarterly by the Investment Company, at an
annual rate of up to 0.25% of the average daily net assets of a LifePoints
Fund's Class D or Class E Shares.

PAYING FOR SHARES

Shares of the LifePoints Funds may be purchased without a sales load on any
business day the Funds are open. Purchase orders are processed at the next net
asset value per share calculated after receipt of an order in proper form
(defined in the "Written Instructions" section), and acceptance of the order.
Please note the following:

Cash, third party checks and checks drawn on credit card accounts will
not be accepted.

All purchases must be made in U.S. dollars.

Checks and other negotiable bank drafts must be drawn on U.S. banks and
made payable to "Frank Russell Investment Company."

OFFERING DATES AND TIMES

Orders must be received by the Transfer Agent on any day when Fund shares
are offered, prior to the close of the NYSE (currently 4:00 p.m. Eastern
time).

ORDER AND PAYMENT PROCEDURES

37
<PAGE>

BY MAIL

BY FEDERAL FUNDS WIRE

BY AUTOMATED CLEARING HOUSE ("ACH")

AUTOMATED INVESTMENT PROGRAM

THREE DAY SETTLEMENT PROGRAM

The Funds will accept orders from Financial Intermediaries to purchase Class
D or Class E Shares of the LifePoints Funds for settlement on the third
business day following the receipt of the order. These orders are paid for by
a federal funds wire if the Financial Intermediary has enrolled in the program
and agreed in writing to indemnify the LifePoints Funds against any losses
resulting from non-receipt of payment.

EXCHANGE PRIVILEGE

BY MAIL OR TELEPHONE

Investors may exchange Class D or Class E Shares of any LifePoints Funds
they own for shares of any other LifePoints Fund offered by this Prospectus on
the basis of the current net asset value per share at the time of the
exchange. Shares of a LifePoints Fund offered by this Prospectus may only be
exchanged for shares of a Fund offered by the Trust through another prospectus
under certain conditions and only in states where the exchange may be legally
made. For additional information, including prospectuses for other Funds,
contact your Financial Intermediary.

38
<PAGE>

IN-KIND EXCHANGE OF SECURITIES

HOW TO REDEEM LIFEPOINTS FUND SHARES

Shares of the LifePoints Funds may be redeemed on any business day the Funds
are open at the next net asset value per share calculated after receipt of an
order in proper form (defined in the "Written Instructions" section). Payment
will ordinarily be made within seven days after receipt of your request in
proper form. Shares recently purchased by check will not be available for
liquidation for 15 days following the purchase to assure payment has been
collected.

The LifePoints Funds reserve the right to reject or delay a redemption on
certain legal grounds or to suspend the right of redemption or postpone the
date of payment if any unlikely emergency conditions, as specified in the 1940
Act or determined by the SEC, should develop.

REDEMPTION DATES AND TIMES

39
<PAGE>

BY MAIL OR TELEPHONE

SYSTEMATIC WITHDRAWAL PROGRAM

PAYMENT OF REDEMPTION PROCEEDS

BY CHECK

A check for the redemption proceeds will be sent to the shareholder(s) of
record at the address of record within seven days after receipt of a
redemption request in proper form.

BY WIRE

WRITTEN INSTRUCTIONS

PROPER FORM: Written instructions must include:

40
<PAGE>

SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE

<TABLE>
<S> <C>
ACCOUNT TYPE REQUIREMENTS FOR WRITTEN REQUESTS
- --------------------------------------------------------------------------------
Individual, Joint Written instructions must be signed by each
Tenants, shareholder, exactly as the names appear in the
Tenants in Common account registration.
- --------------------------------------------------------------------------------
UGMA or UTMA (custodial Written instructions must be signed by the custodian
accounts for minors) in his/her capacity as it appears in the account
registration.
- --------------------------------------------------------------------------------
Corporation, Association Written instructions must be signed by authorized
person(s), stating his/her capacity as indicated by
the corporate resolution to act on the account.
A copy of the corporate resolution, certified within
the past 90 days, authorizing the signer to act.
- --------------------------------------------------------------------------------
Estate, Trust, Pension, Written instructions must be signed by all trustees.
Profit Sharing Plan
If the name of the trustee(s) does not appear in the
account registration, please provide a copy of the
trust document certified within the last 60 days.
- --------------------------------------------------------------------------------
Joint tenancy Written instructions must by signed by the surviving
shareholders whose tenant(s).
co-tenants are deceased A certified copy of the death certificate must
accompany the request.
</TABLE>

SIGNATURE GUARANTEE

ACCOUNT POLICIES

THIRD PARTY TRANSACTIONS

Investors purchasing LifePoints Fund shares through a program of services
offered by a Financial Intermediary may be required to pay additional fees.
Investors should contact their Financial Intermediary for information
concerning what additional fees, if any, may be charged.

REDEMPTION IN-KIND

A Fund may pay for any redemption amount by a distribution in-kind of
securities from the Fund's portfolio, instead of in cash. Investors will incur
brokerage charges on the sale of these portfolio securities.

41
<PAGE>

ADDITIONAL INFORMATION

DISTRIBUTOR, CUSTODIAN, INDEPENDENT ACCOUNTANTS, AND REPORTS

Russell Fund Distributors, Inc., a wholly owned subsidiary of FRIMCo, is the
principal distributor for Investment Company shares. The distributor receives
no compensation from the Investment Company for its services other than as
described in "How to Purchase Shares--Distribution and Shareholder Services
Plans" elsewhere in this Prospectus.

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

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

YEAR 2000

The services provided to the Trust and the shareholders by FRIMCo, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact of handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no
adverse impact on the Trust, FRIMCo, the Distributor, the Transfer Agent and
the Custodian have advised the Trust that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will
be adapted in time for the event. The obligation to make such adaptations, if
any, would be the responsibility of the service provider that maintains the
system. Therefore, the Trust does not expect to incur any material expense in
that regard.

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 by changing its domicile and legal status
to 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."

The Investment Company issues shares of beneficial interest divisible into
an unlimited number of funds, each of which funds is a separate trust under
Massachusetts law, and the funds' shares may be offered in multiple classes.
Shares of each class of a Fund represent proportionate interests in the assets
of that Fund attributable to that class, and have the same voting and other
rights and preferences as the shares of other classes of the Fund. Shares of
each class of a Fund are entitled to such dividends and distributions earned
on the assets belonging to the Fund as may be declared by the Board. Shares of
each class of a Fund have a par value of $0.01 per share, are fully paid and
nonassessable, and have no preemptive or conversion rights. Each share of a
class of a Fund

42
<PAGE>

has one vote; there are no cumulative voting rights. There are no annual
meetings of shareholders, but special meetings may be held. On any matter
which affects only a particular Fund or class, only shareholders of that Fund
or class, as applicable, will vote, unless otherwise required by the 1940 Act
or the amended Master Trust Agreement.

In addition to offering Class D and Class E Shares, the LifePoints Funds are
authorized to offer beneficial interests in Class S Shares. Class S Shares
are, as of the date of this Prospectus, not offered for public investment.

The Trustees hold office for the life of the Investment Company. A Trustee
may resign or retire, and a Trustee may be removed at any time by, in
substance, a vote of two-thirds of the Investment Company shares. A vacancy in
the Board 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 31, 1998, the following shareholders may be deemed by the 1940 Act
to control the LifePoints Funds because it owns more than 25% of the voting
shares of the indicated Funds; H & H Investments Solutions, Inc.--Equity
Balance Strategy, Aggressive Strategy, Balanced Strategy, Moderate Strategy,
and Conservative Strategy Funds, Class D; Capinco/Sargento--Equity Balanced
Strategy Fund, Class E; Board of Pensions of Church of God, Inc.,--Balanced
Strategy Fund, Class E; Zions First National Bank--Moderate Strategy Fund,
Class E; Jasco & Co.--Conservative Strategy Fund, Class E.

MONEY MANAGER PROFILES

The money managers have no other affiliations with the Underlying Funds,
FRIMCo, or with Russell. Each money 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 Russell, including its wholly
owned subsidiary, Frank Russell Trust Company.

DIVERSIFIED EQUITY FUND

Alliance Capital Management L.P., First Bank Place, 601 2nd Ave. South,
Suite 5000, Minneapolis, MN 55402-4322, is a limited partnership whose (i)
general partner is a wholly owned subsidiary of The Equitable Companies
Incorporated ("The Equitable") and (ii) majority unit holder is ACM, Inc., a
wholly owned subsidiary of The Equitable. AXA, a French insurance holding
company owns 60.5% of the Equitable.

Barclays Global Investors N.A., 45 Fremont Street, San Francisco, CA 94105,
is an indirect, wholly-owned subsidiary of Barclays Bank PLC.

Equinox Capital Management, Inc., 590 Madison Avenue, 41st Floor, New York,
NY 10022. Equinox is a registered investment adviser with majority ownership
held by Ron Ulrich.

INVESCO Capital Management, Inc., 1315 Peachtree Street N.E., Suite 500,
Atlanta, GA 30309, is a corporation whose indirect parent is AMVESCO, PLC, a
London-based financial services holding company.

43
<PAGE>

Morgan Stanley Asset Management, Inc., 1221 Avenue of the Americas, New
York, NY 10020, is a wholly-owned subsidiary of Morgan Stanley Dean Witter &
Co., a publicly held corporation.

Peachtree Asset Management, One Peachtree Center, Suite 4500, 303 Peachtree
Street N.E., Atlanta, GA 30308. Peachtree is a unit of the Smith Barney Asset
Management division of Smith Barney Mutual Funds Management, Inc., which is a
wholly owned subsidiary of Travelers Group Inc.

Trinity Investment Management Corporation, 75 Park Plaza, Boston, MA 02116,
is a corporation with seven shareholders, with Stanford M. Calderwood holding
majority ownership.

SPECIAL GROWTH FUND

Delphi Management, Inc., 50 Rowes Wharf, Suite 440, Boston, MA 02110, is
100% owned by Scott Black.

Fiduciary International, Inc., 2 World Trade Center, New York, NY 10048, an
investment advisor registered with the SEC, is an indirect wholly-owned
subsidiary of Fiduciary Trust Company International, a New York state
chartered bank.

GlobeFlex Capital, L.P., 4365 Executive Drive, Suite 720, San Diego, CA
92121, is a California limited partnership and an SEC registered investment
advisor. Its general partners are Robert J. Anslow, Jr. and Marina L.
Marrelli.

Jacobs Levy Equity Management, Inc., 280 Corporate Center, 3 ADP Boulevard,
Roseland, NJ 07068, is 100% owned by Bruce Jacobs and Kenneth Levy.

Sirach Capital Management, Inc., One Union Square, Suite 3323, 600 Union
Street, Seattle, WA 98101, is a wholly owned subsidiary of United Asset
Management Company, a publicly traded corporation.

Wellington Management Company, LLP, 75 State Street, Boston, MA 02109, is a
private Massachusetts limited liability partnership, of which the following
persons are managing partners: Robert W. Doran, Duncan M. McFarland and John
R. Ryan.

44
<PAGE>

QUANTITATIVE EQUITY FUND

Barclays Global Investors N.A., See: Diversified Equity Fund.

J.P. Morgan Investment Management, Inc., 522 Fifth Ave., New York, NY 10036,
is a wholly owned subsidiary of J.P. Morgan & Co., Inc., a publicly held bank
holding company.

INTERNATIONAL SECURITIES FUND

J.P. Morgan Investment Management, Inc., See: Quantitative Equity Fund.

Mastholm Asset Management, L.L.C., 10500 N.E. 8th Street, Suite 660,
Bellevue, WA 98004 is a Washington limited Liability corporation that is
controlled by the following members: Thomas A. Garr; Robert L. Gernstetter;
Joseph P. Jordon; Arthur M. Tyson and Theodore J. Tyson.

Rowe Price-Fleming International, Inc., 100 East Pratt Street, 9th Floor,
Baltimore, MD 21202, and 4th Floor, 25 Copthall Ave., London, England EC2R
7DR, which is a joint venture of T. Rowe Price Associates, Inc., and The
Fleming Group, each of which owns 50% of the company. Ownership of The Fleming
Group holding is split equally between Copthall Overseas Limited, a subsidiary
of Robert Fleming Holdings, and Jardine Fleming International Holdings
Limited, a subsidiary of Jardine Fleming Holdings. Robert Fleming Holdings is
a London-based UK holding company with the majority of the shares distributed:
51% to public companies and 38% to the Fleming family. Jardine Fleming is a
Hong Kong-based holding company which is owned 50% by Robert Fleming Holdings
and 50% by Jardine Matheson & Co., the Hong Kong trading company, a wholly
owned subsidiary of Jardine Matheson Holdings Limited. The stock of T. Rowe
Price Associates, Inc., is publicly traded with a substantial percentage of
such stock owned by the company's active management.

The Boston Company Asset Management, Inc., One Boston Place, 14th Floor,
Boston, MA 02108-4402, is 100% owned by Mellon Bank Corporation, a publicly
held corporation.

45
<PAGE>

EMERGING MARKETS FUND

Genesis Asset Managers, Limited., 21 Knightsbridge, London, SW1X 7LY, 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
advisor 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 International Ltd., is controlled 55% by
management and associated interests and the balance held by outside
shareholders, with the largest single holding being 15%.

J.P. Morgan Investment Management, Inc., See: Quantitative Equity Fund.

Montgomery Asset Management, L.P., 101 California Street, 35th Floor, San
Francisco, CA 94111, is a Delaware limited liability company with majority
ownership held by Commerzbank AG, a foreign banking organization.

REAL ESTATE SECURITIES FUND

AEW Capital Management, L.P., 225 Franklin Street, Boston, MA 02110, is a
wholly-owned affiliate of New England Investment Companies, L.P. ("NEIC").
NEIC is a publicly-held limited partnership. Metropolitan Life Insurance
Company, a publicly-held corporation, owns approximately 53% of NEIC. AEW
Capital Management, Inc., a wholly-owned subsidiary of NEIC, is the general
partner, and NEIC is the sole limited partner, of AEW Capital Management, L.P.

DIVERSIFIED BOND FUND

Lincoln Capital Management Company, See: Diversified Equity Fund.

Standish, Ayer & Wood, Inc., One Financial Center, Boston, MA 02111, whose
ownership is divided among seventeen directors, with no director having more
than a 25% ownership interest.

VOLATILITY CONSTRAINED BOND FUND

BlackRock Financial Management, 345 Park Ave., Floor, New York, NY 10154, is
a wholly-owned indirect subsidiary of PNC Bank.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

STW Fixed Income Management, Trinity Hall, 43 Cedar Avenue, P. O. Box 2910,
Hamilton HM KX, Bermuda, is a Bermuda exempted company. William H. Williams
III is the sole shareholder.

46
<PAGE>

MULTISTRATEGY BOND FUND

BEA Associates Inc., One Citicorp Center 153 East 53rd Street, 58th Floor,
New York, NY 10022, is a general partnership of Credit Suisse Capital
Corporation ("CS Capital") and Basic Appraisals, Inc. ("Basic"). CS Capital is
an 80% partner, and is a wholly owned subsidiary of Credit Suisse Investment
Corporation, which is in turn a wholly-owned subsidiary of Credit Suisse, a
Swiss bank, which is in turn a subsidiary of CS Holding, a Swiss corporation.
No one person or entity possesses a controlling interest in Basic, the 20%
partner. BEA Associates is a registered investment advisor.

Pacific Investment Management Company, See: Diversified Bond Fund.

Standish, Ayer & Wood, Inc., See: Diversified Bond Fund.

47
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
TELEPHONE (800) 972-0700
IN WASHINGTON (253) 627-7001

MONEY MANAGERS

DIVERSIFIED EQUITY
Alliance Capital Management L.P.
Barclays Global Investors, N.A.
Equinox Capital Management, Inc.
INVESCO Capital Management, Inc.
Lincoln Capital Management Company
Morgan Stanley Asset Management, Inc.
Peachtree Asset Management
Schneider Capital Management
Suffolk Capital Management, Inc.
Trinity Investment Management Corporation

SPECIAL GROWTH
Delphi Management, Inc.
Fiduciary International, Inc.
GlobeFlex Capital, L.P.
Jacobs Levy Equity Management, Inc.
Sirach Capital Management, Inc.
Wellington Management Company, LLP

QUANTITATIVE EQUITY
Barclays Global Investors, N.A.
Franklin Portfolio Associates, LLC
J.P. Morgan Investment Management, Inc.

INTERNATIONAL SECURITIES
J.P. Morgan Investment Management, Inc.
Marathon Asset Management Limited
Mastholm Asset Management LLC
Oechsle International Advisors
Rowe Price-Fleming International, Inc.
Sanford C. Bernstein & Co., Inc.
The Boston Company Asset
Management, Inc.

REAL ESTATE SECURITIES
AEW Capital Management, L.P.
Cohen & Steers Capital Management

DIVERSIFIED BOND
Lincoln Capital Management Company
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

VOLATILITY CONSTRAINED BOND
BlackRock Financial Management
Standish, Ayer & Wood, Inc.
STW Fixed Income Management

MULTISTRATEGY BOND
BEA Associates, Inc.
Pacific Investment Management Company
Standish, Ayer & Wood, Inc.

EMERGING MARKETS
Genesis Asset Managers, Limited
J.P. Morgan Investment Management, Inc.
Montgomery Asset Management, L.P.

MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment
Management Company 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, Massachusetts 02109

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

OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) 787-7354
(800) Russel4
In Washington (253) 627-7001

48
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
SUPPLEMENT DATED JUNE 15, 1998
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1998

Effective June 15, 1998, Frank Russell Investment Company makes the following
changes to the Statement of Additional Information:

All references to "Class C" are hereby changed to "Class E" to reflect a
redesignation of that class of shares.

In the section captioned: "Operation of the Investment Company," under
subsection captioned "Manager," the following two paragraphs will be added
as the third and fourth paragraphs under that sub-section:

The Board has approved, subject to approval by the shareholders of
the applicable Funds at a meeting to be held during 1998 (the "1998
Shareholder Meeting"), an amendment to the Management Agreement.
Under the amendment, in addition to the fees set forth above
(restructured as described in the next paragraph), the Funds will pay
FRIMCo a fee which compensates FRIMCo for managing collateral which
the Funds have received in securities lending and certain other
portfolio transactions. If the amendment is approved by shareholders,
each Fund will pay a fee to FRIMCo for its services in managing the
Fund's cash, securities and other investment assets which are not
treated as net assets of that Fund ("additional assets") in
determining the Fund's net asset value per share. If approved, the
additional fee payable to FRIMCo will equal an amount of up to 0.07%
of each Fund's additional assets on an annualized basis.

It is also proposed that the services which FRIMCo provides to the
Funds under the present Management Agreement will be divided into two
components. Those services which are investment advisory in nature
will be provided pursuant to a new Advisory Agreement. Other services
which are administrative in nature will be provided pursuant to a new
Administrative Agreement. It is not anticipated that this
restructuring of services provided to the Funds will materially affect
the costs of these services to the Funds, or affect FRIMCo's current
voluntary fee waiver.

In the section captioned: "Operation of the Trust," the subsection --
Distribution Plan -- shall be revised to read in its entirety as follows:

DISTRIBUTION PLAN. Under the 1940 Act, the SEC has adopted Rule 12b-
1, which regulates the circumstances under which the Funds may,
directly or indirectly, bear distribution expenses. Rule 12b-1
provides that the Funds may pay for such expenses only pursuant to a
plan adopted in
<PAGE>

accordance with Rule 12b-1. Accordingly, the Multiple Class Funds
adopted a distribution plan (the "Distribution Plan") for the Multiple
Class Funds' Class E Shares, which are described in the respective
Funds' Prospectuses. Effective May 18, 1998, the Distribution Plan was
discontinued with respect to those Shares by a vote of the majority of
Independent Trustees. In adopting the Distribution Plan, a majority of
the Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements entered into in connection with
the Distribution Plan (the "Independent Trustees"), concluded, in
conformity with the requirements of the 1940 Act, that there is a
reasonable likelihood that the Distribution Plan will benefit each
respective Multiple Class Fund and its shareholders. In connection
with the Trustees' consideration of whether to adopt the Distribution
Plan, the Distributor, as the Multiple Class Funds' principal
underwriter, represented to the Trustees that the Distributor believed
that the Distribution Plan should result in increased sales and asset
retention for the Multiple Class Funds by enabling the Multiple Class
Funds to reach and retain more investors and Financial Intermediaries
(such as brokers, banks, financial planners, investment advisors and
other financial institutions), although it is impossible to know for
certain, in the absence of a Distribution Plan or under an alternative
distribution arrangement, the level of sales and asset retention that
a Multiple Class Fund would have.

The Distribution Plan provided that each Multiple Class Fund could
spend annually, directly or indirectly, up to 0.75% of the average
daily net asset value of its Class E Shares for any activities or
expenses primarily intended to result in the sale of Class E Shares of
a Multiple Class Fund. Such payments by the Trust were to be
calculated daily and paid periodically and were not to be made less
frequently than quarterly. The Board had determined to limit payments
under the Distribution Plan to 0.40% of average daily net assets. Any
amendment to increase materially the costs that a Multiple Class
Fund's Shares could bear for distribution pursuant to the Distribution
Plan would have been effective upon a vote of the holders of the
lesser of (a) more than fifty percent (50%) of the outstanding Shares
of a Multiple Class Fund or (b) sixty-seven percent (67%) or more of
the Shares of a Multiple Class Fund present at a shareholders'
meeting, if the holders of more than 50% of the outstanding Shares of
such Fund are present or represented by proxy. The Distribution Plan
did not provide for the Multiple Class Funds to be charged for
interest, carrying or any other financing charges on any distribution
expenses carried forward to subsequent years. A quarterly report of
the amounts expended under the Distribution Plan, and the purposes for
which such expenditures were incurred, was made to the Trustees for
their review. The Distribution Plan could not have been amended
without approval of the holders of the Class E Shares. The
Distribution Plan and
<PAGE>

material amendments to it was required to be approved annually by all
of the Trustees and by the Independent Trustees. While the
Distribution Plan was in effect, the selection and nomination of the
Independent Trustees was committed to the discretion of such
Independent Trustees. The Distribution Plan was terminable, as to a
Multiple Class Fund's Shares, without penalty at any time by (a) a
vote of a majority of the Independent Trustees, or (b) a vote of the
holders of the lesser of (a) more than fifty percent (50%) of the
outstanding Shares of a Multiple Class Fund or (b) sixty-seven percent
(67%) or more of the Shares of a Multiple Class Fund present at a
shareholders' meeting, if the holders of more than 50% of the
outstanding Shares of such Fund were present or represented by proxy.

In the section captioned: "Operation of the Trust," the subsection --
Transfer and Dividend Disbursing Agent -- shall be revised to read in its
entirety as follows:

FRIMCo serves as Transfer Agent for the Trust. For this service,
FRIMCo is paid a per-account fee for transfer agency and dividend
disbursing services provided to the Trust. From this fee FRIMCo
compensates unaffiliated agents who assist in providing these
services. FRIMCO is also reimbursed by the Trust for certain out-of-
pocket expenses, including postage, taxes, wires, stationery and
telephone. FRIMCo's mailing address is 909 A Street, Tacoma, WA 98402.

In the section captioned: "Investment Restrictions, Policies and Certain
Investments," under the subsection -- Investment Restrictions -- the
following language will be added to No.7:

The Board has approved, subject to approval by the shareholders of the
respective Funds at the 1998 Shareholder Meeting, a proposal to revise
the Funds' fundamental policy on borrowing. If approved by the
shareholders, this limit would be increased to up to 33 1/3% of the
current value of the Fund's total assets.
<PAGE>

FRANK RUSSELL INVESTMENT COMPANY
SUPPLEMENT DATED JUNE 15, 1998
TO THE LIFEPOINTS STATEMENT OF
ADDITIONAL INFORMATION DATED MAY 1, 1998

Effective June 15, 1998, Frank Russell Investment Company makes the following
changes to the LifePoints Statement of Additional Information:

In the section captioned: "Operation of the Trust," under the subsection
captioned "Manager," the following two paragraphs will be added as the
second and third paragraphs under that sub-section:

The Board has approved, subject to approval by the shareholders of
the applicable Funds at a meeting to be held during 1998 (the "1998
Shareholder Meeting"), an amendment to the Management Agreement.
Under the amendment, in addition to the fees set forth above
(restructured as described in the next paragraph), the Funds will pay
FRIMCo a fee which compensates FRIMCo for managing collateral which
the Funds have received in securities lending and certain other
portfolio transactions. If the amendment is approved by shareholders,
each Fund will pay a fee to FRIMCo for its services in managing the
Fund's cash, securities and other investment assets which are not
treated as net assets of that Fund ("additional assets") in
determining the Fund's net asset value per share. If approved, the
additional fee payable to FRIMCo will equal an amount of up to 0.07%
of each Fund's additional assets on an annualized basis.

It is also proposed that the services which FRIMCo provides to the
Funds under the present Management Agreement will be divided into two
components. Those services which are investment advisory in nature
will be provided pursuant to a new Advisory Agreement. Other services
which are administrative in nature will be provided pursuant to a new
Administrative Agreement. It is not anticipated that this
restructuring of services provided to the Funds will materially affect
the costs of these services to the Funds, or affect FRIMCo's current
voluntary fee waiver.

In the section captioned: "Operation of the Trust," the subsection --
Transfer and Dividend Disbursing Agent -- shall be revised to read in its
entirety as follows:

expenses, including postage, taxes, wires, stationery and telephone.
FRIMCo's mailing address is 909 A Street, Tacoma, WA 98402.

In the section captioned: "Investment Restrictions, Policies and Practices
of the LifePoints Funds," under the subsection -- Investment Restrictions -
- the following language will be added to No.7: