SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No._____)
X Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
RUSSELL INSURANCE FUNDS
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
Fee paid previously with preliminary proxy materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:_________________________________________________
2. Form, Schedule or Registration Statement No.:___________________________
3. Filing Party:___________________________________________________________
4. Date Filed:
<PAGE>
RUSSELL INSURANCE FUNDS
909 A Street
Tacoma, Washington 98402
1-800-972-0700
Dear Shareholder:
Enclosed is a Notice of Special Meeting in lieu of Annual Meeting of
Shareholders of the Russell Insurance Funds (the "Investment Company"). The
Special Meeting has been called for Thursday, November 19, 1998 at 11:00 a.m.,
local time, at the offices of the Investment Company at 909 A Street, Tacoma,
Washington. The accompanying Proxy Statement details the proposals being
presented for your consideration.
The Special Meeting will consider several matters, and shareholders will be
asked to: (i) elect the members of the Board of Trustees of the Investment
Company; (ii) ratify the selection of PricewaterhouseCoopers LLP as the
Investment Company's independent accountants; (iii) approve a proposed
management agreement between the Investment Company, on behalf of each sub-trust
of the Investment Company (each a "Fund") and Frank Russell Investment
Management Company ("FRIMCo"), to take effect upon the acquisition of Frank
Russell Company by The Northwestern Mutual Life Insurance Company; and (iv)
approve a change in each Fund's fundamental investment restriction limiting
borrowing to authorize a higher borrowing level for the purpose of meeting
redemptions.
The enclosed materials provide details of the proposals. Accordingly, a
proxy card for the Special Meeting in lieu of Annual Meeting of Shareholders is
enclosed. IT IS IMPORTANT THAT YOU COMPLETE, SIGN AND RETURN YOUR CARD AS SOON
AS POSSIBLE TO ENSURE THAT YOUR VOTE IS COUNTED AT THE SPECIAL MEETING. Please
return your proxy card as soon as possible.
Sincerely,
Karl J. Ege, Esq.
Secretary
NOTE: If you own shares of more than one Fund, you will receive a separate
proxy card for each Fund. PLEASE COMPLETE THE CARD PROVIDED FOR EACH
FUND IN WHICH YOU OWN SHARES so that each Fund will have the quorum
needed to conduct its business.
<PAGE>
RUSSELL INSURANCE FUNDS
909 A Street
Tacoma, Washington 98402
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
OF THE
RUSSELL INSURANCE FUNDS
To be held on Thursday, November 19, 1998
To the Shareholders of Multi-Style Equity Fund, Aggressive Equity Fund,
Non-U.S. Fund and Core Bond Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders (the
"Shareholders") of the four sub-trusts (each a "Fund," and collectively the
"Funds") of Russell Insurance Funds (the "Investment Company") will be held at
the Investment Company's offices located at 909 A Street, Tacoma, Washington, on
Thursday, November 19, 1998 at 11:00 a.m., local time, for the following
purposes:
1. To elect the members of the Board of Trustees of the Investment Company.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Investment
Company's independent accountants.
3. To approve a proposed management agreement with Frank Russell Investment
Management Company ("FRIMCo"), the current investment manager of the
Investment Company, to take effect upon the closing of the acquisition
of Frank Russell Company by The Northwestern Mutual Life Insurance
Company.
4. To approve a change to each Fund's fundamental investment restriction
limiting borrowing activities, authorizing a higher borrowing level for
the purpose of meeting shareholder redemption requests.
The Special Meeting also will consider and act upon any other business (none
being known as of the date of this notice) as may legally come before the
Special Meeting or any adjournment thereof.
The attached Proxy Statement provides more information concerning the items upon
which Shareholders will be asked to vote.
Shareholders of record as of the close of business on September 21, 1998, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment
thereof.
By Order of the
Board of Trustees,
KARL J. EGE, ESQ.
Secretary
Tacoma, Washington
October ___, 1998
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING! WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED
PROXY CARD(S) AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS
NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DESIRE TO VOTE IN PERSON YOU
MAY REVOKE YOUR PROXY PRIOR TO THE MEETING. PLEASE COMPLETE AND RETURN ALL
PROXY CARDS ENCLOSED. EACH IS FOR A SEPARATE FUND.
- --------------------------------------------------------------------------------
<PAGE>
RUSSELL INSURANCE FUNDS
909 A Street
Tacoma, Washington 98402
1-800-972-0700
PROXY STATEMENT
Dated October ____, 1998
FOR A SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS OF
RUSSELL INSURANCE FUNDS
TO BE HELD NOVEMBER 19, 1998
SUMMARY
What is the Purpose of this Proxy Statement?
The principal purpose of this Proxy Statement is to seek Shareholder approval of
the matters identified in the accompanying Notice of Special Meeting in lieu
of Annual Meeting. Shareholders of each Fund will be asked to consider and
approve, on behalf of their respective Fund(s), the four proposals discussed
in this Proxy Statement. Before addressing the specific proposals, this Proxy
Statement provides you with important information regarding how the Funds
operate.
How are the Funds Managed?
Each Fund is a sub-trust of the Russell Insurance Funds, an open-end management
investment company organized under the laws of the Commonwealth of
Massachusetts, with principal offices located at 909 A Street, Tacoma,
Washington 98402. The management of the business and affairs of the Investment
Company is the responsibility of the Board of Trustees (the "Board" or
"Trustees"). The Board oversees the Funds' operations, including reviewing and
approving the Funds' contracts with Frank Russell Investment Management Company
("FRIMCo" or the "Manager"), Frank Russell Company ("FRC") and the Funds' 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
assigned to them.
Shareholders will be asked to elect Trustees, ratify the selection of
accountants, and amend a restriction affecting borrowing. Shareholders will also
consider approval of a new management agreement to become effective at the time
of a change of control of FRC, the corporate parent of the investment manager to
the Investment Company.
Each Fund is managed by FRIMCo, whose address is 909 A Street, Tacoma,
Washington 98402. As described in more detail in connection with Proposal #3
below, 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 investment guidelines and restrictions, selects money
managers, allocates assets among money managers and monitors the
money managers' investment programs and results; 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,
dividend disbursing, and shareholder recordkeeping), as well as a portion of the
costs of preparing and distributing materials that describe the Funds. FRIMCo is
a wholly owned subsidiary of FRC, which provides comprehensive asset management
consulting services to institutional pools of investment assets. The address of
FRC is 909 A Street, Tacoma, Washington 98402. George F. Russell, Jr., Chairman
of the Board of the Investment Company, is the Chairman of the Board and
controlling shareholder of FRC.
The Investment Company has received an exemptive order from the U.S. Securities
and Exchange Commission (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 the aggregate fees paid to the manager and the
money managers of each sub-trust.
The money managers for the Funds are listed in Exhibit A to this Proxy
Statement. The money managers will not change as a result of the proposals that
Shareholders are being asked to consider at the Special Meeting.
What are the various fees and expenses for the Funds?
The following summarizes the fees and expenses of the Funds under the current
service agreements.
Investment Management Fees:
Under its Management Agreement with the Investment Company, FRIMCo receives a
management fee from each Fund for FRIMCo's services. From this fee, FRIMCo, as
the Investment Company'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. Quarterly,
each money manager is paid the pro rata portion of an annual fee, based on the
average of all assets allocated to the money manager for the quarter. Additional
information regarding the management fees of the Funds is set forth under
"Information Regarding the Current Management Agreement" in this Proxy
Statement.
<PAGE>
Administrative Services:
FRIMCo provides the Investment Company with administrative services and
facilities necessary to operate the Funds. FRIMCo also serves as the
dividend-paying agent, transfer agent and shareholder servicing agent for the
Funds.
PROPOSAL #1: TO ELECT THE MEMBERS OF THE BOARD OF TRUSTEES
At its meeting held on October 5, 1998, the Trustees determined to present
the election of the Board of Trustees to Shareholders at the Special Meeting.
Messrs. Russell, Lynn L. Anderson, Paul E. Anderson, Baxter and
Gingrich, Dr. Anton and Ms. Palmer (the "Current Trustees"), after due
consideration, unanimously approved each nominee identified below to serve as a
member of the Board of Trustees. Mr. Russell will not stand for re-election as a
voting Trustee of the Investment Company, although he has been elected to serve
as a Trustee Emeritus immediately upon the completion of his present service as
a Trustee. In considering the nominees for election as Trustees of the
Investment Company, the Trustees took into account the qualifications of each of
the nominees and the concern for the continued efficient conduct of the
Investment Company's business.
In particular, the Trustees considered the requirements of the 1940 Act as they
apply to the election of Trustees. One factor considered by the Board is the
requirement imposed by the 1940 Act that the selection and nomination of
trustees who are not "interested persons" (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Investment Company (the "Independent Trustees")
must be committed, in the first instance, to the Independent Trustees then in
office. The Independent Trustees met separately with Investment Company counsel,
and proposed the nomination of the Independent Trustees whose names are set
forth below.
At a meeting held on October 5, 1998, the Board also noted the proposed change
in control of FRC described in Proposal #3 below. Under Section 15(f) of the
1940 Act, for a period of three years following a change of control, at least
75% of the members of the Board of Trustees must be individuals who are not
"interested persons" of FRIMCo or its predecessor entities. Based upon the
current affiliations of the nominees for election, the election of a Board
comprised of six nominees set forth in this Proposal #1 will satisfy that
requirement.
The Current Trustees will continue to serve as Trustees until the Trustees
elected by the Shareholders take office, although Mr. Russell will resign as a
voting Trustee effective December 30, 1998, or at such date as may be considered
appropriate to assure that the composition of the Board complies with Section
15(f). Upon the election and qualification of the new Trustees, the six nominees
listed below will constitute the Board of Trustees of the Investment Company. It
is anticipated that the nominees will take office at the first regularly
scheduled Board meeting following their election, which Board meeting is
presently anticipated to be held in January, 1999. Mr. Russell and Mr. Lynn
Anderson are and will continue to be, "interested persons" of the Investment
Company. Mr. Russell has been designated by the Board of Trustees as a Trustee
Emeritus of the Investment Company as described above pursuant to the Amended
Master Trust Agreement. As a Trustee Emeritus, he will be expected to attend
meetings of the Board, will participate in discussions of the business of the
Investment Company, and may continue to provide the benefit of his advice and
experience to the Board. Under the Amended Master Trust Agreement, a Trustee
Emeritus does not vote on any matter before the Board, and is not liable for the
actions taken or omitted by the Board.
<PAGE>
Because the Investment Company does not hold regular annual meetings, each
nominee, if elected, will hold office until his or her successor is elected and
qualified. The Board may call special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or required or permitted by
the Master Trust Agreement and by-laws of the Investment Company. In compliance
with the 1940 Act, shareholder meetings will be held to elect Trustees whenever
fewer than a majority of the Trustees holding office have been elected by the
shareholders or, if necessary in the case of filling vacancies, to assure that
at least two-thirds of the Trustees holding office after vacancies are filled
have been elected by shareholders.
The Nominees
The following information is provided for each of the six nominees. It includes
the nominee's name, principal occupation(s) or employment during the past five
years, and directorships with other companies which file reports periodically
with the SEC. Unless otherwise noted, the mailing address for each nominee is
Frank Russell Investment Company, 909 A Street, Tacoma, WA 98402. Each of the
nominees is currently a Trustee of the Investment Company and, except as
otherwise indicated, has served as a Trustee since 1996.
Mr. Lynn Anderson is the only nominee for election as a Trustee who is an
"interested person" of the Investment Company as defined in the 1940 Act. This
designation results from his ownership interest and position as an officer of
certain FRC affiliates. As used in the list below, "Frank Russell Company"
includes its corporate predecessor, Frank Russell Co., Inc.
*Lynn L. Anderson--59 years old--Trustee, President and Chief Executive Officer
since 1996. Trustee, President and Chief Executive Officer, Frank Russell
Investment Company; Director, Chief Executive Officer and Chairman of the Board,
Russell Fund Distributors, Inc.; Trustee, Chairman of the Board and President,
The SSgA Funds (investment company); Director, Chief Executive Officer and
Chairman of the Board, Frank Russell Investment Management Company; Director,
Chief Executive Officer and President, Frank Russell Trust Company; Director and
Chairman of the Board, Frank Russell Investment Company Public Limited PLC;
Director, Frank Russell Company, Frank Russell Investments (Ireland) Limited,
Frank Russell Investments (Cayman) Ltd. and Frank Russell Investments (UK) Ltd.,
Russell Insurance Agency, Inc., Frank Russell Investment Company, PLC; June
1993 to November 1995, Director, Frank Russell Company. Until September 1994,
Director and President, The Laurel Funds, Inc. (investment company); November
1995 to December 1996, Director and Chairman, Russell MLC Management Company;
December 1996 to March 1997, Director and Chairman, Frank Russell Company
(Delaware) Inc.
<PAGE>
Paul E. Anderson--66 years old--Trustee. 23 Forest Glen Lane, Tacoma,
Washington 98409. Trustee, Frank Russell Investment Company; 1996 to Present,
President, Forest Limited Partnership. 1984 to 1996, President, Vancouver Door
Company, Inc.
Paul Anton, Ph.D.--78 years old--Trustee. PO Box 212, Gig Harbor,
Washington 98335. Trustee, Frank Russell Investment Company. President, Paul
Anton and Associates (Marketing Consultant on emerging international markets for
small corporations). 1991-1994, Adjunct Professor, International Marketing,
University of Washington, Tacoma, Washington.
William E. Baxter--72 years old--Trustee. 800 North C Street, Tacoma,
Washington 98403. Trustee, Frank Russell Investment Company, Retired.
Lee C. Gingrich--67 years old--Trustee. 1730 North Jackson, Tacoma,
Washington 98406. Trustee, Frank Russell Investment Company. President, Gingrich
Enterprises, Inc. (Business and Property Management).
Eleanor W. Palmer--71 years old--Trustee. 2025 Narrows View Circle #232-D,
P.O. Box 1057, Gig Harbor, Washington 98335. Trustee, Frank Russell Investment
Company; Director of Frank Russell Trust Company.
The Investment Company pays fees only to the Independent Trustees of the
Investment Company. Compensation of officers and Trustees who are "interested
persons" of the Investment Company (as indicated by an asterisk) is paid by
FRIMCo or its affiliates.
All of the nominees attended each regular Board of Trustees meeting held in
1997, and the special meeting of the Board of Trustees held on June 6, 1997,
except for Paul Anderson, who was absent from two meetings, Lynn L. Anderson,
who was absent from three meetings, and Eleanor W Palmer, who was absent from
one meeting. The Board of Trustees has an Audit Committee, which is composed of
the Independent Trustees of the Investment Company. The function of the Audit
Committee is to advise the Board with regard to the appointment of the
Investment Company's independent accountants, review and approve audit and
non-audit services of the Investment Company's independent accountants, and meet
with the Investment Company's financial officers to review the conduct of
accounting and internal controls. The Committee also serves as a vehicle for
these Trustees to consult separately with the Investment Company's outside
counsel. The Audit Committee met once during the year ended December 31, 1997.
All members of the Audit Committee attended the Audit Committee meeting. The
Board does not have standing nominating or compensation committees.
The following represents the compensation paid to each Current Trustee
for the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL FROM
TRUSTEE FROM THE INVESTMENT PART OF THE BENEFITS UPON THE INVESTMENT
COMPANY INVESTMENT RETIREMENT COMPANY
COMPANY EXPENSES PAID TO TRUSTEES
<S> <C> <C> <C> <C>
Lynn L. Anderson $ 0 $0 $0 $0
Paul E. Anderson $11,263* $0 $0 $31,263**
Paul Anton, PhD. $11,263* $0 $0 $31,263**
William E.Baxter $11,263* $0 $0 $31,263**
Lee C. Gingrich $11,263* $0 $0 $31,263**
Eleanor W. Palmer $11,263* $0 $0 $31,263**
George F.Russell $ 0 $0 $0 $0
</TABLE>
* Of this amount, $4,000 was for services during 1996.
** The Trustees received $20,000 for service as trustees on the Board of
Trustees for the Frank Russell Investment Company.
<PAGE>
Officers of the Investment Company
Information about the Investment Company's principal executive officers (other
than Lynn Anderson), including their names, ages, position(s) with the
Investment Company, and principal occupation or employment during the past five
years, is set forth below. An asterisk (*) indicates that the officer is an
"interested person" of the Investment Company as defined in the 1940 Act. As
used in the table, "Frank Russell Company" includes its corporate predecessor,
Frank Russell Co., Inc.
*George F. Russell, Jr.--65 years old--Trustee and Chairman of the Board
since 1996. Trustee and Chairman of the Board of Frank Russell Investment
Company since 1984; Director, Chairman of the Board and Chief Executive Officer,
Russell Building Management Company, Inc.; Director and Chairman of the Board,
Frank Russell Company, Frank Russell Securities, Inc., Frank Russell Trust
Company, Frank Russell Investments (Delaware), Inc.; Director, Frank Russell
Investment Management Company; Director, Chairman of the Board, and President,
Russell 20/20 Association.
*Mark E. Swanson--34 years old--Treasurer and Chief Accounting Officer since
August 1998. Treasurer and Chief Accounting Officer, Frank Russell Investment
Company; Interim Director, Finance and Operations, Frank Russell Trust Company;
Senior Vice President and Assistant Fund Treasurer, SSgA Funds (investment
company); Interim Director of Fund Administration and Accounting, Frank Russell
Investment Management Company; Manager, Funds Accounting and Taxes, Russell Fund
Distributors, Inc. April 1996 to August 1998, Assistant Treasurer, Frank Russell
Investment Company; August 1996 to August 1998, Assistant Treasurer, Frank
Russell Investment Company; November 1995 to July 1998, Assistant Secretary, the
Seven Seas Series Fund; February 1997 to July 1998, Manager, Funds Accounting
and Taxes, Frank Russell Investment Management Company.
<PAGE>
*Randall P. Lert--44 years old--Director of Investments since 1996. Director of
Investments, Frank Russell Investment Company; Senior Investment Officer and
Director of Investment Services, Frank Russell Trust Company; Director and Chief
Investment Officer, Frank Russell Investment Management Company; Director and
Chief Investment Officer, Russell Fund Distributors, Inc. Director-Futures
Trading, Frank Russell Investments (Ireland) Limited and Frank Russell
Investments (Cayman) Ltd.; Senior Vice President and Director of Portfolio
Trading, Frank Russell Canada Limited/Limitee. April 1990 to November 1995,
Director of Investments of Frank Russell Investment Management Company.
*Karl J. Ege--56 years old--Secretary and General Counsel since 1996. Secretary
and General Counsel of Frank Russell Investment Company. Director, Secretary and
General Counsel, Russell Fiduciary Services Co., Frank Russell Capital, Inc.;
Secretary, General Counsel and Managing Director--Law and Government Affairs of
Frank Russell Company; Secretary and General Counsel of Frank Russell Investment
Management Company, Frank Russell Trust Company and Russell Fund Distributors,
Inc.; Director and Secretary of Russell Building Management Company Inc.,
Russell International Services Co., Inc. and Russell 20-20 Association; Director
and Assistant Secretary of Frank Russell Company Limited (London) and Russell
Systems Ltd.; Director, Frank Russell Investment Company LLC, Frank Russell
Investments (Cayman) Ltd., Frank Russell Investment Company PLC, Frank Russell
Investments (Ireland) Limited, Frank Russell Company S.A., Frank Russell Japan
Co. Ltd., Frank Russell Company (NZ) Limited, Russell Investment Nominee Co PTY
Ltd and Frank Russell Investments (UK) Ltd.; Secretary, A Street Investments,
Inc.; Director and Secretary, Frank Russell Investments (Delaware), Inc.; July
1992 to June 1994, Director, President and Secretary of Frank Russell Shelf
Corporation; July 1993 to December 1996, Secretary, Russell MLC Management Co.
*Peter Apanovitch--52 years old--Manager of Short-Term Investment Funds since
1996. Manager of Short-Term Investment Funds, Frank Russell Investment Company;
Manager of Short-Term Investment Funds, Frank Russell Investment Management
Company and Frank Russell Trust Company.
The persons named in the proxy intend, in the absence of contrary
instructions, to vote all proxies in favor of the election of each nominee. A
Shareholder may vote for or withhold authority to vote on any or all of the
nominees. If an executed proxy is returned without voting instructions, the
shares will be voted for all nominees named herein for Trustees. All of the
nominees have consented to being named in this Proxy Statement and to serve if
elected. The Investment Company knows of no reason why any nominee would be
unable or unwilling to serve if elected. Should any of the nominees become
unable or unwilling to accept nomination or election prior to the Special
Meeting, the persons named in the proxy will exercise their voting power to vote
for such substitute person or persons as the Current Trustees of the Investment
Company may recommend. If any nominee is not approved by the Shareholders of the
Investment Company, the Board will consider alternative nominations.
The nominees who receive the greatest number of votes cast by the shareholders
of the Investment Company who are present at the Meeting in person or by proxy
will be declared elected.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE TO ELECT AS TRUSTEES THE
NOMINEES FOR ELECTION TO THE
BOARD OF TRUSTEES OF THE INVESTMENT COMPANY
PROPOSAL #2: RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS THE
INVESTMENT COMPANY'S INDEPENDENT ACCOUNTANTS
<PAGE>
At its meeting on April 27, 1998, pursuant to a request by the management of the
Investment Company, the Board, including a majority of the Independent Trustees
of the Investment Company, selected the firm of PricewaterhouseCoopers LLP to be
independent accountants for the Investment Company for the fiscal year ending
December 31, 1998. Shareholders of all of the sub-trusts of the Investment
Company are being asked at the Special Meeting to ratify the selection of
PricewaterhouseCoopers LLP, a firm formed by the recent merger of the Investment
Company's accountant with another prominent accounting firm.
Services in connection with the audit function to be performed by the Investment
Company's independent accountants include: (i) the examination of the annual
financial statements of the Investment Company; (ii) all services rendered in
order to permit the accountants to render a formal opinion on the Investment
Company's financial statements; and (iii) provision of assistance and
consultations with respect to filings with the SEC. PricewaterhouseCoopers LLP
does not have any direct or indirect financial interest in the Investment
Company. It is not expected that a representative of PricewaterhouseCoopers LLP
will be present at the Special Meeting. If a representative is present, he or
she will have an opportunity to make a statement if he or she so desires to do
so, and would be available to respond to appropriate questions.
To be ratified, the appointment of PricewaterhouseCoopers LLP must receive the
affirmative vote of a majority of the securities of the Investment Company which
are present at the Meeting in person or by proxy, and vote on this proposal.
THE BOARD OF TRUSTEES RECOMMENDS
THAT SHAREHOLDERS VOTE TO RATIFY THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
THE INVESTMENT COMPANY'S INDEPENDENT ACCOUNTANTS
<PAGE>
PROPOSAL #3: TO APPROVE A PROPOSED MANAGEMENT
AGREEMENT BETWEEN THE INVESTMENT COMPANY,
ON BEHALF OF EACH FUND, AND FRANK RUSSELL
INVESTMENT MANAGEMENT COMPANY, TO TAKE EFFECT
UPON THE ACQUISITION OF FRANK RUSSELL COMPANY
BY THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Introduction
FRIMCo currently serves as the investment manager to the Funds pursuant to an
investment management agreement (the "Management Agreement") described below.
The current Management Agreement with FRIMCo is dated August 5, 1996. The
Management Agreement was continued until April 30, 1999, by the Board, including
all of the Independent Trustees, at its meeting held on April 27, 1998. The
continuance of the current Management Agreement assured that the Investment
Company would continue to receive the services of FRIMCo after April 30, 1998.
On August 10, 1998, FRC entered into an Agreement and Plan of Merger (the
"Transaction Agreement") with The Northwestern Mutual Life Insurance Company
("Northwestern Mutual") pursuant to which Northwestern Mutual will acquire at
the effective time all of the outstanding common stock of FRC through the merger
of Project Rainier Corp., a wholly-owned subsidiary of Northwestern Mutual, with
and into FRC (the "Transaction"). Northwestern Mutual is a Milwaukee-based
mutual insurance company with assets of more than $76 billion at June 30, 1998,
and annual revenues of more than $12.3 billion for the year ended December 31,
1997. Northwestern Mutual Investment Services, LLC ("NMIS"), a wholly-owned
subsidiary of Northwestern Mutual, serves as investment adviser to the Mason
Street Funds, Inc. (a family of retail mutual funds sponsored by Northwestern
Mutual) and Northwestern Mutual Series Fund, Inc. (the investment fund for
Northwestern Mutual's variable annuity and life insurance contracts). NMIS had
approximately $9 billion under management at June 30, 1998. The mailing address
of Northwestern Mutual is 720 East Wisconsin Avenue, Milwaukee, Wisconsin
53202-4797.
Pursuant to the Transaction Agreement, FRC will be the surviving
corporation in the merger, and will continue to exist as a Washington
corporation, as a subsidiary of Northwestern Mutual. The corporate headquarters
of FRC will remain in Tacoma, Washington. FRC will retain its name and operating
independence and will continue to operate globally as a separate company. George
F. Russell, Jr. will continue as Chairman of the Board of Directors of FRC.
Michael J. A. Phillips will continue as Chief Executive Officer of FRC and as a
member of FRC's Board of Directors.
Consummation of the Transaction will constitute an "assignment," as that term is
defined in the 1940 Act, of the Management Agreement. As required by the 1940
Act, that Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transaction and the resulting termination, a
new investment agreement (the "New Agreement") between the Funds and FRIMCo is
being submitted for approval by shareholders of the Funds. A copy of the
Management Agreement is attached hereto as Exhibit B. THE NEW AGREEMENT FOR THE
FUNDS WILL CONTAIN IN ALL MATERIAL RESPECTS THE SAME TERMS AS THE TERMS IN THE
MANAGEMENT AGREEMENT THAT ARE IN EFFECT AT THE TIME OF THE CONSUMMATION OF THE
TRANSACTION, other than the effective date of the agreement.
<PAGE>
Board of Trustees Evaluation and Conclusions
At a Board of Trustees meeting on August 10, 1998, the Board was advised that
FRC and Northwestern Mutual had entered into the Transaction Agreement. The
Board directed the officers of the Investment Company to obtain additional
information concerning Northwestern Mutual, the terms of the Transaction, and
the impact of the Transaction on the Investment Company. Extensive information
was provided to the Board by FRC and Northwestern Mutual, and this information
was reviewed by the Board. In addition, the Independent Trustees also consulted
with the Investment Company's outside counsel concerning these matters. After a
careful review and evaluation of this information, a special meeting of the
Board was held on October 5, 1998 to consider the information provided by FRC
and Northwestern Mutual.
At its October meeting, the Board of the Investment Company focused upon the
effect of the proposed Transaction on the Investment Company. Representatives of
FRC and Northwestern Mutual attended the meeting and described the terms of the
proposed Transaction and the perceived benefits to the FRC organization, FRIMCo
and FRIMCo's investment advisory clients. In the course of these discussions,
FRIMCo and FRC advised the Independent Trustees that they did not expect that
the proposed Transaction would have a material effect on the operations of the
Investment Company or its shareholders. FRC has advised the Independent Trustees
that the Transaction Agreement, by its terms, does not contemplate any changes
in the structure or operations of FRIMCo, or in the way that FRIMCo provides
services to the Investment Company. Representatives of Northwestern Mutual have
informed the Trustees that Northwestern Mutual currently intends to maintain the
separate existence of the investment companies that FRIMCo advises, and the
funds that NMIS manages.
Though no specific plans have been developed at this time, the Trustees have
been advised by FRC that there may be some changes in personnel currently
involved in providing services to the Investment Company in order to combine the
strengths and efficiencies of FRC and Northwestern Mutual. With respect to
non-investment advisory services, Northwestern Mutual and FRC will seek to
identify ways in which FRIMCo and other subsidiaries of Northwestern Mutual
(including Robert W. Baird & Co. Incorporated) can more effectively meet the
administrative needs of the Investment Company and its affiliates. Any
restructuring of non-advisory services provided by FRIMCo will be subject to the
review and approval of the Board of Trustees, including the Trustees who are not
"interested persons" of FRC or Northwestern. In their discussions with the
Trustees, Northwestern Mutual representatives also emphasized the strengths of
the Northwestern Mutual organization and its commitment to provide the FRC
organization, including FRIMCo, with the resources necessary to continue to
provide high quality services to the Investment Company and the other investment
advisory clients of the FRC organization.
The Board of the Investment Company was advised that the Transaction Agreement
provides for FRC to rely, and that FRC intends to rely, on Section 15(f) of the
1940 Act, which provides a safe harbor for an investment adviser to an
investment company (and the adviser's affiliated persons) to retain any amount
or benefit received in connection with a change in control of the investment
adviser so long as the two conditions described below are met.
<PAGE>
First, for a period of three years after the Transaction, at least 75% of the
members of the Board of Trustees of the Investment Company must not be
"interested persons" of the Investment Company's investment adviser or its
predecessor adviser. Assuming the election of the nominees listed in Proposal
#1, the Board of the Investment Company would be in compliance with this
provision of Section 15(f) at the time of, or prior to, the consummation of the
Transaction. (See Proposal #1 concerning the election of the Board of Trustees.)
Second, an "unfair burden" must not be imposed upon the Investment Company as a
result of such Transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
Transaction whereby the investment adviser, or any interested person of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the Investment Company or its shareholders (other than fees for
bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the Investment Company (other than ordinary fees for bona fide
services as principal underwriter for the Investment Company). No compensation
agreements which would violate Section 15(f) are contemplated in connection with
the Transaction.
FRIMCo has undertaken to pay the costs associated with the preparation, filing,
printing, and distribution of these proxy materials, and of holding the special
meeting in lieu of annual meeting, as well as any other fees and expenses
incurred by the Investment Company in connection with the Transaction, including
the fees and expenses of legal counsel to the Investment Company.
During the course of their deliberations, the Independent Trustees considered a
variety of factors. These included the nature, quality and extent of the
services furnished by FRIMCo to the Investment Company; the investment record of
FRIMCo in managing the Funds in the Investment Company, including the special
role of FRIMCo as a "manager of managers"; the increased complexity of the
domestic and international securities markets; and comparative data as to
investment performance, advisory fees and other fees, including administrative
fees, and expense ratios. The Board also considered the risks assumed by FRIMCo
by serving as Adviser to the Investment Company; the necessity for FRIMCo to
maintain and enhance its ability to retain and attract capable personnel to
serve the Investment Company; FRIMCo's profitability from advising the
Investment Company; and other benefits received by FRIMCo from serving the
Investment Company. In connection with the acquisition of FRC by Northwestern
Mutual, the Board noted that there could be possible economies of scale or other
advantages to the Investment Company of having an adviser with a parent which
also serves other investment companies. The Board also considered current and
developing conditions in the financial services industry, including the entry
into the industry of large and well capitalized companies which are spending and
appear to be prepared to continue to spend substantial sums to engage
experienced personnel and to provide services to competing investment companies;
and the financial resources of FRIMCo and the continuance of appropriate
incentive compensation arrangements to assure that FRIMCo will continue to
furnish high quality services to the Investment Company.
<PAGE>
In addition to the foregoing factors, the Independent Trustees gave careful
consideration to the likely impact of the Transaction on the FRC organization.
In this regard, the Independent Trustees considered, among other things, the
following factors: the structure of the Transaction, which is expected to afford
FRIMCo executives significant autonomy over FRIMCo's operations and could
potentially provide meaningful FRC equity participation and incentives for
certain FRIMCo employees; FRIMCo's, FRC's and Northwestern Mutual's commitment
to enable FRIMCo to pay compensation adequate to attract and retain top quality
personnel; information regarding the financial resources and business reputation
of Northwestern Mutual; the complementary nature of various aspects of the
business of FRIMCo and the Northwestern Mutual organization; and the current
intention of Northwestern Mutual to maintain separate Frank Russell and
Northwestern Mutual brands in the mutual fund business. Based on the foregoing,
the Independent Trustees concluded that the Transaction should cause no
reduction in the quality of services provided to the Investment Company and
concluded that the Transaction should enhance FRIMCo's ability to provide such
services. The Independent Trustees considered the foregoing factors with respect
to each of the sub-trusts of the Investment Company, and the Investment Company
collectively. The Trustees, including the Independent Trustees, concluded that
the on-going reorganization of the organizational and operational structure of
the sub-trusts of the Investment Company permitted the Trustees to conclude that
no sub-trust would be affected differently from the Investment Company as a
whole in these respects, and therefore determined that the conclusions of the
Board with respect to these matters would have equal impact with respect to
every sub-trust in the Investment Company.
As a result of these deliberations, at the Board of Trustees meeting on October
5, 1998, the Trustees of the Investment Company, including the Independent
Trustees, approved the New Agreement for the Investment Company, and recommended
that shareholders of each of the sub-trusts in the Investment Company approve
the New Agreement, to become effective upon the completion of the change of
control of FRC and the termination of the Management Agreement then in effect.
The Board has not determined what action would be taken in the event that any
sub-trust does not approve the New Agreement for that sub-trust, and the
Transaction closes. In such a circumstance, the Board would seek to obtain for
the sub-trust suitable advisory services from FRIMCo or another investment
advisor on both an interim and/or a continuing basis. The approval of continuing
arrangements would be subject to the approval of the shareholders of the
affected sub-trust. The Trustees have determined that, in the event the
Transaction is not completed, FRIMCo will continue to serve the Investment
Company under the terms of the agreement then in effect.
<PAGE>
Information Concerning the Transaction and Northwestern Mutual
Under the Transaction Agreement, at the effective time of the Transaction,
each share of FRC common stock then outstanding (other than shares for which
dissenters' rights have been exercised) will be converted into the right to
receive $905,000,000 divided by the number of fully diluted units of equity of
FRC (taking into account all outstanding shares of FRC capital stock, options to
acquire shares of FRC capital stock, equity appreciation units and other equity
related rights), adjusted as described below. Such share price will be increased
or reduced based on the change (taking into account certain pro forma
adjustments) in FRC's net worth per share between March 31, 1998 and closing. In
addition, $90,000,000 of the $905,000,000 will be held back by Northwestern
Mutual at the closing to cover any adjustments occasioned by changes in the net
worth of FRC and for any losses incurred by Northwestern Mutual or FRC as a
result of the breach by FRC of certain specified representations made by FRC in
the Transaction Agreement, and will be distributed to the former FRC
shareholders and other former holders of FRC equity related rights no earlier
than October 1, 1999 to the extent that there are no such adjustments or claims
in respect of the breach of the specified representations. FRC currently has
approximately 200 shareholders. Certain shareholders of FRC who have held their
shares of common stock for less than twelve months will have the option to
convert such shares of common stock into FRC preferred stock prior to the
closing. Such preferred stock will be subject to certain put and call rights
during certain periods (at a price per share equal to the amount that would have
been paid if the preferred stock had been common stock at the effective time of
the Transaction, plus a percentage of cumulative earnings per share of FRC on a
fully diluted basis from such effective time to the quarter preceding the put or
call) but will convert to FRC common stock if not redeemed or repurchased after
four years. George Russell, his family members and their related trusts are
expected to own approximately 59% in the aggregate of the fully diluted equity
units of FRC at the effective time of the Transaction. Lynn Anderson is also a
shareholder of FRC and is expected to own approximately 1% of the fully diluted
equity units of FRC at the effective time of the Transaction.
At and after the effective time of the Transaction, FRC will be a subsidiary of
Northwestern Mutual. FRIMCo will remain a wholly-owned subsidiary of FRC. In
connection with the Transaction, 50,000,000 shares of new FRC common stock will
be reserved for future issuance under an FRC Incentive Payments Plan. The
Incentive Payments Plan will be established to enhance the value of FRC and its
subsidiaries, including FRIMCo, by motivating superior performance of management
and key employees of the FRC organization after the closing of the Transaction
through the award of shares of FRC common stock and cash (to cover certain
income tax consequences of any stock award) to certain employees of FRC and its
subsidiaries. Over the course of a five-year period from the effective time of
the Transaction, participants in the Incentive Payments Plan could collectively
earn awards constituting up to 20% of the outstanding common stock of
FRC, depending upon FRC's cumulative earnings over the five year period. George
Russell and his wife, Jane Russell, will be awarded 20% in the aggregate of the
total number of incentive shares that may be issued under the Incentive Payments
Plan. Lynn Anderson is expected to participate in the Incentive Payments Plan.
The number of incentive shares to be granted to Mr. Anderson will be determined
after the closing of the Transaction.
At the closing, FRC and Northwestern Mutual will enter into a Governance
Agreement (the "Governance Agreement"). Under the Governance Agreement, the
Board of Directors of FRC will be comprised of five persons. Initially,
Northwestern Mutual will elect to the FRC Board George F. Russell, Jr., Michael
J.A. Phillips (both of whom are currently members of FRC's Board) and three
other Northwestern Mutual-designated persons. Thereafter, Northwestern Mutual
has agreed to take all actions within its power to cause the FRC Board at all
times to be comprised of (i) FRC's Chief Executive Officer and one other senior
officer or employee of FRC designated by the Chief Executive Officer and
approved by a majority of the FRC directors then in office (with Messrs. Russell
and Phillips, each a "Russell-designated director"); and (ii) three other
persons designated by Northwestern Mutual.
<PAGE>
The names, addresses and principal occupations of the initial Russell-designated
directors are as follows:
George F. Russell, Jr., 909 A Street, Tacoma, Washington,
98402; Trustee and Chairman of the Board, Frank Russell
Investment Company; Trustee and Chairman of the Board,
Russell Insurance Funds; Director, Chairman of the Board,
and Chief Executive Officer, Russell Building Management
Company, Inc.; Director and Chairman of the Board, Frank
Russell Company, Frank Russell Securities, Inc., Frank
Russell Trust Company, Frank Russell Investments (Delaware),
Inc.; Director, Frank Russell Investment Management Company;
Director, Chairman of the Board and President, Russell 20/20
Association.
Michael J.A. Phillips, 909 A Street, Tacoma, Washington,
98402; Director, President and Chief Executive Officer,
Frank Russell Company; Director and President, Frank Russell
Investments (Delaware), Inc.; Director, Frank Russell
Capital Inc., Frank Russell Japan Co., Ltd., Frank Russell
Trust Company, Russell Systems Limited, Frank Russell
Company Limited and Frank Russell Company Pty Limited.
The three initial directors to be designated by Northwestern Mutual have not yet
been determined, but will be selected prior to the closing of the Transaction.
It is currently anticipated that such directors will be selected from among the
executive officers of Northwestern Mutual.
The Governance Agreement, which will terminate no later than December 31, 2008,
vests the officers of FRC with the responsibility for day-to-day management and
implementation of FRC's annual operating budget and strategic plan. However, FRC
Board approval is required before certain specified actions may be taken by FRC
or its subsidiaries including, (i) the registration, issuance and/or sales of
securities of FRC and its subsidiaries; (ii) the merger, consolidation or sale
of a substantial portion of assets with or to another entity (other than another
FRC company); (iii) entering into certain joint ventures, partnerships or other
business combinations or acquisitions; (iv) entering into any material business
or line of business other than investment management, investment consulting,
securities trading, analytical services, and other similar financial services,
or discontinuing any material line of business; (v) entering into material
exclusivity contracts, or other agreements, which materially restrict the manner
in which FRC or its subsidiaries conduct their investment management business in
any jurisdiction, or any U.S. distribution agreements with any life insurance
company or life insurance marketing company other than Northwestern Mutual and
its affiliates; (vi) selling, leasing or otherwise disposing of certain assets
or property; (vii) assuming, incurring, or becoming liable for certain material
indebtedness for borrowed money; (viii) pledging, mortgaging or encumbering
certain assets; (ix) amending its articles of incorporation or bylaws or
undertaking any recapitalization or similar plan; (x) changing FRC's heads of
internal audit or compliance; (xi) approving any transaction with key employees
or certain related parties; (xii) taking any action with respect to an FRC
stockholder meeting; (xiii) declaring dividends or distributions on FRC's
shares; or (xiv) taking any action required to be taken or approved by the FRC
Board under Washington State corporate law. With respect to (iv) and (v) above,
FRC Board approval must include the approval of the Chief Executive Officer of
FRC. In addition, for a period of ten years from the date of the Governance
Agreement, FRC may not change its name or move its principal place of business
to a location other than Tacoma, Washington, without the unanimous vote or
consent of the FRC Board.
<PAGE>
The closing of the Transaction is subject to a number of conditions, including,
among others, approval by FRC shareholders; a determination that at the closing
date FRC's annualized revenues from investment advisory, retainer consulting and
analytical services (neutralized for market effect and currency fluctuations)
have not fallen below 90% of the level of such revenues as of July 31, 1998; the
absence of any restraining order or injunction preventing the Transaction, or
any litigation seeking such an injunction; the continued accuracy of the
representations and warranties contained in the Transaction Agreement; delivery
and/or filing of certain documents contemplated by the Transaction Agreement;
all material governmental approvals having been obtained; holders of not more
than 2% of the outstanding FRC common stock having exercised their statutory
appraisal rights; and compliance in all material respects with all agreements
and obligations contained in the Transaction Agreement. Holders entitled to vote
a percentage of shares of FRC sufficient to approve the Transaction have entered
into an agreement with Northwestern Mutual in which they have agreed to vote
such shares in favor of the approval of the Transaction. The Transaction is
expected to close on or about December 30, 1998, with the merger becoming
effective on January 1, 1999.
The information set forth under this Proposal #3 concerning FRC and the
Transaction has been provided to the Investment Company by FRC, and the
information set forth under this Proposal #3 concerning Northwestern Mutual has
been provided to the Investment Company by Northwestern Mutual.
Founded in 1857, Northwestern Mutual is a mutual insurance corporation organized
under the laws of Wisconsin. Its home office is located at 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202-4797. Northwestern Mutual's products consist
of a full range of permanent and term life insurance, disability income
insurance, long term care insurance, mutual funds and annuities for personal,
estate, retirement, business and benefits planning. Northwestern Mutual provides
its insurance products and services through an exclusive network of
approximately 7,200 agents associated with over 100 general agencies nationwide.
Northwestern Mutual leads the U.S. in both individual life insurance sold
annually (approximately $78 billion in 1997) and total individual life insurance
in force (more than $500 billion at June 30, 1998). Northwestern Mutual employs
over 3,600 people, mostly in Milwaukee, Wisconsin.
FRC, one of the world's leading investment management and consulting firms,
provides investment advice, analytical tools and funds to institutional and
individual investors in more than 30 countries. FRC, through its subsidiaries,
currently manages approximately $40 billion in assets and provides investment
strategy consulting, including manager selection, for more than $1 trillion in
retainer client assets. It is also well known for its family of market indexes,
including the Russell 2000(R). Russell indexes provide complete sets of
performance benchmarks for investors in Australia, Canada, Japan and the United
States. FRC is a three-time winner of Washington CEO magazine's "Best Large
Company to Work For" award in Washington State, and in 1997 was chosen from
among some 12 million family companies to receive the "National Family Business
of the Year" Award. Founded in 1936, the FRC organization is an established
presence in the asset management and mutual fund industry.
<PAGE>
Required Vote
To be approved, the Management Agreement must receive the affirmative vote
of a "majority of the outstanding voting securities" of each Fund, as defined in
the 1940 Act. Under the 1940 Act, a vote of a majority of the outstanding voting
securities of each Fund means the lesser of (i) 67% or more of the shares of
each Fund represented at the Special Meeting, if more than 50% of the
outstanding shares are present at the Special Meeting or represented by proxy,
or (ii) more than 50% of the outstanding shares of each Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE TO APPROVE THE PROPOSED MANAGEMENT AGREEMENT WITH
FRIMCo ON BEHALF OF THE FUNDS, TO TAKE EFFECT
UPON THE ACQUISITION OF FRC BY NORTHWESTERN MUTUAL
PROPOSAL #4: TO APPROVE AN AMENDMENT TO
EACH FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS TO INCREASE THE AMOUNT WHICH THE
FUND MAY BORROW TO MEET REDEMPTIONS
What is the current limitation on borrowing by the Funds?
Section 18(f)(1) of the 1940 Act provides that it shall be unlawful for any
registered open-end investment company to issue any class of senior security or
to sell any senior security of which it is the issuer, except that any such
registered company shall be permitted to borrow from any bank; provided, that
immediately after any such borrowing, there is an asset coverage of at least 300
per cent for all borrowings of the investment company; and provided further,
that in the event that such asset coverage shall at any time fall below 300 per
cent the registered company shall, within three days thereafter (not including
Sundays and holidays) or such longer period as the SEC may allow, reduce the
amount of its borrowings to an extent that the asset coverage of such borrowings
shall be at least 300 per cent.
The Investment Company, on behalf of the Funds, has previously adopted a
fundamental investment restriction that limits the borrowing authority of each
sub-trust to less than the amount that is permitted by the 1940 Act as described
in the prior paragraph. Specifically, each Fund's investment restriction on
borrowing currently provides:
"[The Fund will not:] Borrow amounts more than 5% of the Fund's total
assets taken at cost or at market value, whichever is lower, and only
from banks as a temporary measure for extraordinary or emergency
purposes, except that [the] Fund may engage in reverse repurchase
agreements to meet redemption requests without immediately selling any
portfolio instruments. The Fund will not mortgage, pledge or in any
other manner transfer as security for any indebtedness, any of its
assets. Collateral arrangements with respect to margin for futures
contracts are not deemed a pledge of assets."
<PAGE>
Why is an increase in the borrowing limitation proposed?
At a Board meeting held on October 5, 1998, management reported to the Board on
the prospects for entering into a line of credit for the Investment Company with
a commercial bank, whereby the Investment Company's sub-trusts would be
permitted to borrow money under the line of credit in order to meet redemption
requests. This practice would permit the Funds to pay redemption proceeds to
shareholders without the need to make untimely and disadvantageous dispositions
of securities. Given the current investment restriction of the Investment
Company, borrowings by the Funds for this purpose would be limited to five
percent of each Fund's assets.
At the Board meeting, management recommended that the Trustees consider
approving a revision to the fundamental restriction that would authorize a
higher borrowing level for the purpose of efficiently meeting shareholder
redemption requests. FRIMCo, in advocating an increase in the borrowing limits
for the Investment Company's sub-trusts, noted that raising the maximum level of
borrowing to conform to the 1940 Act's limitation would give the Investment
Company's money managers greater flexibility in meeting shareholder redemption
requests.
The officers of the Investment Company noted that an increase in the maximum
level of borrowing permitted to the Investment Company's sub-trusts would permit
the Investment Company to negotiate a larger line of credit with a bank,
although the officers advised the Board that there is no current intention to do
so at this time.
At that meeting, the Board approved a proposal to increase the borrowing limit
under each Fund's fundamental investment restriction, and directed that the
officers of the Investment Company submit to Shareholders a proposal to approve
such amendment to permit borrowing at a higher level by the Funds. If approved,
each Fund's investment restriction would be revised to state:
"[The Fund will not:] Borrow money, except that the Fund may borrow as a
temporary measure for extraordinary or emergency purposes, and not in
excess of five percent of its net assets; provided, that the Fund may
borrow to facilitate redemptions (not for leveraging or investment),
provided that borrowings do not exceed an amount equal to 33-1/3% of the
current value of the Fund's assets taken at market value, less
liabilities other than borrowings. If at any time the Fund's borrowings
exceed this limitation due to a decline in net assets, such borrowings
will be reduced to the extent necessary to comply with this limitation
within three days. Reverse repurchase agreements will not be considered
borrowings for purposes of the foregoing restriction, provided that the
Fund will not purchase investments when borrowed funds (including
reverse repurchase agreements) exceed 5% of its total assets."
The revised fundamental investment restriction will take effect after receipt of
approval by Shareholders.
<PAGE>
To be approved, the proposal must receive the affirmative vote of "a majority of
the outstanding voting securities" of each Fund, as defined in the 1940 Act and
as described in more detail in the last paragraph under Proposal #3.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE A CHANGE IN
EACH FUND'S FUNDAMENTAL RESTRICTIONS TO INCREASE THE
LIMITS ON BORROWING MONEY FOR THE PURPOSE
OF MEETING REDEMPTIONS
INFORMATION REGARDING THE CURRENT
MANAGEMENT AGREEMENT
The table below sets forth (i) the net assets of each Fund as of the
Investment Company's year ended December 31, 1997; (ii) the rate of management
fees, computed daily and payable monthly, to which FRIMCo is entitled for the
services provided and expenses assumed pursuant to the Management Agreement;
(iii) the actual management fees (net of waivers) paid by the Funds for the year
ended December 31, 1997; and (iv) the management fees paid by FRIMCo to money
managers for their services for the year ended December 31, 1997.
<TABLE>
<CAPTION>
Funds Net Assets Annual Management Management Fees Fees Paid to
as of Fee (Based On (net of waivers) Money Managers
12/31/97 Average Net Assets) for Year for Year
Ended 12/31/97 Ended 12/31/97
<S> <C> <C> <C> <C>
Multi-Style Equity Fund $23,639,008 0.78% $88,827 $53,897
Aggressive Equity Fund $15,371,664 0.95% $82,018 $75,321
Non-U.S. Fund $ 6,876,259 0.95% $25,461 $23,654
Core Bond Fund $ 8,522,683 0.60% $ 0 $14,574
</TABLE>
Until further notice, FRIMCo intends to voluntarily waive all or a portion of
its management fees, and, if necessary, reimburse total fund operating expenses,
to the extent necessary for each of the Funds to maintain annual expense ratios
of not more than 0.92% for the Multi-Style Equity Fund; 1.25% for the Aggressive
Equity Fund; 1.30% for the Non-U.S. Fund and 0.80% for the Core Bond Fund. Any
such waiver may be revised or eliminated at any time.
<PAGE>
For the year ended December 31, 1997, the Funds did not pay any brokerage
commissions and did not enter into any brokerage transaction.
Directors and Officers of FRIMCo
Set forth below are the names and current positions of the officers and
directors of FRIMCo, along with their positions with FRC and/or the Investment
Company, as applicable:
<TABLE>
<CAPTION>
Name Investment Company FRIMCo FRC
<S> <C> <C> <C>
George F. Russell, Trustee, Director Director,
Jr. Chairman of the Board Chairman of
the Board
Lynn L. Anderson Trustee, President, Director, Director
and Chief Executive Chairman of the Board
Officer and Chief Executive
Officer
Randall P. Lert Director of Director -------
Investments
Eric A. Russell ------- Director, President Director
Karl J. Ege Secretary and Secretary and Secretary and
General Counsel General Counsel General
Counsel
Peter F. Apanovitch Manager of Short Term Manager of Short Term -------
Investment Funds Investment Funds
Mark E. Swanson Treasurer and Chief Interim Director of -------
Accounting Officer Fund Administration
and Accounting
</TABLE>
INFORMATION REGARDING THE SOLICITATION AND REVOCATION
OF PROXIES AND VOTING INFORMATION
This Proxy Statement is provided on behalf of the Board of Trustees of the
Investment Company in connection with a Special Meeting of Shareholders of the
Investment Company to be held at the offices of the Investment Company at 909 A
Street, Tacoma, Washington 98402, on Thursday, November 19, 1998 at 11:00 a.m.,
local time, and at any or all adjournments thereof. This Proxy Statement is
being mailed to Shareholders on or about October 14, 1998. You may revoke your
proxy at any time before it is exercised by delivering a written notice to the
Investment Company expressly revoking your proxy, by signing and forwarding to
the Investment Company a later-dated proxy, or by attending the Special Meeting
and casting your votes in person.
The Investment Company requests that broker-dealer firms, custodians, nominees
and fiduciaries forward proxy material to the beneficial owners of the shares
held of record by such persons. Under the terms of certain exemptive orders
which the SEC has issued to the Investment Company, insurance companies which
have placed assets in the Funds are required to forward proxies to policy
holders to request voting instructions. The cost of soliciting these proxies
will be borne by each Fund, to the extent of its direct operational expenses,
and by FRIMCo. In addition to solicitations by mail, some of the officers and
employees of the Investment Company, FRIMCo and Russell Fund Distributors, Inc.,
("Distributors") without extra remuneration, may conduct additional
solicitations by telephone, or facsimile or computer transmission or in person.
Who may vote at the Special Meeting?
The Board of the Investment Company has fixed the close of business on September
21, 1998, as the record date (the "Record Date") for the determination of
Shareholders entitled to notice of and to vote at the Special Meeting and any
adjournments thereof. Only holders of record of shares at the close of business
on the Record Date are entitled to notice of, and to vote at, the Special
Meeting and any adjournments thereof. The holders of 5% or more of each Fund's
shares are listed in the section "Principal Shareholders" below. At the close of
business on the Record Date, the total number of voting shares of each Fund
issued and outstanding was the following:
Multi-Style Equity Fund 3,980,134 Shares
Aggressive Equity Fund 1,737,033 Shares
Non-U.S. Bond Fund 1,603,391 Shares
Core Bond Fund 2,373,899 Shares
The total number of voting shares of the Investment Company issued and
outstanding was 9,694,457.
The holder of record of each full share of beneficial interest of each Fund
outstanding as of the close of business on the Record Date is entitled to one
vote for each share held of record upon each matter properly submitted to the
Special Meeting or any adjournments thereof, with a proportionate vote for each
fractional share.
<PAGE>
What other business will be discussed at the Special Meeting in Lieu of Annual
Meeting?
The Board of Trustees does not intend to present any matters before the Special
Meeting in Lieu of Annual Meeting other than as described in this Proxy
Statement, and is not aware of any other matters to be brought before the
Meeting or any adjournments thereof by others. If any other matter legally comes
before the meeting, your shares will be voted in accordance with the
instructions of the Board of Trustees of the Investment Company, and in the
judgment of the named proxies.
What if a quorum is not present at the Special Meeting in Lieu of Annual
Meeting?
In the event a quorum is not present at the Special Meeting in Lieu of Annual
Meeting or sufficient votes to approve a proposal are not received, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. A shareholder vote may be taken on any other
matter to properly come before the Meeting prior to such adjournment if
sufficient votes to approve such matters have been received and such vote is
otherwise appropriate. Any adjournment of the Meeting will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy and voting. The persons named as proxies on the proxy card
will vote against any such adjournment those proxies required to be voted
against such proposal. They will vote in favor of an adjournment all other
proxies which they are entitled to vote. The costs of any such additional
solicitation and of any adjourned session will be borne by the Investment
Company. Abstentions and broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be counted as shares that are present for purposes of determining the
presence of a quorum.
PRINCIPAL SHAREHOLDERS
As of September 21, 1998, the only persons known by the Investment Company
to be beneficial owners of more than 5% of the Investment Company's voting
securities were: [Insurance Companies].
ADDITIONAL INFORMATION
How are the Funds Distributed?
Distributors, located at 909 A Street, Tacoma, WA 98402, a wholly-owned
subsidiary of FRIMCo, serves as the principal underwriter of the Investment
Company's shares. Distributors receives no compensation from the Investment
Company for its services.
<PAGE>
Massachusetts State Law Considerations
The Investment Company is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the Master Trust Agreement of the Investment
Company contains an express disclaimer of shareholder liability for acts or
obligations of the Investment Company and provides for indemnification and
reimbursement of expenses out of the Investment Company's property for any
shareholder held personally liable for the obligations of the Investment
Company. The amended Master Trust Agreement also provides that the Investment
Company may maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Investment Company,
the shareholders of the sub-trusts, Trustees, officers, employees and agents
covering possible tort and other liabilities. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability also is limited to
circumstances in which both inadequate insurance exists and the Investment
Company itself is unable to meet its obligations.
Under Massachusetts law, the Investment Company is not required to hold annual
meetings. In the past, the Funds have availed themselves of these provisions of
state law to achieve cost savings by eliminating printing costs, mailing charges
and other expenses involved to hold routine annual meetings. Each Fund may,
however, hold a meeting for such purposes as changing fundamental investment
restrictions, approving a new investment management agreement or any other
matters which are required to be acted on by shareholders under the 1940 Act. In
addition, a meeting also may be called by shareholders holding at least 10% of
the shares entitled to vote at the meeting for the purpose of voting upon the
removal of Trustees, in which case shareholders may receive assistance in
communicating with other shareholders such as that provided in Section 16(c) of
the 1940 Act. The Investment Company is holding the Special Meeting because of
the items that must be presented for Shareholders' consideration and approval.
As of September 21, 1998, the officers and Trustees of the Investment Company as
a group beneficially owned less than 1% of the shares of each Fund outstanding
on such date.
Annual and Semi-Annual Reports
A Fund will furnish, without charge, a copy of the Fund's Annual Report and the
most recent Semi-Annual Report succeeding the Annual Report, to a Shareholder
upon request. A Shareholder may receive the report by writing to the Secretary,
Russell Insurance Funds, 909 A Street, Tacoma, Washington 98402 or by
telephoning 1-800-832-6688.
By Order of the Trustees,
Karl J. Ege
Secretary
October ___, 1998
<PAGE>
EXHIBITS TO PROXY STATEMENT
Exhibit
A. List of Money Managers for the Underlying Funds.
B. Present Management Agreement (the "Management Agreement") between the
Investment Company and FRIMCo.
<PAGE>
RUSSELL INSURANCE FUNDS PROXY
SPECIAL MEETING OF SHAREHOLDERS NOVEMBER 19, 1998
The undersigned hereby revokes all previous proxies for the undersigned's shares
and appoints Gregory J. Lyons and Rick Chase, and each of them, proxies of the
undersigned with full power of substitution to vote all shares of the Russell
Insurance Funds (the "Investment Company") which the undersigned is entitled to
vote at the Special Meeting of Shareholders (the "Special Meeting") to be held
at the offices of the Investment Company, at 909 A Street, Tacoma, WA 98402 at
11:00 a.m., local time, on Thursday, the 19th day of November 1998, including
any adjournment thereof, upon such business as may properly be brought before
the Special Meeting.
FOR AGAINST ABSTAIN
No. 1 To elect the Board of Trustees of the
Investment Company: (To withhold your vote for a nominee,
strike out the name of the nominee below.)
a. Lynn L. Anderson
b. Paul E. Anderson
c. Paul Anton, Ph.D.
d. William E. Baxter
e. Lee C. Gingrich
f. Eleanor W. Palmer
No. 2 To ratify the selection of
PricewaterhouseCoopers LLP as the
independent accountants for the Investment
Company.
No. 3 To approve a new management agreement with
Frank Russell Investment Management Company
("FRIMCo"), the current investment manager
to the Investment Company, to take effect
upon the acquisition of Frank Russell
Company by The Northwestern Mutual Life
Insurance Company.
No. 4 To approve a change to each Fund's
fundamental investment restrictions,
authorizing a higher borrowing level for the
purpose of meeting redemptions.
GRANT WITHHOLD
To consider and act upon any other business
which may legally come before the meeting
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES. IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
SHALL BE VOTED IN FAVOR OF THE ELECTION OF THE NOMINEES TO THE BOARD, TO RATIFY
THE SELECTION OF ACCOUNTANTS, AND IN FAVOR OF THE PROPOSALS TO APPROVE A
MANAGEMENT AGREEMENT AND TO AMEND CERTAIN FUNDAMENTAL RESTRICTIONS. IF ANY OTHER
MATTERS PROPERLY COME BEFORE THE MEETING ABOUT WHICH THE PROXY HOLDERS ARE NOT
AWARE AT THIS TIME, THE PROXY HOLDERS MAY VOTE IN ACCORDANCE WITH THE VIEWS OF
THE TRUSTEES THEREON. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS.
Dated:
Signature
Signature
Note: Please sign exactly as your name appears on the
proxy. If signing for estates, trusts or corporations, title
or capacity should be stated. If shares are held jointly,
each holder must sign.
<PAGE>
EXHIBIT A
As of the date of this Proxy Statement, the money mangers for the Funds, along
with their addresses, are as follow:
Multi-Style Equity Fund
Chancellor LGT Asset Management, Inc., 1166 Avenue of the Americas, New York, NY
10036 Equinox Capital Management Inc., 590 Madison Avenue, 41st Floor, New York,
NY 10022 Westpeak Investment Advisors, LP, 1011 Walnut Street, Suite 400,
Boulder, CO 80302
Aggressive Equity Fund
Rothschild Asset Management, Inc., 1251 Avenue of the Americas, 51st Floor, New
York, NY 10020 Westpeak Investment Advisors, LP, 1011 Walnut Street, Suite 400,
Boulder, CO 80302
Non-U.S. Fund
J.P. Morgan Investment Management, Inc., 522 Fifth Avenue, 14th Floor, New
York, NY 10036 Oechsle International Advisors, One International Place, 44th
Floor, Boston, MA 02110 The Boston Company Asset Management, One Boston Place,
14th Floor, Boston, MA 02108
Core Bond Fund
Pacific Investment Management Company, 840 Newport Center Drive, Suite 360,
Newport Beach, CA 92660 Standish, Ayer & Wood, Inc., One Financial Center,
Boston, MA 02110
<PAGE>
EXHIBIT B
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made this 5th day of August , 1996 between RUSSELL
INSURANCE FUNDS, a Massachusetts business trust hereinafter called the "Trust")
and FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY, a Washington corporation
hereinafter called "FRIMCo."
WHEREAS, the Trust has been organized by and at the expense of a company
affiliated with FRIMCo and operates as an investment company of the "series"
type registered under the Investment Company Act of 1940 ("1940 Act") for the
purpose of investing and reinvesting its assets in portfolios of securities,
each of which has distinct investment objectives and policies (each distinct
portfolio being referred to herein as a "Sub-Trust"), as set forth more fully in
its Master Trust Agreement, its Bylaws and its Registration Statements under the
1940 Act and the Securities Act of 1933, all as heretofore amended and
supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance, and facilities of a manager and to have a
manager perform for its various management, administrative, statistical,
research, money manager selection, investment management, and other services;
and
WHEREAS, FRIMCo is registered as an investment adviser under the Investment
Adviser's Act of 1940 and will engage in the business of rendering investment
advisor, counseling, money manager recommendation, and supervisory services to
investment consulting clients; and FRIMCo and its affiliated corporations have
undertaken the initiative and expense of organizing the Trust in order to have a
means to commingle assets for certain investors to have access to and utilize
the "Multi-Style, Multi-Manager" method of investment and to provide services to
the Trust in consideration of and on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the trust and FRIMCo agree as follows:
1. Employment of FRIMCo. The Trust hereby employs FRIMCo to manage the
investment and reinvestment of the Trust's assets and to act as a
discretionary Money Manager to certain of the Sub-Trusts in the manner set
forth in Section 2(B) of this Agreement, and to administer its business and
administrative operations, subject to the direction of the Board of
Trustees and the officers of the Trust, for the period, in the manner, and
on the terms hereinafter set forth. FRIMCo hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth. FRIMCo shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to
act for or represent the Trust in any way.
2. Obligations of and Services to be provided by FRIMCo. FRIMCo undertakes
to provide the services hereinafter set forth and to assume the
following obligations:
A. Management and Administrative Services.
<PAGE>
(1) FRIMCo shall furnish to the Trust adequate (a) office
space, which may be space within the offices of FRIMCo or
in such other place as may be agreed upon from time to
time, (b) office furnishing, facilities, and equipment as
may be reasonably required for managing and administering
the business and operations of the Trust, including (i)
complying with the business trust, securities, and tax
reporting requirements of the United States and the
various states in which the Trust does business, (ii)
conducting correspondence and other communications with
the shareholders of the Trust ("Shareholders"), and (iii)
maintaining or supervising the maintenance of all internal
bookkeeping, accounting, and auditing services and records
in connection with the Trust's investment and business
activities. The Trust agrees that its shareholder
recordkeeping services, the computing of net asset value
and the preparation of certain of its records required by
Rule 31 under the 1940 Act are maintained by the Trust's
Transfer Agent, Custodian, and Money Managers, and that
with respect to these records FRIMCo's obligations under
this Section 2(A) are supervisory in nature.
(2) FRIMCo shall employ or provide and compensate the
executive, administrative, secretarial, and clerical
personnel necessary to supervise the provision of the
services set forth in sub-paragraph 2(A)(1), and shall
bear the expense of providing such services except as
provided in Section 4 of this Agreement. FRIMCo shall also
compensate all officers and employees of the Trust who are
officers or employees of FRIMCo, or its affiliated
companies.
B. Investment Management Services.
(1) The Trust intends to appoint one or more persons or
companies ("Money Manager[s]") for each of the Sub-Trusts
or segments thereof, and each Money Manager shall have
full investment discretion and shall make all
determinations with respect to the investment of a
Sub-Trust's assets assigned to the Money Manager and the
purchase and sale of portfolio securities with those
assets, and such steps as may be necessary to implement
its decision. FRIMCo shall not be responsible or liable
for the investment merits o any decision by a Money
Manager to purchase, hold, or sell a security for a
Sub-Trust portfolio.
(2) FRIMCo shall, subject to and in accordance with the
investment objectives and policies of the Trust and each
Sub-Trust and any directions which the Trust's Board of
Trustees may issue to FRIMCo, have: (i) overall
supervisory responsibility for the general management and
investment of the Trust's assets and securities
portfolios; and (ii) full investment discretion to make
all determinations with respect to the investment of
Sub-Trust assets not assigned to a Money Manager.
(3) FRIMCo shall develop overall investment programs and
strategies for each Sub-Trust, or segments thereof, shall
revise such programs as necessary, and shall monitor and
report periodically to the Board of Trustees concerning
the implementation of the Programs.
<PAGE>
(4) FRIMCo shall research and evaluate Money Managers and
shall advise the Board of Trustees of the Trust of the
Money Managers which FRIMCo believes are best suited to
invest the assets of each Sub-Trust; shall monitor and
evaluate the investment performance of each Money Manager
employed by the Trust; shall determine the portion of each
Sub-Trust's assets to be managed by each Money Manager;
shall recommend changes or additions of Money Managers
when appropriate; shall coordinate the investment
activities of the Money Managers; and acting as a
fiduciary for the Trust shall compensate the Money
Managers.
(5) FRIMCo shall render to the Trust's Board of Trustees such
periodic reports concerning the Trust's and Sub-Trust's
business and investments as the Board of Trustees shall
reasonably request.
C. Use of Frank Russell Company Research.
FRIMCo is hereby authorized and expected to utilize the research
and other resources of Frank Russell Company, its corporate
parent, or any predecessor organization, in providing the
Investment Management Services specified in Subsection "B,"
above. Neither FRIMCo nor the Trust shall be obligated to pay any
fee to Frank Russell Company for these services.
D. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
FRIMCo will make available and provide financial, accounting, and
statistical information required by the Trust for the preparation
of registration statements, reports, and other documents required
by federal and state securities laws, and with such information
as the Trust may reasonably request for use in the preparation of
such documents or of other materials necessary or helpful for the
underwriting and distribution of the Trust's shares.
E. Other Obligations and Services.
FRIMCo shall make available its officers and employees to the
Board of Trustees and officers of the Trust for consultation and
discussions regarding the administration and management of the
Trust and its investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. FRIMCo or the
Money Managers, subject to and in accordance with any directions which the
Trust's Board of Trustees may issue from time to time, shall place, in the
name of the Trust, orders for the execution of the Sub-Trust's portfolio
transactions. When placing such orders, the primary objective of FRIMCo and
Money Managers shall be to obtain the best net price and execution for the
Trust, but this requirement shall not be deemed to obligate FRIMCo or a
Money Manager to place any order solely on the basis of obtaining the
lowest commission rate if the other standards set forth in this section
have been satisfied. The Trust recognizes that there are likely to be many
cases in which different brokers are equally able to provide such best
price and execution and that, in selecting among such brokers with respect
to particular trades, it is desirable to choose those brokers who furnish
"brokerage and research services" (as defined in Section 28(e)(3) of the
Securities and Exchange Act of 1934) or statistical quotations and other
information to the Trust, FRIMCo and/or the Money Managers in accord with
the standards set forth below. Moreover, to the extent that it continues to
be lawful to do so and so long as the Board determines as a matter of
general policy that the Trust will benefit, directly or indirectly, by
doing so, FRIMCo or a Money Manager may place orders with a broker who
charges a commission for that transaction which is in excess of the amount
of commission that another broker would have charged for effecting that
transaction, provided that the excess commission is reasonable in relation
to the value of brokerage and research services provided by that broker.
Accordingly, the Trust and FRIMCo agree that FRIMCo and the Money Managers
shall select brokers for the execution of the Sub-Trust's portfolio
transactions from among:
A. Those brokers and dealers who provide brokerage and research
services, or statistical quotations and other information to the
Trust, specifically including the quotations necessary to
determine the Trust's net assets, in such amount of total
brokerage as may reasonably be required in light of such
services;
B. Those brokers and dealers supply brokerage and research
services to FRIMCo and/or its affiliated corporations, or the Money
Managers, which relate directly to portfolio securities, actual or
potential, of the Trust, or which place FRIMCo or Money Managers in a
better position to make decisions in connection with the management of
the Trust's assets and portfolios, whether or not such data may also
be useful to FRIMCo and its affiliates, or the Money Managers and
their affiliates, in managing other portfolios or advising other
clients, in such amount of total brokerage as may reasonably be
required; and
C. Frank Russell Securities, Inc., an affiliate of FRIMCo, when
FRIMCo or Money Manager has determined that the Trust will
receive competitive execution, price, and commission. FRIMCo
shall render regular reports to the Trust, not more frequently
than quarterly, of how much total brokerage business has been
placed with Frank Russell Securities, Inc., and the manner in
which the allocation has been accomplished.
FRIMCo agrees and each Money Manager will be required to agree, that no
investment decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing, and that the
right to make such allocation of brokerage shall not interfere with
FRIMCo's or Money Manager's primary duty to obtain the best net price
and execution for the Trust.
<PAGE>
4. Expenses of the Trust. It is understood that the Trust will pay all its
expenses other than those expressly assumed by FRIMCo herein, which
expressly assumed by FRIMCo herein, which expenses payable by the Trust
shall include:
A. Fees for the services of the Money Manager;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, dividend disbursing agent,
and shareholder recordkeeping services;
D. Expenses of custodial services including recordkeeping
services provided by the Custodian;
E. Expenses of obtaining quotations for calculating the value of the
Trust's net assets;
F. Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management reports for each portfolio of each
Sub-Trust;
G. Expenses of maintaining each Sub-Trust's tax records;
H. Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of FRIMCo;
I. Taxes levied against the Trust;
J. Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Trust;
K. Cots, including the interest expense, of borrowing money;
L. Costs and/or fees incident to meetings of the Trust, the
preparation and mailings of prospectuses and reports of the Trust
to its Shareholders, the filing of reports with regulatory
bodies, the maintenance of the Trust's existence, and the
registration of shares with federal and state securities
authorities;
M. Legal fees, including the legal fees related to the registration
and continued qualification of the Trust shares for sale;
N. Costs of printing stock certificates representing shares of the
Trust;
O. Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of FRIMCo or any of its affiliates;
P. The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
Q. Association membership dues; and
R. Extraordinary expenses as may arise including expenses incurred
in connection with litigation, proceedings, other claims, and the
legal obligations of the Trust to indemnify its Trustees,
officers, employees, Shareholders, distributors, and agents with
respect thereto.
<PAGE>
5. Activities and Affiliates of FRIMCo.
A. The services of FRIMCo and its affiliated corporations to the
Trust hereunder are not to be deemed exclusive, and FRIMCo and
any of its affiliates shall be free to render similar services to
others.
(1) FRIMCo and its affiliated corporations shall use the same
skill and care in the management of the Sub-Trust's
portfolios as they use in the administration of other
accounts to which they provide asset management consulting
and manager selection services, but they shall not be
obligated to give the Trust more favorable or preferential
treatment vis-a-vis their other clients.
(2) The Trust expressly recognizes that Frank Russell
Investment Company ("FRIC") is a client of FRIMCo and that
Frank Russell Trust Company ("Trust Company"), a
corporation affiliated with FRIMCo, is also a client of a
corporation affiliated with FRIMCo and each of FRIC and
Trust Company receives substantially the same portfolio
structuring and money manager selection services from the
affiliate as does the Trust; that each of FRIC and Trust
Company has, or may have, commingled investment funds with
substantially the same investment objectives, strategies,
and programs as the Trust; that each of FRIC and the Trust
was organized by and at the expense of FRIMCo or of a
corporation affiliated with FRIMCo for the express purpose
of offering the same type of investment management
services to the Trust's Shareholders, at least some of
whom could not obtain these services through FRIC or Trust
Company, as FRIC provides to its Shareholders and as Trust
Company provides to its trust customers; and that over
time FRIC, Trust Company and the Trust may utilize some of
the same money managers and have similar portfolio
securities holders.
B. Subject to and in accordance with the Master Trust Agreement (as
defined below) and Bylaws of the Trust and to Section 10(a) of the
1940 Act, it is understood that Trustees, officers, agents, and
Shareholders of the Trust are or may be interested in FRIMCo or its
affiliates as directors, agents, or stockholders of FRIMCo or its
affiliates are or may be interested in the Trust as Trustees,
officers, agents, Shareholders, or otherwise; that FRIMCo or its
affiliates may be interested in the Trust as Shareholders or
otherwise; and that the effect of any such interests shall be governed
by said Master Trust Agreement, Bylaws, and the 1940 Act.
<PAGE>
6. Compensation of FRIMCo.
FRIMCo shall receive from each of the following Sub-Trusts an annual
management fee, accrued daily at the rate of 1/365th of the applicable
management fee and payable following the last day of each month. The
annual management fee, including the fee payable to the Money Managers
(for each respective Sub-Trust), shall be computed based on the
following annual percentage of each Sub-Trust's average daily net assets
during the month:
Multi-Style Equity 0.78%
Aggressive Equity 0.95
Non-U.S. 0.95
Core Bond 0.60
Money Market Liquidity 0.25
From this management fee, FRIMCo, acting as a fiduciary of the Trust,
shall compensate the Money Managers.
7. Liabilities of FRIMCo.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties
hereunder or on the part of FRIMCo or its corporate affiliates,
FRIMCo and its corporate affiliates shall not be subject to
liability to the Trust or to any Shareholder of the Trust for any
act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding, or sale of any security.
B. No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or FRIMCo and its corporate
affiliates, from liability in violation of Section 17(h) and (i)
of the 1940 Act.
8. Renewal and Termination.
A. This Agreement shall become effective on and as of August 5,
1996 and shall continue in effect as to each Sub-Trust until May 31,
1998. The Agreement is renewable annually thereafter for successive
one-year periods (a) by a vote of a majority of the Trustees of the
Trust, or (b) as to any Sub-Trust, by a vote of a majority of the
outstanding voting securities of that Sub-Trust, and in either case by
a majority of the Trustees who are not parties to the Agreement or
interested person of any parties to the Agreement (other than as
Trustees of the Trust), cast in person at a meeting called for
purposes of voting on the Agreement; provided, however, that
if the Shareholders of any one or more Sub-Trusts fail to approve the
Agreement as provided herein, FRIMCo may continue to serve in
such capacity in the manner and to the extent permitted by the 1940
Act and Rules and Regulations thereunder.
B. This Agreement:
(a) May at any time be terminated without the payment of any
penalty either by vote of the Board of Trustees of the
Trust or, as to any Sub-Trust, by vote of a majority of
the outstanding voting securities of the Sub-Trust, on 60
days' written notice to FRIMCo;
(b) Shall immediately terminate in the event of its assignment;
and
(c) May be terminated by FRIMCo on 60 days' written notice to the
Trust.
C. As used in this Section 8, the Terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth for any such terms
in the 1940 Act.
D. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed postpaid, to the other party
at any office of such party.
9. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder
of this Agreement shall not be affected thereby.
10. Reservation of Name. The parties hereto acknowledge that Frank Russell
Company has reserved the right to grant the non-exclusive use of the
name "Russell," or any derivative thereof, to any other investment
company, investment advisor, distributor or other business enterprise,
and to withdraw from the Trust the use of the name "Russell." In the
event that Frank Russell Company should elect to withdraw the use of the
name "Russell" from the Trust, the Trust will submit the question of
continuing this Agreement to a vote of its Shareholders.
11. Limitation of Liability. The Master Trust Agreement, dated July 11,
1996, as amended from time to time, establishing the Trust, which is
hereby referred to and a copy of which is on file with the Secretary
of The Commonwealth of Massachusetts, provides that the name Russell
Insurance Funds means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement. It is
expressly acknowledged and agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Shareholders, Trustees,
officers, employees, or agents of the Trust, personally, but shall
bind only the trust property of the Trust, as provided in its Master
Trust Agreement. The execution and delivery of this Agreement have
been authorized by the Trustees of the Trust and signed by the
President of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers
shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only
the trust property of the Trust as provided in its Master Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
RUSSELL INSURANCE FUNDS
By:
Gregory J. Lyons, Assistant Secretary Lynn L. Anderson, President
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
By:
Gregory J. Lyons, Assistant Secretary Eric A. Russell, President
FRANK RUSSELL COMPANY agrees to provide consulting services without charge to
the Trust upon the request of the Board of Trustees or officers of the Trust, or
upon the request of Manager pursuant to Section 2(C).
FRANK RUSSELL COMPANY
By:
J. David Griswold, Assistant Secretary Michael J. A. Phillips, President
