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Exhibit (o)1.1
FRANK RUSSELL INVESTMENT COMPANY
MULTIPLE CLASS
PLAN PURSUANT TO RULE 18f-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
April 22, 1996
as Revised November 4, 1996,
June 3, 1998, November 9, 1998, August 9, 1999,
November 22, 1999, August 7, 2000, October 27, 2000.
I. INTRODUCTION
In accordance with Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), this Plan describes the multi-class structure that
will apply to certain portfolios of shares (each, a "Fund" and collectively, the
"Funds") of beneficial interest, $.01 par value per share ("Shares") of Frank
Russell Investment Company ("FRIC"), including the separate class arrangements
for the service and distribution of Shares, the method for allocating the
expenses, income, gain and loss of each Fund among its classes, and any related
exchange privileges and conversion features that apply to the different classes.
II. THE MULTI-CLASS STRUCTURE
Each of the following Funds is authorized to issue the following classes of
Shares, identified as Class C, Class E, and Class S, respectively: Diversified
Equity Fund, Special Growth Fund, Equity Income Fund, Quantitative Equity Fund,
Diversified Bond Fund, Short Term Bond Fund (formerly known as Fixed Income II
Fund), Multistrategy Bond Fund, Tax Exempt Bond Fund (formerly known as Limited
Volatility Tax Free Fund), International Securities Fund, Real Estate Securities
Fund, and Emerging Markets Fund, (each, a "Russell Fund").
Each of the following Funds is authorized to issue the following classes of
Shares, identified as Class C, Class D, Class E and Class S, respectively:
Equity Aggressive Strategy Fund (formerly known as Equity Balanced Strategy
Fund), Aggressive Strategy Fund, Balanced Strategy Fund, Moderate Strategy Fund
and Conservative Strategy Fund (each, a "LifePoints Fund").
Each of the following Funds is authorized to issue the following classes of
Shares, identified as Class E, Class I, Class Y, and Premier Class,
respectively: Equity I Fund, Equity II Fund, Equity III Fund, Equity Q Fund,
International Fund, Fixed Income I Fund and Fixed Income III Fund (each, an
"Institutional Fund").
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Each of the following Funds is authorized to issue the following classes of
Shares, identified as Class C, Class E, and Class S, respectively: Tax-Managed
Global Equity Fund, Tax-Managed Aggressive Strategy Fund, Tax-Managed Moderate
Strategy Fund, Tax-Managed Conservative Strategy Fund, Tax-Managed Large Cap
Fund (formerly Equity T Fund), and Tax-Managed Small Cap Fund (each, a "Tax-
Managed Fund").
Each of the following Funds is authorized to issue the Class S Shares;
Money Market Fund, Tax Free Money Market Fund, and US Government Money Market
Fund (the "Money Funds").
Each of the following Funds is authorized to issue the following classes of
Shares, identified as Class C, Class E, Class S, Class I, and Class Y
respectively: Tax-Managed Overseas Equity Fund, Select Value Fund, and Select
Growth Fund (the "Hybrid Funds").
Each Russell Fund, LifePoints Fund, Tax-Managed Fund, Money Fund and Hybrid
Fund (the "Class A Funds" or "Class B Funds") shall also be authorized to issue
Class A Shares and Class B Shares.
Shares of each class of a Fund represent an equal pro rata interest in the
underlying assets of that Fund, and generally have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class of Shares
offered in connection with a Rule 12b-1 plan or shareholder services plan would
bear certain fees under its respective plan and would have exclusive voting
rights on matters pertaining to that plan and any related agreements; (2) each
class of Shares may contain a different conversion feature; (3) each class of
Shares may bear differing amounts of certain Class Expenses (as defined below);
(4) different policies may be established with respect to the payment of
distributions on the classes of Shares of a Fund to equalize the net asset
values of the classes or, in the absence of such policies, the net asset value
per share of the different classes may differ at certain times; (5) each class
of Shares of a Fund might have different exchange privileges from another class;
and (6) each class of Shares of a Fund would have a different class designation
from another class of that Fund. Each class of Shares shall also have the
distinct features described in Section III, below.
III. CLASS ARRANGEMENTS
A. RULE 12b-1 AND SHAREHOLDER SERVICES PLANS
FRIC has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act with respect to Class B Shares of each Money Fund, Class B Shares and C
Shares of each Russell Fund, of each Tax-Managed Fund and each Hybrid Fund and
Class B Shares, Class C Shares and Class D Shares of each LifePoints Fund
containing the following terms:
FRIC may compensate its principal underwriter (the "Distributor") or any
investment advisers, financial planners, banks, broker-dealers or other
financial
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institutions that have entered into Sales Support Agreements for any activities
or expenses primarily intended to result in the sale of Class B Shares, Class C
Shares or Class D Shares as the case may be, of the applicable Funds, as
provided in the Shareholder Services Plan and the Distribution Plan and any
Supplements thereto, subject to an annual limit of .75% of the average daily net
assets of a Fund attributable to its Class B Shares, Class C Shares and Class D
Shares as the case may be.
FRIC has adopted a Shareholder Services Plan with respect to the Class A
Shares, Class B Shares, Class C Shares, Class D Shares, and Class E Shares of
each applicable Fund containing the following terms:
FRIC may compensate the Distributor or any broker-dealers, banks,
investment advisers, financial planners and other financial institutions that
are dealers of record or holders of record or that have a servicing relationship
with the beneficial owners or shareholders of Class A, Class B, Class C, Class
D, or Class E Shares for any activities or expenses primarily intended to
assist, support or service their clients who beneficially own or are
shareholders of Class A, Class B, Class C, Class D, or Class E Shares, as set
forth in the Shareholder Services Agreement for FRIC, subject to an annual limit
of 0.25% of the average daily net assets of a Fund attributable to its Class A
Shares, Class B Shares, Class C Shares, Class D Shares, or Class E Shares, as
the case may be.
B. INITIAL SALES CHARGE
Class A Shares are offered at an offering price that is equal to their net
asset value ("NAV") plus a sales charge of up to 5.75% of the public offering
price (which maximum may be less for certain Funds, as described in each Fund's
respective prospectuses or statements of additional information as from time to
time in effect). The sales charges on Class A Shares are subject to reduction
or waiver as permitted by Rule 22d-1 under the 1940 Act and as described in the
Funds' respective prospectuses or statements of additional information as from
time to time in effect. No other Class of Shares carries an initial sales
charge.
C. CONTINGENT DEFERRED SALES CHARGE
Purchases of Class A Shares for which all or a part of the initial sales
charge has been waived and that are redeemed within one or two years of purchase
are subject to a contingent deferred sales charge ("CDSC") of up to 1.00% of
either the purchase price or the NAV of the Shares redeemed, whichever is less.
Shares are not otherwise subject to a CDSC. The CDSC on Class A Shares is
subject to reduction or waiver in certain circumstances, as permitted by Rule
6c-10 under the 1940 Act and as described in the Funds' respective prospectuses
or statements of additional information as from time to time in effect.
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Purchases of Class B Shares that are redeemed within six years of purchase
are subject to a CDSC that declines ratably throughout that period. The CDSC is
imposed as follows:
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Years of Redemption CDSC as a
Following Purchase % of the lesser of Purchase or NAV
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1 5
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2 4
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3 4
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4 3
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5 2
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6 1
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D. ALLOCATION OF EXPENSES AND INCOME
1. "TRUST" AND "FUND" EXPENSES
The net investment income, realized and unrealized capital gains and losses
and expenses (other than "Class Expenses," as defined below) of each Fund that
is not a money market fund under Rule 2a-7 under the 1940 Act shall be allocated
to each Class on the basis of its net asset value relative to the net asset
value of the Fund. The net investment income, realized and unrealized capital
gains and losses and expenses (other than "Class Expenses," as defined below) of
each Fund that is a money market fund under Rule 2a-7 under the 1940 Act shall
be allocated to each Share, regardless of class, on the basis of its net asset
value relative to the net asset value of the Fund. Expenses so allocated
include expenses of FRIC that are not attributable to a particular Fund or class
of a Fund ("Trust Expenses") and expenses of a Fund not attributable to a
particular class of a Fund ("Fund Expenses"). Trust expenses include, but are
not limited to, Trustees' fees and expenses; insurance costs; certain legal
fees; expenses related to shareholder reports; and printing expenses (other than
those set forth in Section D.2 below). Fund Expenses include, but are not
limited to, certain registration fees (i.e., state registration fees imposed on
a Fund-wide basis and SEC registration fees); custodial fees; audit fees;
transfer agent fees (other than those set forth in Section D.2 below); advisory
fees; administrative fees (other than those set forth in Section D.2 below);
fees related to the preparation of separate documents of a particular Fund, such
as a separate prospectus; and other expenses relating to the management of the
Fund's assets.
2. "CLASS" EXPENSES
Class expenses include the following types of expenses, which are
attributable to a particular class ("Class Expenses"): (a) payments pursuant to
the Rule 12b-1 plan for that class; (b) transfer agent fees attributable to a
specific class; (c) printing and postage expenses related to preparing and
distributing shareholder reports, prospectuses and proxy materials to members of
a specific class; (d) registration fees (other than those set forth in Section
D.1 above); (e) the expense of Fund administrative personnel and services as
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required to support the shareholders of a specific class; (f) litigation or
other legal expenses relating solely to a specific class of Shares; (g) audit or
accounting expenses relating solely to a specific class; (h) Trustees' fees
incurred solely as a result of issues relating to a specific class of Shares;
and (i) the expense of holding meetings solely for shareholders of a specific
class. Expenses described in subpart (a) of this paragraph must be allocated to
the class for which they are incurred. All other expenses described in this
paragraph may (but need not) be allocated as Class Expenses, but only if FRIC's
Board of Trustees determines, or FRIC's President and Secretary/Treasurer have
determined, subject to ratification by the Board of Trustees, that the
allocation of such expenses by class is consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of 1986, as amended.
In the event that a particular expense is no longer reasonably allocable by
class or to a particular class, it shall be treated as a Trust Expense or Fund
Expense, and in the event a Trust Expense or Fund Expense becomes reasonably
allocable as a Class Expense, it shall be so allocated, subject to compliance
with Rule 18f-3 and to approval or ratification by the Board of Trustees.
3. WAIVERS OR REIMBURSEMENTS OF EXPENSES
Expenses may be waived or reimbursed by any adviser to FRIC, by FRIC's
underwriter or any other provider of services to FRIC without the prior approval
of FRIC's Board of Trustees.
E. EXCHANGE PRIVILEGES
Shareholders of a Fund may, to the extent provided from time to time in
FRIC's registration statement under the Securities Act of 1933, as amended, (the
"1933 Act") exchange Shares of a particular class for Shares of the same class
in another Fund and exchange Shares of a particular class for Shares of a
different class in the same Fund, each at the relative net asset values of the
respective Shares to be exchanged and with no sales charge; provided, that a
shareholder that exchanges Shares of any Class of Shares other than Class A
Shares for Class A Shares in the same Fund must pay the front-end sales charge
on those Class A Shares as described in the applicable prospectus or statement
of additional information; provided further, that the Shares to be acquired in
the exchange are, as may be necessary, registered under the 1933 Act, qualified
for sale in the shareholder's state of residence and subject to the applicable
requirements, if any, as to minimum amount. The holding period for determining
any CDSC applicable to Class A Shares and Class B Shares will include the
holding period of the Shares exchanged, and will be calculated using the
schedule of any Fund into or from which Shares have been exchanged that would
result in the highest CDSC applicable to such Class A Shares or Class B Shares,
as the case may be.
Notwithstanding the foregoing, Class B shareholders that pay the contingent
deferred sales charge for Class B Shares, as described in the applicable
prospectus or statement of additional information, may exchange those Class B
Shares for Class A shares in the
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same Fund at the relative net asset values of the Class A Shares without
imposition of the Class A front-end sales charge. Alternatively, at the option
of the Funds, shareholders that exchange Class B Shares for Class A Shares may
do so without imposition of the Class B Shares' contingent deferred sales charge
if the shareholder pays the front-end sales charge on the Class A Shares, as
described in the applicable prospectus or statement of additional information
F. CONVERSION FEATURE
Shares of a class of a Fund may contain a conversion feature whereby they
could automatically convert into Shares of a different class after a prescribed
period following the purchase of the convertible Shares. Shares acquired
through the reinvestment of dividends and other distributions paid with respect
to convertible Shares also shall have a conversion feature. All conversions
shall be on the basis of the relative net asset values of the two classes of
Shares, without the imposition of any sales or other charge. Any asset-based
sales or other charge applicable to the class of Shares into which the original
Shares were converted shall thereafter apply to the converted Shares.
IV. BOARD REVIEW
A. INITIAL APPROVAL
The Board of Trustees of FRIC, including a majority of the Trustees who are
not interested persons of FRIC, as defined under the 1940 Act (the "Independent
Trustees"), at a meeting held on April 22, 1996, initially approved this Plan
based on a determination that the Plan, including the expense allocation, is in
the best interests of each class of Shares of each Fund individually and FRIC as
a whole, and approved revisions of this Plan on November 4, 1996, on April 28,
1997, on June 3, 1998, on November 9, 1998, on August 9, 1999, on November 22,
1999, on August 7, 2000, and on October 27, 2000 in each case based on a similar
determination.
B. APPROVAL OF AMENDMENTS
Before any material amendments to this Plan, FRIC's Board of Trustees,
including a majority of the Independent Trustees, must find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses), is in the best interests of each class
of Shares of each Fund individually and FRIC as a whole. In considering whether
to approve any proposed amendment(s) to the Plan, the Trustees of FRIC shall
request and evaluate such information, as they consider reasonably necessary to
evaluate the proposed amendment(s) to the Plan. Such information shall address
the issue of whether any waivers or reimbursements of advisory or administrative
fees could be considered subsidization of one class by another, and other
potential conflict of interest between classes.
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C. PERIODIC REVIEW
The Board of Trustees of FRIC shall review the Plan as frequently as it
deems necessary, consistent with applicable legal requirements.
V. EFFECTIVE DATE
The Plan first became effective as of April 22, 1996 and
(a) was revised as of November 4, 1996 to add the LifePoints Funds, and to
add Class D Shares and Class E Shares with respect to each of those
Funds and
(b) was revised as of June 3, 1998 (i) to redesignate existing Class C
shares of the Russell Funds as Class E Shares; (ii) to add new and
different Class C Shares with respect to the Russell Funds and the
LifePoints Funds, (iii) to redesignate the existing shares of the
Institutional Funds as Class I Shares; and (iv) to add Class Y, Premier
Advisor Class, and Premier Institutional Class Shares with respect to
the Institutional Funds and
(c) was revised as of November 9, 1998 (i) to authorize Class C Shares of
the Short Term Bond Fund (formerly known as Fixed Income II Fund), (ii)
to redesignate the Premier Advisor Class Shares of the Institutional
Funds as "Premier Class" and (iii) to redesignate the Premier
Institutional Class Shares of the Institutional Funds as "Class E
Shares" and
(d) was revised as of August 9, 1999 to add the Class C and Class S Shares
of the Tax-Managed Funds and
(e) was revised as of November 22, 1999 to add the Class A Shares of the
Class A Funds, and
(f) was revised as of August 7, 2000 (i) to add the Class B Shares of the
Class B Funds, (ii) to add the Class A Shares, Class B Shares, Class C
Shares, Class E Shares and Class S Shares of the Tax-Managed Overseas
Equity Fund, Select Growth Fund, and Select Value Fund, (iii) add Class
E Shares of Tax-Managed Funds; (iv) to redesignate the existing Class S
Shares of the Money Funds as Class I Shares and create new Class A,
Class B and Class S Shares of the Money Funds; and (v) to permit
holders of Class B Shares who have paid the applicable contingent
deferred sales charge to exchange those Shares for A Shares of the same
Fund without imposition of the Class A front-end Sales Charge and
(g) was revised as of October 27, 2000 (i) to revoke the prior
redesignation of the Class S Shares of the Money Funds as Class I
Shares, (ii) to revoke the creation of new Class S Shares of the Money
Funds, and (iii) to add the Class I Shares and Class Y Shares of the
Tax-Managed Overseas Equity Fund, Select Growth Fund, and Select Value
Fund and to define those funds as "Hybrid Funds".
