SCHEDULE 14A
                           SCHEDULE 14A INFORMATION

                   PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a)
                    of the Securities Exchange Act of 1934
                              (AMENDMENT NO.(Amendment No.   )

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              [_] Definitive
                  Additional Materials
              [_] Soliciting Material
                  Pursuant to Sec.Section
                  240.14a-11(c) or
                  Sec.Section 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)Russell Investment Funds
               (Name of Registrant as Specified In Its Charter)

   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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                           RUSSELL INSURANCEINVESTMENT FUNDS
                                 909 A STREET
                           TACOMA, WASHINGTON 98402

                                1-800-787-73541-800-628-8510


Dear Shareholder:


   Enclosed is a Notice of Special Meeting in lieu of Annual Meetingshareholders of Shareholders of the Russell
InsuranceInvestment Funds (the "Investment Company"("RIF"). The Special Meeting has been called for Thursday, November 19, 1998October 3,
2003 at 11:009:30 a.m., local time, at the offices of the Investment CompanyRIF at 909 A Street, Tacoma,
Washington.Washington 98402. The accompanying Proxy Statement details the proposals being
presented for your consideration.
 
  The Special Meeting will consider several matters,consideration by shareholders of RIF's series (each a "Fund,"
and, shareholderscollectively, the "Funds").


   Shareholders will be asked to: (i)to consider the following proposals at the
Special Meeting:

      1. To elect thethree 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)RIF;

      2. To approve a change into each Fund's fundamental investment restriction limiting
borrowingobjective;

      3. To approve the reclassification of the investment objective of each
   Fund from "fundamental" to authorize a higher borrowing level for"non-fundamental"; and

      4. To consider and act on any other business (none being known as of the
   purposedate of meeting
redemptions.this notice) as may legally come before the Special Meeting or any
   adjournment thereof.


   The enclosed materials provide details of the proposals. Accordingly, aA proxy or voting
instruction 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, OR TAKE ADVANTAGE OF THE FACSIMILE,
TELEPHONIC OR INTERNET VOTING OR VOTING INSTRUCTION PROCEDURES DESCRIBED IN THE
PROXY OR VOTING INSTRUCTION CARD, AS SOON AS POSSIBLE TO ENSURE THAT YOUR VOTE
ISOR INSTRUCTIONS ARE COUNTED AT THE SPECIAL MEETING.
Please return your proxy card as soon as possible.


                                          Sincerely,

                                          /s/ Karl J. Ege
                                          Karl J. Ege
                                          Esq.
                                      Secretary

NOTE: If you own shares ofNote: You may receive more than one Fund, you will receive a separate
proxy card for each Fund.card. PLEASE COMPLETE THEEACH CARD PROVIDED FOR EACH FUND IN
WHICH YOU OWN SHARES so that each Fund will have the quorum needed to conduct
its business.PROVIDED.



                           RUSSELL INSURANCEINVESTMENT FUNDS
                            Multi-Style Equity Fund
                            Aggressive Equity Fund
                                  Non-US Fund
                                Core Bond Fund
                          Real Estate Securities Fund

                (each a "Fund," and, collectively, the "Funds")

                                 909 A STREET
                           TACOMA, WASHINGTON 98402

                               -----------------

                   NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL 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:OCTOBER 3, 2003

                               -----------------


   NOTICE IS HEREBY GIVEN that a Special Meeting in lieu of Annual Meeting of the shareholders (the "Shareholders") of the
four sub-trusts (eachFunds, each a "Fund,"
and collectively the "Funds")series of Russell InsuranceInvestment Funds (the "Investment
Company"("RIF"), will be held at the Investment Company'sRIF's
offices located at 909 A Street, Tacoma, Washington, on Thursday, November 19, 1998October 3, 2003 at 11:009:30
a.m., local time, for the following purposes:


      1. To elect thethree members of the Board of Trustees of the Investment
  Company.RIF;

      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'sthe fundamental investment restriction
  limiting borrowing activities, authorizing a higher borrowing level forobjective of each
   Fund;

      3. To approve the purposereclassification of meeting shareholder redemption requests.
 
  The Special Meeting also willthe investment objective of each
   Fund from "fundamental" to "non-fundamental"; and

      4. To consider and act uponon 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 each of
the proposed items upon which Shareholdersshareholders will be asked to vote.

   Shareholders of record as of the close of business on September 21, 1998,July 7, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment
thereof.

                                          By Order of the Board of Trustees,

                                          /s/ Karl J. Ege
                                          KARLKarl J. EGE, ESQ.Ege
                                          Secretary
Tacoma, Washington
October 19, 1998July 8, 2003

  IT IS IMPORTANT THAT SHARES REPRESENTED BY YOUR SHARESVOTING INSTRUCTIONS BE
  REPRESENTED AT THE SPECIAL MEETING! WHETHER OR NOT YOU EXPECT TO BE PRESENT
  AT THE SPECIAL MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD(S)CARD OR
  VOTING INSTRUCTION CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
  WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DESIRE TO
 VOTESTATES, OR TAKE ADVANTAGE OF
  THE FACSIMILE, TELEPHONIC OR INTERNET VOTING PROCEDURES DESCRIBED IN PERSON YOU MAY REVOKE YOURTHE
  PROXY PRIOR TO THE MEETING. PLEASE
 COMPLETE AND RETURN ALL PROXY CARDS ENCLOSED. EACH IS FOR A SEPARATE FUND.CARD OR VOTING INSTRUCTION CARD.



                               TABLE OF CONTENTS


PAGE ---- Questions and Answers About the Special Meeting and the Proxy Statement.. 2 Proposal 1: Election of Trustees to the Board of Trustees of RIF........ 4 Proposal 2: To change the fundamental investment objectives of the Funds 12 Proposal 3: To make each Fund's investment objective non-fundamental.... 16 Other Business........................................................... 17 Information about RIF.................................................... 18 Further Information...................................................... 20 List of Names and Addresses of Money Managers............................ 22 Beneficial Owners of the Funds........................................... 24
RUSSELL INSURANCEINVESTMENT FUNDS 909 A STREET TACOMA, WASHINGTONStreet Tacoma, Washington 98402 1-800-787-73541-800-628-8510 ----------------- PROXY STATEMENT ----------------- DATED OCTOBER 19, 1998July 8, 2003 FOR A SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS OF Multi-Style Equity Fund Aggressive Equity Fund Non-US Fund Core Bond Fund Real Estate Securities Fund (each a "Fund," and, collectively, the "Funds") EACH A SERIES OF RUSSELL INSURANCEINVESTMENT FUNDS TO BE HELD NOVEMBER 19, 1998 SUMMARY WHAT IS("RIF") QUESTIONS AND ANSWERS ABOUT THE PURPOSE OF THISSPECIAL MEETING AND THE PROXY STATEMENT?STATEMENT GENERAL INFORMATION ABOUT THE PROPOSALS Q. What is the purpose of this proxy statement? A. You are receiving these proxy materials--a booklet that includes the Proxy Statement and one or more proxy or voting instruction cards--because you have the right to vote or give voting instructions on important proposals concerning your investment in your Fund(s). The principal purpose of this Proxy Statement is to seek Shareholdershareholder approval of the matters identified in the accompanyingtable below.
Proposal Shareholders Solicited -------- ---------------------- 1. To elect three members of the Board of Trustees of RIF. Each Fund 2(a) To approve changes to the fundamental investment Each Fund through objectives of the Funds. 2(e) 3. To approve a change to the fundamental investment Each Fund objectives of the Funds to make them non-fundamental.
INFORMATION ABOUT VOTING Q. Who is asking for my vote? A. The Board of Trustees (the "Board" or the "Trustees") of RIF has requested your vote on several matters in connection with the Special Meeting (the "Special Meeting") of shareholders of the series of RIF (the "Shareholders"). The Special Meeting will be held at 9:30 a.m., local time, on October 3, 2003, at the offices of RIF located at 909 A Street, Tacoma, Washington. RIF proposes to mail the Notice of Special Meeting, the proxy card and the Proxy Statement to Shareholders of record on or about July 15, 2003. As described below, on or about such date, the Notice of Special Meeting, Proxy Statement and a voting instruction card will be mailed to holders of certain variable annuity contracts and variable life insurance policies who have the right to instruct Shareholders of record how to vote at the Special Meeting. Q. Who is eligible to vote? A. RIF has the following five series, or funds, in lieuall (each a "Fund," and, collectively, the "Funds"): Multi-Style Equity Fund, Aggressive Equity Fund, Non-US Fund, Core Bond Fund and Real Estate Securities Fund. Shareholders of Annualrecord of the Funds at the close of business on July 7, 2003 (the "Record Date") are entitled to notice of and to vote at the Special Meeting or at any adjournment of the Special Meeting on the proposals applicable to the Fund(s) for which they hold shares. Shareholders of record will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold on each matter presented at the Special Meeting. ShareholdersThe Funds serve as investment vehicles for variable annuity contracts and variable life insurance policies (the "Variable Contracts" and "Variable Policies") issued by various life insurance companies (the "Participating Insurance Companies"). Participating Insurance Companies may also invest their own general account assets in RIF. All shares of the Funds are owned of record by sub-accounts of separate accounts ("Separate Accounts") established to fund the Variable Contracts and Variable Policies issued by the Participating Insurance Companies or by the Participating Insurance Companies in their general accounts. 2 Each Participating Insurance Company, to the extent required by the Investment Company Act of 1940, as amended (the "1940 Act"), will solicit voting instructions from Variable Contract and Variable Policy owners who beneficially own shares of a Fund through a Separate Account (a "1940 Act Separate Account") of such Participating Insurance Company as of the Record Date (the "Contractowners"). These shares will be voted by the applicable Participating Insurance Company as timely directed by the Contractowners. Each Participating Insurance Company will vote the shares of each 1940 Act Separate Account for which no timely instructions are received from a Contractowner in the same proportion as dictated by the timely voting instructions received from other Contractowners for shares of such Fund held in that 1940 Act Separate Account. RIF has been advised by certain Participating Insurance Companies that they are not required by the 1940 Act to solicit voting instructions from the owners of Variable Contracts or Variable Policies who own shares of a Fund through certain of their Separate Accounts (the "Non-1940 Act Separate Accounts") and that such Participating Insurance Companies therefore will not solicit voting instructions from the Variable Contract or Variable Policy owners that beneficially own shares of a Fund through a Non-1940 Act Separate Account (and such Variable Contract or Variable Policy owners are not included in the term "Contractowners" as used herein). Fund shares held in a Non-1940 Act Separate Account will be represented at the Special Meeting by the applicable Participating Insurance Company and voted in the same proportion as the aggregate of votes cast with respect to shares of such Fund held in all of that Participating Insurance Company's 1940 Act Separate Accounts or in such other manner as may be required by law. Q. How do I deliver voting instructions to my Participating Insurance Company? A. Contractowners may instruct their Participating Insurance Company how to vote shares of the Funds attributable to their Variable Contract or Variable Policy in writing, by executing the enclosed voting instruction card and returning it in the envelope provided or via facsimile, telephone or the Internet as described in the proxy or voting instruction card. The Participating Insurance Companies have fixed 4:00 p.m. Eastern time on September 30, 2003 as the last day and time on which voting instructions will be accepted. Voting instructions received after this date and time will not be considered. To give voting instructions via the Internet, please access the website listed on your instruction card(s) or noted in the enclosed voting instructions. To give voting instructions via the Internet, you will need the "control number" that appears on your voting instruction card. The Internet voting procedures are designed to authenticate your identity, to allow you to give voting instructions and to confirm that your instructions have been recorded properly. If you vote via the Internet, you may incur costs associated with electronic access providers and telephone companies. Voting instruction card(s) that are properly signed, dated and received prior to 4:00 p.m. Eastern time on September 30, 2003 and proper voting instructions received via facsimile, telephone or the Internet prior to 4:00 p.m. Eastern time on September 30, 2003, will be voted by your Participating Insurance Company in accordance with the instructions received. If you sign, date and return the voting instruction card(s), but do not specify a vote for one or more of the Proposals, your Participating Insurance Company will vote the shares of each Fund represented by your voting instructions on the Proposals for which you have not specified a vote as follows: . IN FAVOR of electing each of the nominees to serve on the Board of Trustees of RIF (Proposal 1); . IN FAVOR of approving a change to the investment objective, currently a fundamental investment restriction, of each Fund, (Proposals 2(a) through 2(e), voted on a Fund-by-Fund basis); and . IN FAVOR of approving a change to the fundamental investment objective of each Fund to make it non-fundamental (Proposal 3, voted on a Fund-by-Fund basis). 3 Q. If I send my voting instructions in now as requested, can I change my instructions later? A. Contractowners may revoke their voting instructions at any time prior to 4:00 p.m. Eastern time on September 30, 2003 by submitting written notice of revocation, a later-dated instruction card or a later-dated voting instruction via facsimile, telephone or the Internet. Revocations of voting instructions received after this date and time will not be asked to consideraccepted. Q. How do the Trustees recommend that I vote for these proposals? A. The Trustees recommend that Shareholders and approve, on behalf of their respective Fund(s), the four proposals discussed inContractowners vote FOR each proposal. Q. Whom should I call for additional information about this Proxy Statement. Before addressing the specific proposals, this Proxy Statement provides you with importantStatement? A. Please call D.F. King & Co., Inc., RIF's information regarding howagent, toll-free at 1-800-628-8510. GENERAL INFORMATION ABOUT THE FUNDS Q. How are the Funds operate. HOW ARE THE FUNDS MANAGED? Each Fundmanaged? A. RIF 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. Under Massachusetts law, each Fund is a "sub-trust" of RIF. The management of the business and affairs of the Investment CompanyRIF is the responsibility of the Board of Trustees (the "Board" or "Trustees").Board. The Board oversees the Funds' operations, including reviewing and approving the Funds' contracts with the Funds' investment adviser, Frank Russell Investment Management Company ("FRIMCo" or the "Manager"), Frank Russell Company ("FRC") and the Funds' money managers. The Investment Company'srespective sub-advisers ("Money Managers"). RIF'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 managersMoney 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 CompanyRIF has received an exemptive order from the U.S. Securities and Exchange Commission (the "SEC"("SEC") which permits the Investment Company,RIF, with the approval of the Board, to engage and terminate money managersMoney Managers without a shareholder vote and to disclosevote. Please see page 22 of this Proxy Statement for a list of the aggregate fees paid to the manager and the money managers of each sub-trust. The money managerscurrent Money Managers for the Funds are listed in Exhibit A to this Proxy Statement.Funds. The money managersMoney Managers will not change as a result of the proposalsProposals 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 2 forth under "Information Regarding the Current Management Agreement" in this Proxy Statement. 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.PROPOSALS PROPOSAL #1:1: TO ELECT THETHREE MEMBERS OF THE BOARD OF TRUSTEES At itstheir meeting held on October 5, 1998,May 20, 2003, the Trustees determined to present the election of three trustees who have not been previously elected by the Shareholders to hold office until their respective successors are elected and qualified. RIF currently has ten trustees, seven of whom have previously been elected by RIF's Shareholders. This Proposal 1 will not affect the status of these seven Trustees. Each of these Trustees, and, if elected, each of the nominees, will continue to hold office during the lifetime of RIF except as such Trustee sooner dies, resigns or is removed, as provided for in RIF's Master Trust Agreement. RIF also has two Trustees Emeritus. Trustees Emeritus do not have the power to vote on matters coming before the Board, or to direct the vote of Trustees to Shareholders atany Trustee, and generally are not responsible or accountable in any way for 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 memberperformance 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.Board's responsibilities. In considering the nominees for election as Trustees of the Investment Company,RIF, the Trustees took into account the qualifications of each of the nomineesnominee and the concern for the continued efficient conduct of the Investment Company'sRIF's business. In particular, the Trustees considered the requirements of the Investment Company1940 Act of 1940, as amended, (the "1940 Act") as they apply to the election of Trustees. One factor considered byTrustees generally and the nominees in particular. The Board has determined that Proposal 1 is in 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)best interests of the 1940 Act)Shareholders 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 the 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 3 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 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 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. Because the Investment Companyeach Fund. RIF does not hold regular annual meetings, each nominee, if elected, will hold office until his or her successor is elected and qualified.meetings. The Board may call special meetings of shareholdersShareholders for action by shareholderShareholder vote as may be required by the 1940 Act or required or permitted by the Master Trust Agreement 4 and by-laws of the Investment Company.RIF. In compliance with the 1940 Act, shareholderShareholder meetings will be held to elect Trustees whenever fewer than a majority of the Trustees holding office have been elected by the shareholdersShareholders 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 NOMINEESShareholders. The Nominees The following information is provided for each of the six nominees.nominee. It includes the nominee's name, principal occupation(s) or employment during the past five years, date of birth, address and directorships with other companies whichthat file reports periodically with the SEC. Unless otherwise noted, the mailing address for eachEach nominee is Frank Russell Investment Company, 909 A Street, Tacoma, WA 98402. Each of the nominees is currently a Trustee of the Investment CompanyRIF. Ms. Weston 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 anConnealy are not "interested person"persons" of the Investment CompanyRIF as defined in Section 2(a)(19) of the 1940 Act. This designation results fromMr. Phillips is an interested person of RIF by virtue of his ownership interest and position as an officeremployment by Frank Russell Company, the parent of certain FRC affiliates. As usedFRIMCo. Each nominee currently oversees 37 funds 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, Chairmancomplex. The Russell Fund complex consists of the Board, President,RIF and Treasurer, The SSgA Funds (investment company); Director, Chief Executive Officer and Chairman of the Board, Frank Russell Investment Management Company; Director, 4 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.("FRIC"). The address for each nominee listed below is 909 A Street, Tacoma, Washington 98402-1616.
No. of Portfolios In Russell Term of Principal Fund Other Position(s) Office** and Occupation(s) Complex Directorships Name Held With Length of During the Overseen by Held by and Age Fund Time Served Past 5 Years Trustee Trustee ------- ----------- ------------ --------------------------------- ----------- ------------- Interested Nominee Michael J. A. Phillips, Trustee Since 2002 Chairman of the Board, CEO and 37 None Born January 20, 1948 Director, Frank Russell Company ("FRC"); President, FRC until July 1, 2003 Independent Nominees Daniel P. Connealy,.... Trustee Since April 2001-2003, Vice President and 37 Director, Born June 6, 1946 2003 Chief Financial Officer, Janus Gold Banc Capital Group Inc.; 1979-2001, Corporation, Audit and Accounting Partner, Inc. Pricewaterhouse- Coopers LLP Julie W. Weston,....... Trustee Since 2002 Retired since 2000. 1997 to 2000, 37 None Born October 2, 1943 Arbitrator, The American Arbitration Association Commercial Panel. From 1995 to 1999, Hearing Officer, University of Washington
- -------- ** Each Trustee serves as a Trustee during the lifetime of RIF and Frank Russell Investments (UK) Ltd., Russell Insurance Agency, Inc., Frank Russell Investment Company, PLC; June 1993until its termination except as such Trustee sooner dies, resigns or is removed. During the fiscal year ended December 31, 2002, there were four regular meetings of the Board, two special meetings of the Board and one telephonic meeting of the Board. All of the Trustees, including the nominees with respect to November 1995, Director, Frank Russell Company. Until September 1994, Directormeetings held after their election to the Board by the Trustees, attended at least 75% of the meetings of the Board of Trustees held during that time. The Board of Trustees has established a standing Audit Committee and President,a standing Nominating and Governance Committee. The Laurel Funds, Inc. (investment company); November 1995Audit Committee's primary functions are: (1) oversight of the Funds' accounting and financial reporting policies and practices and their internal controls; (2) oversight of the quality and objectivity of the Funds' financial statements and the independent audit thereof; and (3) to act as liaison between the Funds' independent auditors and the full Board. It is management's responsibility to maintain appropriate 5 systems for accounting and internal control and the auditor's responsibility to plan and carry out a proper audit. Currently, the Audit Committee members consist of Mmes. Kristianne Blake and Eleanor W. Palmer and Messrs. Raymond P. Tennison, Jr. and Daniel P. Connealy, each of whom is an independent Trustee. For the fiscal year ended December 1996, Director31, 2002, the Audit Committee held five meetings. RIF's Board of Trustees has adopted and Chairman, Russell MLC Management Company; December 1996approved a formal written charter for the Audit Committee, which sets forth the Audit Committee's current responsibilities. The Audit Committee reviews the maintenance of the Funds' records and the safekeeping arrangements of RIF's custodian, reviews both the audit and non-audit work of RIF's independent auditors, submits a recommendation to March 1997, Directorthe Board as to the selection of independent auditors, and Chairman, Frank Russell Company (Delaware) Inc.pre-approves (i) all audit and non-audit services to be rendered by the auditors for RIF, (ii) all audit services provided to FRIMCo, or any affiliate thereof that provides ongoing services to RIF, relating to the operations and financial reporting of RIF, and (iii) all non-audit services relating to the operations and financial reporting of RIF, provided to FRIMCo, or any affiliate thereof that provides ongoing services to RIF, by any auditors with an ongoing relationship with RIF. The primary functions of the Nominating and Governance Committee are to: (1) nominate individuals who are not interested persons of RIF for independent Trustee membership on the Board; (2) evaluate and review the composition and performance of the Board; (3) review Board governance procedures; (4) review Trustee compensation; and (5) make nominations for membership on all Board committees and review the responsibilities of each committee. The Committee will not consider nominees recommended by Shareholders of the Funds. Currently, the Nominating and Governance Committee members consist of Messrs. Paul E. Anderson, -- 67 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 -- 73 years old --and Lee C. Gingrich and Ms. Julie W. Weston, each of whom is an independent Trustee. 800 North CFor the fiscal year ended December 31, 2002, the Nominating and Governance Committee held one meeting. 6 Information Regarding the Other Trustees and the Officers of RIF Listed below are the Trustees of RIF not named above as nominees and its principal executive officers, including their names, ages, position(s) with RIF, and principal occupation or employment during the past five years. Mr. George F. Russell, Mr. Lynn L. Anderson and Mr. Michael J.A. Phillips are the only Trustees who are "interested persons" of RIF as defined in section 2(a)(19) of the 1940 Act. The address for each Trustee and officer listed below is 909 A Street, Tacoma, Washington 98403.98402-1616.
No. of Portfolios in Russell Term of Principal Fund Other Position(s) Office** and Occupation(s) Complex Directorships Name Held With Length of During the Overseen by Held by and Age Fund Time Served Past 5 Years Trustee Trustee ------- ----------- ------------- ----------------------------------- ------------- ------------- Interested Trustee and Interested Trustee Emeritus* Lynn L. Anderson,........ Trustee Trustee since Vice Chairman, FRC; Chairman of 37 Trustee, Born April 22, 1939 and 1987; the Board, Trustee, FRIC and RIF; SSgA Funds Chairman Chairman of CEO and Chairman of the Board, (investment of the the Board Russell Fund Distributors, Inc. and company) Board since 1999 FRIMCo; Trustee, President and Chairman of the Board, SSgA Funds (investment company); Trustee and Chairman of the Board, Frank Russell Trust Company; Director, Frank Russell Investments (Ireland) Limited and Frank Russell Investments (Cayman) Ltd.; Until October, 2002, President and CEO, FRIC and RIF George F. Russell, Jr.,.. Trustee Since 1999 Chairman Emeritus, FRC; 37 None Born July 3, 1932 Emeritus Chairman Emeritus, FRIC and RIF and Chairman Emeritus * Interested persons of RIF because of their relationships with FRIMCo or its affiliates as set forth in the table. Independent Trustees and Independent Trustee Emeritus Paul E. Anderson,........ Trustee Since 1984 1996 to present, President, 37 None Born October 15, 1931 Anderson Management Group LLC (private investments consulting) Paul Anton, Ph.D.,....... Trustee Since 2003 Retired since 1997; Trustee of 37 None Born December 1, 1919 Emeritus FRIC and RIF until 2002 William E. Baxter,....... Trustee Since 1984 Retired since 1986 37 None Born June 8, 1925
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No. of Portfolios in Russell Term of Principal Fund Other Position(s) Office** and Occupation(s) Complex Directorships Name Held With Length of During the Overseen by Held by and Age Fund Time Served Past 5 Years Trustee Trustee ------- ----------- ------------ ---------------------------------- ------------- ------------- Kristianne Blake,........ Trustee Since 2000 President, Kristianne Gates Blake, 37 - Trustee Born January 22, 1954 P.S. (accounting services) WM Group of Funds (investment company) - Director, Avista Corporation Lee C. Gingrich,......... Trustee Since 1984 Retired since 1995 37 None Born October 6, 1930 Eleanor W. Palmer,....... Trustee Since 1984 Retired since 1981 37 None Born May 5, 1926 Raymond P. Tennison, Jr., Trustee Since 2000 Currently, President, Simpson 37 None Born December 21, 1955 Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company
- -------- ** Each Trustee Frankserves as a Trustee during the lifetime of RIF and until its termination except as such Trustee sooner dies, resigns or is removed. Dr. Anton was appointed Trustee Emeritus by the Board effective December 31, 2002 for a term not to exceed five years. Mr. Russell was appointed Trustee Emeritus by the Board effective January 1, 1999 to serve until his death, retirement, resignation or removal. 8
Term of Principal Position(s) Office** and Occupation(s) Name Held With Length of During the and Age Fund Time Served Past 5 Years - ------------------------ ---------------------- ------------ ------------------------ OFFICERS Leonard P. Brennan,...... President and Chief Since 2002 Director, President and Born October 11, 1959 Executive Officer CEO, FRIMCo; From 1995 to present, Managing Director Individual Investor Services of Frank Russell Company Mark E. Swanson,......... Treasurer and Chief Since 1998 1998 to present, Born November 26, 1963 Accounting Officer Treasurer and Chief Accounting Officer, FRIC and RIF; Director, Funds Administration, FRIMCo and Frank Russell Trust Company; Treasurer, SSgA Funds (investment company); Manager, Funds Accounting and Taxes, Russell Fund Distributors, Inc. From April 1996 to August 1998, Assistant Treasurer, FRIC. From August 1996 to August 1998, Assistant Treasurer, FRIC and RIF. November 1995 to July 1998, Assistant Secretary, SSgA Funds. February 1997 to July 1998, Manager, Funds Accounting and Taxes, FRIMCo Randall P. Lert,......... Director of Since 1991 Director of Investments, Born October 3, 1953 Investments FRIC and RIF; Chief Investment Officer, FRC and Frank Russell Trust Company; Director, FRIMCo and Russell Fund Distributors, Inc. Karl J. Ege,............. Secretary and General Since 1994 Secretary and General Born October 8, 1941 Counsel Counsel, FRC, FRIC, RIF, FRIMCo, Frank Russell Trust Company, Russell Fund Distributors, Inc. and Frank Russell Capital Inc. Mark D. Amberson,........ Director of Short-Term Since 2001 Director of Short-Term Born July 20, 1960 Investment Funds Investment Funds, FRIC, RIF, FRIMCo and Frank Russell Trust Company. From 1991 to 2001, Portfolio Manager, FRIC, RIF, FRIMCo and Frank Russell Trust Company Retired. Lee C. Gingrich -- 68 years old -- Trustee. 1730 North Jackson, Tacoma, Washington 98406.
- -------- ** All officers serve for one year and until their successors are duly elected and qualified; provided, however, that any officer may be removed at any time either with or without cause, by the Board. 9 Trustee FrankOwnership of Fund Shares The table below sets forth the dollar range of the value of the shares of each Fund, and the dollar range of the aggregate value of the shares of all funds in the Russell Investment Company. President, Gingrich Enterprises, Inc. (BusinessFund Complex, owned directly or beneficially by the Trustees, including the nominees, as of December 31, 2002. The Russell Fund Complex consists of RIF and Property Management). Eleanor W. Palmer -- 72 years old -- Trustee. 2025 Narrows View Circle #232- D, P.O. Box 1057, Gig Harbor, Washington 98335. Trustee, Frank Russell Investment Company; DirectorFRIC. EQUITY SECURITIES BENEFICIALLY OWNED BY TRUSTEES FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2002
Dollar Range of Equity Aggregate Dollar Range of Equity Securities in all Securities in Each Registered Investment Companies Overseen by Interested Trustees Fund Trustees in Russell Fund Complex ------------------- ---------------------- -------------------------------------------------- Lynn L. Anderson........ None None Michael J. A. Phillips.. None None George F. Russell, Jr... None None Independent Trustees -------------------- Paul E. Anderson........ None Over $100,000 Paul Anton, Ph.D........ None $50,001-$100,000 William E. Baxter....... None $1-$10,000 Kristianne Blake........ None Over $100,000 Daniel P. Connealy...... None None Lee C. Gingrich......... None None Eleanor W. Palmer....... None None Raymond P. Tennison, Jr. None None Julie W. Weston......... None $1-$10,000
10 Remuneration of Frank Russell Trust Company. The Investment CompanyTrustees RIF pays fees only to the Independent Trustees of the Investment Company.independent Trustees. Compensation of officers and Trustees who are "interested persons" of the Investment Company (as indicated by an asterisk)RIF 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 5 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, 1997:2002. The Russell Fund Complex consists of FRIC and RIF. TRUSTEE COMPENSATION TABLE FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
AGGREGATE TOTAL COMPENSATION FROM COMPENSATION THE INVESTMENT COMPANY FROM THE INVESTMENT AND THE FUND COMPLEX TRUSTEE COMPANY PAID TO TRUSTEES - -------Pension or Retirement Estimated Total Benefits Annual Compensation Aggregate Accrued as Benefits From Russell Compensation Part of Upon Fund Complex Interested Trustees from RIF RIF Expenses Retirement Paid to Trustees ------------------- ----------------------------------- ------------ ---------- ---------------- Lynn L. Anderson....................Anderson........ $ 0 $0 $0 $ 0 Michael J. A. Phillips.. $ 0 $0 $0 $ 0 George F. Russell, Jr.*. $ 0 $0 $0 $ 0 Independent Trustees -------------------- Paul E. Anderson.................... $11,263* $31,263**Anderson........ $12,530 $0 $0 $ 85,250 Paul Anton, PhD..................... $11,263* $31,263*PhD.**...... $11,760 $0 $0 $ 78,250 William E. Baxter................... $11,263* $31,263*Baxter....... $11,760 $0 $0 $ 81,750 Kristianne Blake........ $12,677 $0 $0 $ 86,800 Daniel P. Connealy***... $ 0 $0 $0 $ 0 Lee C. Gingrich..................... $11,263* $31,263**Gingrich......... $12,390 $0 $0 $ 86,250 Eleanor W. Palmer................... $11,263* $31,263** George F. Russell...................Palmer....... $11,974 $0 $0 $ 083,280 Raymond P. Tennison, Jr. $12,040 $0 $0 $81,750.09 Julie W. Weston****..... $ 04,327 $0 $0 $ $31,333
- ------------------ * Of this amount, $4,000Mr. Russell was for services during 1996.elected Trustee Emeritus effective January 1, 1999. ** The Trustees received $20,000 for service as trustees onDr. Anton was elected Trustee Emeritus effective December 31, 2002. *** Mr. Connealy was elected to the Board of Trustees for the Frank Russell Investment Company. 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. -- 66 years old -- Trustee and Chairman of the Board since 1996. Trustee and Chairman ofon April 24, 2003. **** Ms. Weston was elected to the Board of FrankTrustees on August 19, 2002. The Russell Investment Company; Director, ChairmanFund Complex currently pays each of the Boardindependent Trustees a retainer of $52,000 per year, $5,000 for each regular quarterly meeting attended in person, $2,000 for each special meeting attended in person, and Chief Executive Officer,$2,000 for each Joint Audit Committee meeting or Nominating and Governance Committee meeting attended in person. The Trustees receive a $500 fee for attending an in-person meeting by phone instead of receiving the full fee had the member attended in person. Out of pocket expenses are also paid by the Fund Complex. The Lead Trustee is paid a fee of $10,000 per year, and each Committee Chair is paid a fee of $6,000 per year. The Russell Building Management Company, Inc.; Director and ChairmanFund Complex pays each independent Trustee Emeritus an annual retainer equal to 80% 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 ofannual retainer for independent Trustees in effect at 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; 6 Assistant Secretary and Principal Accounting Officer, 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 SSgA Funds; February 1997 to July 1998, Manager, Funds Accounting and Taxes, Frank Russell Investment Management Company. *Randall P. Lert -- 45 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 -- 57 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.; Director, 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 -- 53 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.time such person is elected Trustee Emeritus. Required Vote The persons named inon the proxy card intend, in the absence of contrary instructions, to vote all proxies in favor of the election of each nominee.the nominees. A Shareholder or Contractowner providing voting instructions may vote for or withhold authority with respect to any or all of the nominees. If an executed proxy card or voting instruction card is 7 returnedreceived without voting instructions, the shares will be voted for alleach of the nominees named herein. All of theThe nominees have consented to being named in this Proxy Statement and to serve if elected. The Investment CompanyRIF knows of no reason why any nomineethe nominees 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 inon the proxy card will exercise their voting power to vote for such substitute person or persons as the Currentcurrent Trustees of the Investment CompanyRIF may recommend. If any nominee is not approved11 RIF's Master Trust Agreement requires that the Trustees be elected by a "plurality" vote. Therefore, the Shareholders of the Investment Company, the Board will consider alternative nominations. Thethree nominees who receive the greatest number of affirmative votes cast by the shareholdersShareholders of the Investment CompanyRIF who are present at the Special 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 At its meeting on April 27, 1998, pursuantelected, provided that there is a sufficient number of shares represented in person or by proxy to a request bymeet the managementquorum requirements set forth in RIF's Master Trust Agreement. Because the Participating Insurance Companies are the only Shareholders of RIF, the presence 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 askedParticipating Insurance Companies 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. 8 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.will meet the quorum requirement. THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND AND CONTRACTOWNERS PROVIDING VOTING INSTRUCTIONS VOTE "FOR" THE ELECTION OF EACH OF THE THREE NOMINEES TO SERVE ON THE BOARD OF TRUSTEES RECOMMENDSAS DESCRIBED IN PROPOSAL 1. ANY EXECUTED UNMARKED PROXY CARDS AND VOTING INSTRUCTION CARDS THAT SHAREHOLDERS VOTEARE RETURNED ON A TIMELY BASIS WILL BE SO VOTED. PROPOSALS 2(a)-2(e): APPROVAL OF A CHANGE TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE INVESTMENT COMPANY'S INDEPENDENT ACCOUNTANTS PROPOSAL #3: TO APPROVE A PROPOSED MANAGEMENT AGREEMENT BETWEENOBJECTIVES OF 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 managerFUNDS Pursuant to the 1940 Act, each of the Funds pursuanthas adopted and operates according to a stated investment objective. The investment policies, restrictions, strategies and activities of each Fund are guided by, and designed to achieve, the Fund's stated investment objective. Each Fund is subject to an investment management agreement (the "Management Agreement") described below. The current Management Agreement with FRIMCoobjective that currently 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 assureda fundamental investment restriction, meaning 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 acquireit may not be changed without Shareholder approval. These investment objectives were established at the effective time allinception 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, 9 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 reflected market conditions and circumstances at that time and the manner in which FRIMCo then wished to conduct the Funds' investment programs. In many cases, market conditions and circumstances have changed since the Funds' inceptions and are expected to continue to change. The proposed changes are designed to clarify the investment objectives and, by doing so, avoid possible investor confusion, facilitate the efforts of FRIMCo to conduct the investment programs of the Funds and reduce administrative burdens associated with clarifying the meaning of and monitoring compliance with the current investment objectives. In addition, clarification of the investment objectives of the Funds may facilitate the marketing of the Funds. In such event, Shareholders could benefit from the economies of scale resulting from increases in the Funds' total assets and consequent decreases in their expense ratios. The changes proposed in the investment objectives for the Funds will not affect materially the manner in which such Funds are managed. The Funds' principal investment strategies will not change. The current investment strategies and policies of the Funds can be found in the current RIF prospectuses. The Board considered the foregoing in making its determination that Proposals 2(a)-2(e) are in the best interests of the Shareholders of each Fund. 12 The current and proposed objectives for the Funds The current and proposed investment objectives for the Funds, a summary of their principal investment strategies and a discussion of the effect of changing the investment objective are set forth in the chart below:
Current Investment Proposed Investment Proposal Fund Objective Objective - -------- ---- --------- --------- 2(a) Multi- To provide income and capital growth by Seeks to provide long term capital growth. Style investing principally in equity securities. Equity Principal Investment Strategy ----------------------------- The Multi-Style Equity Fund invests primarily in common stocks of medium and large capitalization companies, most of which are US based. The Fund employs a "multi-style, multi-manager" approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. The Fund uses three principal investment styles intended to complement one another: a Growth Style, a Value Style and a Market-Oriented Style. The Fund intends to be fully invested at all times. Effect of changing the investment objective ------------------------------------------- Pursuant to its principal investment strategy, the Fund invests in securities that its Money Managers believe will provide income and capital growth. If the proposed investment objective is approved, the Fund would continue to invest in such securities, but income would no longer be a stated investment goal. Current Investment Proposed Investment Proposal Fund Objective Objective - -------- ---- --------- --------- 2(b) Aggressive To provide capital appreciation by Seeks to provide long term capital growth. Equity assuming a higher level of volatility than is ordinarily expected from the Multi-Style Equity Fund by investing in equity securities. Principal Investment Strategy ----------------------------- The Aggressive Equity Fund invests primarily in common stocks of small and medium capitalization companies, most of which are US based. The Fund's investments may include companies that have been publicly traded for less than five years and smaller companies, such as companies not listed in the Russell 2000(R) Index. The Fund employs a "multi-style, multi-manager" approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. The Fund uses three principal investment styles intended to complement one another: a Growth Style, a Value Style and a Market-Oriented Style. The Fund intends to be fully invested at all times. A portion of the Fund's net assets may be "illiquid securities" (i.e., securities that do not have a readily available market or that are subject to resale restrictions). Effect of changing the investment objective ------------------------------------------- Pursuant to its principal investment strategy, the Fund invests in securities that its Money Managers believe will provide capital appreciation. If the proposed investment objective is approved, the Fund would continue to invest in such securities, but capital growth would be the stated investment goal. Also, the investment objective of the Fund would no longer reference Multi-Style Equity Fund.
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Current Investment Proposed Investment Proposal Fund Objective Objective - -------- ---- --------- --------- 2(c) Non-US To provide favorable total return and Seeks to provide long term capital growth. additional diversification for US investors by investing primarily in equity and fixed- income securities of non-US companies and securities issued by non-US governments. Principal Investment Strategy ----------------------------- The Non-U.S. Fund invests primarily in equity securities issued by companies domiciled outside the US and in depositary receipts, which represent ownership of securities of non- US companies. The Fund's investments span most of the developed nations of the world (particularly Europe and the Far East) to maintain a high degree of diversification among countries and currencies. The Fund employs a "multi-style, multi-manager" approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. The Fund uses three principal investment styles intended to complement one another: a Growth Style, a Value Style and a Market-Oriented Style. The Fund intends to be fully invested at all times. A portion of the Fund's net assets may be "illiquid" securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions). Effect of changing the investment objective ------------------------------------------- Pursuant to its principal investment strategy, the Fund invests in securities that its Money Managers believe will provide favorable total return and diversification. If the proposed investment objective is approved, the Fund would continue to invest in such securities, but capital growth would be the stated investment goal. Also, the investment objective of the Fund would no longer reference equity and fixed-income securities of non-US companies and securities issued by non-US governments. Current Investment Proposed Investment Proposal Fund Objective Objective - -------- ---- --------- --------- 2(d) Real To generate a high level of total return Seeks to provide current income and long Estate through above average current income term capital growth. Securities while maintaining the potential for capital appreciation. Principal Investment Strategy ----------------------------- The Real Estate Securities Fund seeks to achieve its objective by concentrating its investments primarily in equity securities of issuers whose value is derived from ownership, development and management of underlying real estate properties. The Fund invests primarily in securities of companies known as real estate investment trusts (REITs) that own and/or manage properties. The Fund may also invest in equity securities of other types of real estate-related companies. The Fund invests in companies which are predominantly US based. The Fund employs a multi-manager approach whereby portions of the Fund are allocated to different money managers whose approaches are intended to complement one another. The Fund intends to be fully invested at all times. A portion of the Fund's net assets may be "illiquid" securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions). Effect of changing the investment objective ------------------------------------------- Pursuant to its principal investment strategy, the Fund invests in securities that its Money Managers believe will provide favorable total return through above average current income. If the proposed investment objective is approved, the Fund would continue to invest in such securities, but current income and capital growth would be the stated investment goals.
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Current Investment Proposed Investment Proposal Fund Objective Objective - -------- ---- --------- --------- 2(e) Core To maximize total return through capital Seeks to provide current income and the Bond appreciation and income by assuming a level preservation of capital. of volatility consistent with the broad fixed- income market by investing in fixed-income securities. Principal Investment Strategy ----------------------------- The Core Bond Fund invests primarily in fixed-income securities. In particular, the Fund holds fixed income securities issued or guaranteed by the US government and, to a lesser extent by non-US governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the US by non-US banks and corporations (Yankee Bonds). The Fund may invest up to 25% of its assets in debt securities that are rated below investment grade. These securities are commonly referred to as "junk bonds." The duration of the Fund's portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 3.73 years as of December 31, 2002, but may vary up to 25% from the Index's duration. The Fund has no restrictions on individual security duration. The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own expertise in the fixed-income markets. Effect of changing the investment objective ------------------------------------------- Pursuant to its principal investment strategy, the Fund invests in securities that its Money Managers believe will provide favorable total return and income. If the proposed investment objective is approved, the Fund would continue to invest in such securities, but current income and the preservation of capital would be the stated investment goals. Also, the investment objective would no longer reference volatility or fixed-income securities.
Shareholders of each Fund are being asked to approve a reclassification of the Fund's investment objectives from "fundamental" to "non-fundamental" in Proposal 3, described below. If Shareholders approve Proposal 3, each of the amended investment objectives that are approved pursuant to Proposals 2(a) through 2(e) will be non-fundamental investment objectives. None of Proposals 2(a) through 2(e) is being submitted forcontingent upon approval of Proposal 3 by Shareholders of the Funds. A copysubject Fund or upon approval 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. 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 reviewedProposal 2 by the Board. In addition,other Funds. Approval of Proposal 3 by the Independent Trustees also consulted with the Investment Company's outside counsel concerning these matters. After a careful review and evaluationShareholders of this information, a special meetingany Fund is likewise not contingent upon approval 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. 10 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 changes in investment advisory services would requirecorresponding Proposal 2. Required Vote The approval of the Board and Shareholders in accordance with the 1940 Act. 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 otheramended 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. 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. 11 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 factors 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. 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 12 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 shareholdersobjective 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. In reaching this decision, the Board did not determine the relative importance of the factors which were discussed. The discussion by the Trustees with Fund counsel reflected consideration by the Board of all of the issues considered. 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 torequires 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. 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 13 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 a 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 other FRC directors then in 14 office (with Messrs. Russell and Phillips, each a "Russell-designated director"); and (ii) three other persons designated by Northwestern Mutual. 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 ofoutstanding voting 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 15 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 a 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.that Fund. 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. 16 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. 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 eacha Fund means the vote of the lesser of (i)(a) 67% or more of the sharesvoting securities of eachthe Fund representedpresent at the Special Meeting,meeting, if the holders of more than 50% of the outstanding sharesvoting securities of the Fund are present at the Special Meeting or represented by proxy,proxy; or (ii)(b) more than 50% of the outstanding sharesvoting securities of the Fund. Shareholders of each Fund will vote separately on their respective Proposal, as applicable. The investment objective applicable to each Fund will be changed only if approved by the Shareholders of that Fund. 15 THE BOARDTRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMEND THAT THE SHAREHOLDERS OF TRUSTEES RECOMMENDSEACH FUND AND CONTRACTOWNERS PROVIDING VOTING INSTRUCTIONS VOTE "FOR" PROPOSALS 2(a) - 2(e) AS APPLICABLE. ANY EXECUTED UNMARKED PROXY CARDS AND VOTING INSTRUCTION CARDS THAT SHAREHOLDERS VOTE TO APPROVE THE PROPOSED MANAGEMENT AGREEMENT WITH FRIMCOARE RETURNED ON BEHALFA TIMELY BASIS WILL BE SO VOTED. PROPOSAL 3: APPROVAL OF A RECLASSIFICATION OF THE FUNDS,INVESTMENT OBJECTIVES OF EACH FUND FROM FUNDAMENTAL 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 providesNON-FUNDAMENTAL The investment objective for each Fund is a "fundamental" investment policy, meaning that it shallmay not be unlawful for any registered open-endchanged without Shareholder approval. The Funds' investment companyobjectives are not required to issue any class of senior security orbe fundamental, and FRIMCo has proposed to sell any senior security of which it is the issuer, exceptBoard 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, thatobjective for each Fund be reclassified from fundamental to non-fundamental. As a non-fundamental investment policy, each investment objective could be changed by the Trustees without Shareholder approval if the Trustees deem the change to be in the event that such asset coverage shall at any time fall below 300 per centbest interests of Shareholders. FRIMCo has proposed these changes in order to provide additional flexibility to conduct the registered company shall, within three days thereafter (not including Sundays and holidays) or such longer period as the SEC may allow, reduce 17 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 authorityprogram of each sub-trustFund in response to less thanchanging market conditions and circumstances consistent with applicable laws in effect from time to time, without the amount that is permitted by the 1940 Act as describedexpense and delay associated with arranging for a Shareholder meeting to approve changes in the prior paragraph. Specifically, each Fund's investment restriction on borrowing currently provides: "[objective. The Board does not expect to use this flexibility frequently. However, the Trustees would be in a position to change the investment objective of any Fund will not:] Borrow amounts more than 5%in circumstances when a change, in the Board's judgment, would be in the best interests of the Fund's total assets taken at costShareholders. Such circumstances would include changes in the securities markets generally that would render achievement of the Fund's then current investment objective more difficult on an ongoing basis 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 arrangementschanges with respect to margin for futures contracts are not deemed a pledge of assets." WHY IS AN INCREASE IN THE BORROWING LIMITATION PROPOSED? At a Board meeting held on October 5, 1998, management reported tothe Fund specifically. If the Board did decide to make such a change to any non-fundamental investment objective, the Fund would provide Shareholders with 60 days' notice before the effective date of such change. If Proposal 3 is approved, Shareholders will no longer have the ability to vote on proposed investment objective changes. The current fundamental investment objectives for each Fund, to which Shareholders are being asked to approve changes, are set forth above in Proposals 2(a) through 2(e). If the prospects for entering intoShareholders of a line of credit forFund approve the Investment Company with a commercial bank, wherebyproposal to reclassify its investment objective from fundamental to non-fundamental, the Investment Company's sub-trustsBoard thereafter would be permitted to borrow money underchange the line of creditinvestment objective for such Fund, if appropriate to do so in order to meet redemption requests. This practice would permit the Funds to pay redemption proceeds to shareholdersits judgment, without the need to make untimelydelay and disadvantageous dispositions of securities. Given the current investment restrictionexpense of the Investment Company, borrowings byFund arranging for Shareholder approval. If these Funds' investment objectives remain fundamental and the Funds for this purposeBoard determined that it was in the best interests of Shareholders to change an investment objective, each such Fund would be limitedrequired to five percenthold a Shareholder meeting at which such change would be voted upon, and to prepare and send a proxy statement to Shareholders seeking their instructions as to how to vote shares at such meeting. Obtaining Shareholder approval to change the Funds' investment objectives is likely to involve significant delays and costs. The Board has determined that Proposal 3 is in the best interests of the Shareholders of each Fund. 16 The table below summarizes the effects of reclassifying each investment objective from fundamental to non-fundamental.
Fundamental Investment Non-Fundamental Investment Objective Objective ---------------------------------- ------------------------------------ Who must approve changes in a Board and Shareholders Board fundamental investment objective? How quickly can a change to the Relatively slowly, since a vote of Relatively quickly, because the investment objective be made? Shareholders is required change can be accomplished by action of the Board alone, provided that Shareholders are provided 60 days' prior notice that their Fund's objective is being changed What is the relative cost to change an Costly to change because a Less costly to change because a investment objective? Shareholder vote requires holding change can be accomplished by a meeting of Shareholders with action of the Board of Trustees additional SEC filing requirements without Shareholder approval and proxy solicitation efforts
Shareholders of each Fund are being asked to approve a change 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,investment objectives 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 officersProposal 2, described above. If Shareholders approve Proposals 2 and 3, each of the Investment Company notedamended investment objectives that an increase in the maximum levelare approved pursuant to Proposals 2(a) through 2(e) will be non-fundamental investment objectives. Proposal 3 is not contingent upon approval 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 officersProposal 2 by Shareholders of the Investment Company submit to Shareholders a proposal to approve such amendment 18 to permit borrowing at a higher levelsubject Fund or upon approval of this Proposal 3 by the other Funds. If approved, each Fund's investment restriction would be revised to state: "[TheApproval of Proposal 2 by the Shareholders of any Fund will not:] Borrow money, except that the Fund may borrow as a temporary measure for extraordinary or emergency purposes, andis likewise not in excess of five percentcontingent upon approval 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%corresponding Proposal 3. Required Vote The approval of the current valuereclassification of the Fund's assets taken at market value, less liabilities other than borrowings. If at any timeinvestment objective of each Fund from fundamental to non-fundamental requires the Fund's borrowings exceed this limitation due toapproval of 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. To be approved, the proposal must receive the affirmative vote of "a majority of the outstanding voting securities"securities of that Fund. The vote of a majority of the outstanding voting securities of a Fund means the vote of the lesser of (a) 67% or more of the voting securities of the Fund present at the meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy; or (b) more than 50% of the outstanding voting securities of the Fund. Shareholders of each Fund as definedwill vote separately on Proposal 3. The investment objective applicable to each Fund will be reclassified only if approved by the Shareholders of that Fund. THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND AND CONTRACTOWNERS PROVIDING VOTING INSTRUCTIONS VOTE "FOR" PROPOSAL 3. ANY EXECUTED UNMARKED PROXY CARDS AND VOTING INSTRUCTION CARDS THAT ARE RETURNED ON A TIMELY BASIS WILL BE SO VOTED. OTHER BUSINESS The Trustees know of no other business to be presented at the Special Meeting other than Proposals 1 through 3, and do not intend to bring any other matters before the Special Meeting. However, if any additional matters should be properly presented, proxies will be voted in the 1940 Act anddiscretion of the persons named 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 19proxies. 17 INFORMATION REGARDING THE CURRENT MANAGEMENT AGREEMENT The table below sets forth (i)ABOUT RIF Investment Advisor, Administrator and Transfer Agent FRIMCo provides or oversees the net assetsprovision of each Fund as of the Investment Company's year ended December 31, 1997; (ii) the rate ofall general management fees, computed daily and payable monthly, to which FRIMCo is entitled for the services providedadministration, investment advisory and expenses assumed pursuant to the Management Agreement; (iii) the actualportfolio 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.
ANNUAL MANAGEMENT MANAGEMENT FEES FEES PAID TO NET ASSETS FEE (BASED (NET OF WAIVERS) MONEY MANAGERS AS ON AVERAGE FOR YEAR ENDED FOR YEAR ENDED FUNDS OF 12/31/97 NET ASSETS) 12/31/97 12/31/97 - ----- ----------- ----------- ---------------- -------------- Multi-Style Equity Fund................... $23,639,008 0.78% $88,827 $53,897 Aggressive Equity Fund.. $15,371,664 0.95% $82,318 $75,321 Non-U.S. Fund........... $ 6,876,259 0.95% $25,460 $23,654 Core Bond Fund.......... $ 8,522,683 0.60% $ 0 $14,574
Until further notice,Funds and acts as transfer agent for the Funds. FRIMCo intends to voluntarily waive all or a portion of its management fees, and, if necessary, reimburse total fund operating expenses, todevelops the extent necessaryinvestment program for each of the Funds, to maintain annual expense ratios of not more than 0.92%selects Money Managers for the Multi-Style Equity Fund; 1.25%Funds (subject to approval by the Board), allocates assets among Money Managers, monitors the Money Managers' investment programs and results, and may exercise investment discretion over certain assets. FRIMCo's mailing address is 909 A Street, Tacoma, Washington 98402. Unlike most investment companies that have a single organization that acts as both administrator and investment advisor, the Funds divide responsibility for corporate management and investment advice between FRIMCo and a number of different Money Managers. A list of the Money Managers and their addresses is provided on page 22 of this proxy statement. Distributor Russell Fund Distributors, Inc. (the "Distributor") serves as the distributor of RIF's shares. The Distributor receives no compensation from RIF for its services. The Distributor is a wholly owned subsidiary of FRIMCo and its mailing address is 909 A Street, Tacoma, WA 98402. Custodian RIF's custodian is State Street Bank and Trust Company and its mailing address is 1776 Heritage Drive, North Quincy, MA 02171. Independent Auditors Upon the recommendation of the Audit Committee, the Board selected the firm of PricewaterhouseCoopers LLP ("PwC") as independent auditors of RIF for the Aggressive Equity Fund; 1.30%fiscal year ending December 31, 2003. Audit Fees. The aggregate fees billed by PwC for professional services rendered for the Non-U.S. Fund and 0.80%audit of RIF's annual financial statements for the Core Bond Fund. Any such waiver mayfiscal years ended December 31, 2001 and 2002 were $77,812 and $74,168, respectively. Audit-Related Fees. PwC billed no aggregate fees for assurance and related services rendered that are reasonably related to the audit of RIF's annual financial statements but not reported under "Audit-Fees" above for the fiscal years ended December 31, 2001 and 2002. Tax Fees. The aggregate fees billed by PwC for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2001 and 2002 were $82,886 and $27,033, respectively. All Other Fees. The aggregate fees billed by PwC for professional services rendered for products and services other than those described above for the fiscal years ended December 31, 2001 and 2002 were $5,300 and $0, respectively. Substantially all of these services were rendered in connection with the issuance of consent letters related to filings by RIF with the Securities and Exchange Commission. The Audit Committee has considered whether the services described above are compatible with PwC's independence. The Audit Committee has also considered whether the provision of all other non-audit services rendered to FRIMCo, or an affiliate thereof that provides ongoing services to RIF, is compatible with maintaining PwC's independence. The Audit Committee has adopted a policy requiring pre-approval by the committee of all services (audit and non-audit) to be revised or eliminated at any time. Forprovided to RIF by its independent auditor. In accordance 18 with that policy, the Audit Committee has given its approval for the provision of audit services by PricewaterhouseCoopers LLP for the fiscal year ended December 31, 1997,2003 and has also given its general pre-approval ("general pre-approval") for up to a year in advance for the brokerage commissions paidprovision by PricewaterhouseCoopers LLP of particular categories or types of audit-related, tax and permitted non-audit services (including permitted non-audit services to RIF, FRIMCo and any entity controlling, controlled by, or under common control with FRIMCo that provides ongoing services to RIF), subject to specific budgets. Services which have not received general pre-approval or which exceed their budgets must receive specific approval of the Audit Committee ("specific approval"). In cases where the Audit Committee's pre-approval is not covered by one of those approvals, the policy provides that the Audit Committee may delegate general or specific pre-approval authority to one or more of its members, and that any such pre-approvals will then be communicated for informational purposes only to the full Audit Committee at its next scheduled meeting. To date, no such delegation of authority has been made by the Funds were: Multi-Style Equity Fund............. $36,614 Aggressive Equity Fund.............. $39,991 Non-US Fund......................... $22,186
Audit Committee. Pre-approval has not been waived in respect of services described under "Audit-Related Fees," "Tax Fees" or "All Other Fees" since the date on which the aforementioned pre-approval procedures were adopted by the Audit Committee. The Core Bond Fund normally doesaggregate non-audit fees billed by PwC for services rendered to RIF and to FRIMCo, or an affiliate thereof that provides ongoing services to RIF, for the fiscal years ended December 31, 2001 and 2002 were $330,697 and $210,258, respectively. Representatives of PwC are not payexpected to be present at the Special Meeting, but will be given the opportunity to make a stated brokerage commission onstatement if they so desire and will be available should any matter arise requiring their presence. Massachusetts State Law Considerations RIF is an entity of the type commonly known as a transaction. The Core Bond Fund does, however, engage in transactions with dealers acting as principal and the costs"Massachusetts business trust." Under Massachusetts law, shareholders of such transactions involve dealer spreads rather than brokerage commissions. 20 DIRECTORS AND OFFICERS OF FRIMCO Set forth below area trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the namesMaster Trust Agreement of RIF contains an express disclaimer of Shareholder liability for acts or obligations of RIF and current positionsprovides for indemnification and reimbursement of expenses out of RIF's property for any Shareholder held personally liable for the obligations of RIF. The Master Trust Agreement also provides that RIF may maintain appropriate insurance (for example, fidelity bonding and errors and omissions insurance) for the protection of RIF, the Shareholders of the sub-trusts, Trustees, officers, employees and directorsagents covering possible tort and other liabilities. Thus, the risk that a Shareholder would incur financial loss on account of FRIMCo, alongShareholder liability also is limited to circumstances in which both inadequate insurance exists and RIF itself is unable to meet its obligations. Under Massachusetts law, RIF 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. The Funds 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 their positions with FRC and/orother Shareholders as provided in Section 16(c) of the Investment Company, as applicable:
NAME INVESTMENT COMPANY FRIMCO FRC ---- ------------------ ------ --- George F. Russell, Trustee, Chairman Director Director, Chairman Jr. ................... of the Board of the Board Lynn L. Anderson........ Trustee, President, and Director, Chairman Director Chief Executive of the Board and Officer Chief Executive Officer Randall P. Lert......... Director of Investments Director -- Eric A. Russell......... -- Director, President Director Karl J. Ege............. Secretary and Secretary and Director, General Counsel General Counsel Secretary and 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 Fund -- Accounting Officer Administration and Accounting
1940 Act. RIF is holding the Special Meeting because of the items that must be presented for Shareholders' consideration and approval. 19 FURTHER INFORMATION REGARDINGABOUT VOTING AND THE SOLICITATION AND REVOCATION OF PROXIES AND VOTING INFORMATIONSPECIAL MEETING This Proxy Statement is provided on behalf of the Board of Trustees of the Investment Company in connection with athe Special Meeting in lieu of Annual Meeting of Shareholders of the Investment CompanyRIF to be held at the offices of the Investment CompanyRIF at 909 A Street, Tacoma, Washington 98402, on Thursday, November 19, 1998October 3, 2003, at 11:009:30 a.m., local time, and at any or all adjournments thereof. This Proxy Statement is first being mailed to Shareholders on or about October 19, 1998. YouJuly 15, 2003. Contractowners may revoke your proxytheir voting instructions at any time before it is exercisedprior to 4:00 p.m. Eastern time on September 30, 2003 by delivering asubmitting written notice to the Investment Company expressly revoking your proxy, by signing and forwarding to the Investment Companyof revocation, a later-dated proxy,instruction card or by attendinga later-dated instruction via facsimile, telephone or the Special Meeting and casting your votes in person. The Investment CompanyInternet. RIF requests that broker-dealer firms, custodians, nominees and fiduciariesParticipating Insurance Companies forward proxy material to Contractowners. RIF may reimburse such Participating Insurance Companies for their reasonable expenses incurred in connection with the beneficial ownerssolicitation 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, someEmployees of the 21 officers and employeesRIF or FRIMCo may solicit voting instructions from Contractowners for no additional remuneration. Record Date Shareholders 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, July 7, 2003, are entitled to notice of,be present and to vote at the Special Meeting andor 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................................... 3,984,687 Shares Aggressive Equity Fund.................................... 1,737,951 Shares Non-U.S. Bond Fund........................................ 1,608,032 Shares Core Bond Fund............................................ 2,377,688 Shares
The total number of voting sharesadjournment of the Investment Company issued and outstanding was 9,708,359. The holderSpecial Meeting. Each share 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 uponon each matter properly submitted topresented at the Special Meeting, orwith proportionate votes for fractional shares. Shares Outstanding As of June 30, 2003, there were the following number of shares of beneficial interest outstanding of each Fund: Number of Shares Name of Fund Outstanding ------------ ----------- Multi-Style Equity Fund 23,884,177.022 Aggressive Equity Fund 10,928,160.262 Non-US Fund 19,600,962.718 Real Estate Securities Fund 16,175,657.167 Core Bond Fund 13,781,646.216 Quorum The Master Trust Agreement provides that a quorum shall be present at a meeting when a majority of the shares entitled to vote is present at the meeting, but any adjournments thereof, with a proportionate votelesser number shall be sufficient for each fractional share. 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?adjournments. In the event that a quorum is not present at the Special Meeting in lieu of Annual Meeting or sufficient votes to approve a proposalProposal are not received, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. A shareholderShareholder vote may be taken on any other matter to properly come before the Special 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 Special Meeting will require the affirmative vote of a majority of those shares present at the Special Meeting or represented by proxy and voting. The persons named as proxies on the proxy 22 card will vote against any such adjournment those proxies required to be voted against such proposal.Proposal. They will vote in favor of an adjournment all other proxies whichthat they are entitled to vote. The costs of any such additional solicitation and of any adjourned session will be borne by the Investment Company.RIF. 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.quorum, but which have not been voted, and will not be voted for or against any adjournment. Abstentions (butand broker non-votes will not broker non-votes)be counted in 20 favor of, but will have no other effect on, Proposal 1, and will have the effect of a "no" vote when determining whether a proposal has received sufficient voteson all other Proposals and adjournments. Accordingly, Shareholders are urged to be approved. PRINCIPAL SHAREHOLDERSforward their voting instructions promptly. Beneficial Owners 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:
RUSSELL MULTI-STYLE AGGRESSIVE CORE BOND INSURANCE EQUITY FUND EQUITY FUND NON-U.S. FUND FUND FUND INSURANCE ---------------- -------------- -------------- ---------------- ---------------- COMPANY SHARES % SHARES % SHARES % SHARES % SHARES % --------- --------- ------ ------- ------ ------- ------ --------- ------ --------- ------ Security Equity Life Insurance Co. ......... 1,527,688 38.34% 965,270 55.54% 413,936 25.74% 440,121 32.41% 3,347,015 34.48% 84 Business Park, Ste. 303 Armont, NY 10504-1738 COVA Financial Services Life Insurance Co. .... 1,410,874 35.40% 305,284 17.57% 680,741 42.33% 1,166,817 49.07% 3,563,717 36.71% One Tower Lane, Ste. 3000 Oakbrook Terace, IL 60181-4644 General American Life Insurance Co........... 1,046,124 26.25% 467,397 26.89% 513,356 31.92% 770,751 18.51% 2,797,628 28.82% 700 Market Street St. Louis, MO 63101-1887
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. 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. 23 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 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,December 31, 2002, the officers and Trustees, including the nominees, of the Investment CompanyRIF as a group beneficially owned less than 1% of the shares of each Fund outstanding on such date. ANNUAL AND SEMI-ANNUAL REPORTS AAs of June 30, 2003, to the best of RIF's knowledge, no person owned beneficially more than 5% of any Fund, will furnish, without charge, a copyexcept as set forth on page 24 of this Proxy Statement. As of the Fund's Annual ReportRecord Date, the Participating Insurance Companies are The Northwestern Mutual Life Insurance Company ("Northwestern Mutual"), First MetLife Investors Insurance Company, MetLife Investors Insurance Company of California, MetLife Investors Insurance Company, Hartford Life Insurance Company, General American Life Insurance Company and Security Equity Life Insurance Company. Northwestern Mutual is an affiliate of FRIMCo and the most recent Semi-Annual Report succeedingDistributor. RIF has been advised by Northwestern Mutual that all shares of a Fund held in its general account will be represented at the Annual Report,Special Meeting by Northwestern Mutual and voted in the same proportion as the aggregate of the votes cast with respect to shares of such Fund held in all of Northwestern Mutual's 1940 Act Separate Accounts. Shareholder Proposals RIF is not required, and does not intend, to hold regular annual meetings of Shareholders. Shareholders wishing to submit proposals for consideration for inclusion in a Shareholder upon request. A Shareholder may receiveproxy statement for the report by writingnext meeting of Shareholders should send their written proposals to the Secretary, Russell Insurance Funds,RIF's offices, 909 A Street, Tacoma, Washington 98402, Attn: Secretary, so they are received within a reasonable time before any such meeting. The Trustees know of no business, other than the matters mentioned in the Notice and described above, that is expected to come before the Special Meeting. An opportunity will be provided at the Special Meeting for Shareholders present in person to present a motion to the Special Meeting. Should any properly presented motion or by telephoning 1-800-787-7354. By Orderany other matter requiring a vote of Shareholders arise, including any question as to an adjournment or postponement of the Trustees, /s/ Karl J. Ege Karl J. Ege Secretary October 19, 1998 24Special Meeting, the persons named as proxies will vote on such matters according to their best judgment in the interests of RIF. Annual and Semi-Annual Reports The Funds' most recent audited financial statements and Annual Report, for the fiscal year ended December 31, 2002, has been previously mailed to Shareholders, and is available free of charge. If you have not received an Annual Report for the Fund(s) in which you are an investor, or would like to receive additional copies, free of charge, please contact your Participating Insurance Company or contact RIF by mailing a request to Russell Investment Funds, 909 A Street, Tacoma, WA 98402, calling 1-800-787-7354, faxing 253-591-3495, or logging onto www.russell.com. 21 EXHIBITS TO PROXY STATEMENT EXHIBIT A. ListLIST OF NAMES AND ADDRESSES OF MONEY MANAGERS The following is a list of names and addresses of the Money Managers for the Underlying Funds. B. Present Management Agreement (the "Management Agreement") between the Investment Company and FRIMCo. 25 EXHIBIT A As of the date of this Proxy Statement, the money managers forThe Money Managers have no affiliations with the Funds alongor the Funds' service providers other than their management of Fund assets. These managers may also serve as Money Managers or advisers to other investment companies unaffiliated with their addresses, are as follows: MULTI-STYLE EQUITY FUNDRIF, other Funds in RIF, or to other clients of FRIMCo or of Frank Russell Company, including Frank Russell Company's wholly-owned subsidiary, Frank Russell Trust Company. Multi-Style Equity Fund Alliance Capital Management L.P., 601 2nd Ave. South,through its Bernstein Investment Research and Management Unit, 1345 Avenue of the Americas, New York, NY 10105. Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, CA 94105. Brandywine Asset Management, LLC, 201 North Walnut Street, Suite 5000, Minneapolis, MN 55402-4322 Equinox1200, Wilmington, DE 19801. Jacobs Levy Equity Management, Inc., 100 Campus Drive, P.O. Box 650, Florham Park, NJ 07932-0650. Montag & Caldwell, Inc., 3455 Peachtree Road, N.E., Suite 1200, Atlanta, GA 30326-3248. Strong Capital Management, Inc., 590 Madison100 Heritage Reserve, P.O. Box 2936, Menomonee Falls, WI 53201. Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312-2414. Westpeak Global Advisors, L.P., 1470 Walnut Street, Boulder, CO 80302. Aggressive Equity Fund CapitalWorks Investment Partners, LLC, 402 West Broadway, 25th Floor, San Diego, CA 92101. David J. Greene and Company, LLC, 599 Lexington Avenue, 41stNew York, NY 10022. Geewax, Terker & Company, 414 Old Baltimore Pike, Chadds Ford, PA 19317. Goldman Sachs Asset Management, L.P., 32 Old Slip, 17th Floor, New York, NY 10022 Westpeak Investment Advisors, LP, 1011 Walnut Street, Suite 400, Boulder, CO 80302 AGGRESSIVE EQUITY FUND Rothschild Asset10005. Jacobs Levy Equity Management, Inc., 1251 Avenue of the Americas, 51st100 Campus Drive, P.O. Box 650, Florham Park, NJ 07932-0650. Suffolk Capital Management, LLC, 1633 Broadway, 40th Floor, New York, NY 10020 Westpeak Investment Advisors, LP, 1011 Walnut Street, Suite 400, Boulder, CO 80302 NON-U.S. FUND J.P. Morgan Investment10019. Systematic Financial Management, L.P., 300 Frank Burr Boulevard, Glenpointe East, 7th Floor, Teaneck, NJ 07666-6703. TimesSquare Capital Management, Inc., 522 Fifth Avenue, 14thFour Times Square, 25th Floor, New York, NY 1003610036-9998. Non-U.S. Fund AQR Capital Management, LLC, 900 Third Avenue, 17th Floor, New York, NY 10022. 22 Fidelity Management & Research Company, 82 Devonshire Street, Boston, MA 02109-3614. Oechsle International Advisors, LLC, One International Place, 23rd Floor, Boston, MA 0211002110. The Boston Company Asset Management, Inc.,LLC, One Boston Place, 14th Floor, Boston, MA 02108 CORE BOND FUND02108-4402. Real Estate Securities Fund AEW Management and Advisors, L.P., World Trade Center East, Two Seaport Lane, Boston, MA 02110-2021. INVESCO Realty Advisors, a division of INVESCO Institutional (N.A.), Inc., One Lincoln Center, Suite 700, 540 LBJ Freeway - LB2, Dallas, TX 75240. RREEF America L.L.C., 875 North Michigan Avenue, 41st Floor, Chicago, IL 60611-1901. Core Bond Fund Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 360,300, P.O. Box 6430, Newport Beach, CA 92660 Standish, Ayer & Wood,92658-6430. TimesSquare Capital Management, Inc., One Financial Center, Boston, MA 02110 A-1Four Times Square, 25th Floor, New York, NY 10036-9998. 23 EXHIBIT B MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT made this 5th day of August, 1996 between RUSSELL INSURANCEBENEFICIAL OWNERS OF THE FUNDS a Massachusetts business trust hereinafter called the "Trust" and FRANK
Fund Name Beneficial Owner Shares Percent --------- ---------------- ------ ------- Aggressive Equity Fund. NORTHWESTERN MUTUAL LIFE INSURANCE 3,547,964.146 32.47% COMPANY VARIABLE LIFE ACCOUNT ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Aggressive Equity Fund. NORTHWESTERN MUTUAL LIFE INSURANCE 3,149,877.814 28.82% COMPANY ACCOUNT B ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Aggressive Equity Fund. NORTHWESTERN MUTUAL LIFE INSURANCE 2,113,066.894 19.34% COMPANY NML ACCOUNT ATTN INVESTMENT ACCOUNTING W6NE 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Aggressive Equity Fund. METLIFE INVESTORS INSURANCE CO 769,857.015 7.04% D/B/A COVA VARIABLE ANNUITY ACCOUNT ONE 4700 WESTOWN PKWY BLDG 4 STE 200 W DES MOINES IA 50266-6718 Core Bond Fund......... NORTHWESTERN MUTUAL LIFE INSURANCE 5,875,027.139 42.63% COMPANY ACCOUNT B ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Core Bond Fund......... NORTHWESTERN MUTUAL LIFE INSURANCE 3,562,880.737 25.85% COMPANY VARIABLE LIFE ACCOUNT ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Core Bond Fund......... METLIFE INVESTORS INSURANCE CO D/B/A 2,931,355.113 21.27% COVA VARIABLE ANNUITY ACCOUNT ONE 4700 WESTOWN PKWY BLDG 4 STE 200 W DES MOINES IA 50266-6718 Multi-Style Equity Fund NORTHWESTERN MUTUAL LIFE INSURANCE 7,629,642.658 31.94% COMPANY VARIABLE LIFE ACCOUNT ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Multi-Style Equity Fund NORTHWESTERN MUTUAL LIFE INSURANCE 6,852,407.910 28.69% COMPANY ACCOUNT B ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Multi-Style Equity Fund METLIFE INVESTORS INSURANCE CO D/B/A 3,961,061.583 16.58% COVA VARIABLE ANNUITY ACCOUNT ONE 4700 WESTOWN PKWY BLDG 4 STE 200 W DES MOINES IA 50266-6718 Multi-Style Equity Fund NORTHWESTERN MUTUAL LIFE INSURANCE 2,909,427.235 12.18% COMPANY NML ACCOUNT ATTN INVESTMENT ACCOUNTING W6NE 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797
24
Fund Name Beneficial Owner Shares Percent --------- ---------------- ------ ------- Non-U.S. Fund.............. NORTHWESTERN MUTUAL LIFE INSURANCE 6,051,959.653 30.88% COMPANY NML ACCOUNT ATTN INVESTMENT ACCOUNTING W6NE 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Non-U.S. Fund.............. NORTHWESTERN MUTUAL LIFE INSURANCE 5,409,132.985 27.60% COMPANY VARIABLE LIFE ACCOUNT ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Non-U.S. Fund.............. NORTHWESTERN MUTUAL LIFE INSURANCE 4,994,865.060 25.48% COMPANY ACCOUNT B ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Non-U.S. Fund.............. METLIFE INVESTORS INSURANCE CO D/B/A 1,923,278.596 9.81% COVA VARIABLE ANNUITY ACCOUNT ONE 4700 WESTOWN PKWY BLDG 4 STE 200 W DES MOINES IA 50266-6718 Real Estate Securities Fund NORTHWESTERN MUTUAL LIFE INSURANCE 7,021,781.858 43.41% COMPANY ACCOUNT B ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Real Estate Securities Fund NORTHWESTERN MUTUAL LIFE INSURANCE 4,454,811.254 27.54% COMPANY NML ACCOUNT ATTN INVESTMENT ACCOUNTING W6NE 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Real Estate Securities Fund NORTHWESTERN MUTUAL LIFE INSURANCE 3,194,786.492 19.75% COMPANY VARIABLE LIFE ACCOUNT ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797 Real Estate Securities Fund NORTHWESTERN MUTUAL LIFE INSURANCE 876,730.131 5.42% COMPANY ACCOUNT C ATTN MUTUAL FUND ACCOUNTING N13NW 720 E WISCONSIN AVE MILWAUKEE WI 53202-4797
25 PROXY CARD PROXY CARD 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 companyFUNDS SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 3, 2003 The undersigned, having received Notice of the "series" type registered under theSpecial Meeting of Shareholders of Russell Investment Company Act of 1940Funds ("1940 Act"RIF") 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 it 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 Advisers Act of 1940 and will engage in the business of rendering investment advice, 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)held on October 3, 2003, at 9:30 a.m., 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: B-1 A. Management and Administrative Services. (1) FRIMCo shall furnish to the Trust adequate (a) office space, which may be space withinPacific Time, at 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 StatesRIF located at 909 A Street, Tacoma, Washington and the various states in which the Trust does business, (ii) conducting correspondencerelated proxy statement, and other communications with the shareholders of the Trust ("Shareholders"), and (iii) maintaining or supervising the maintenance ofhereby revoking 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 thatProxies heretofore given with respect to these records FRIMCo's obligations under this Section 2(A) are supervisory in nature. (2) FRIMCo shall employ or provide and compensateshares to be voted at 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]") forSpecial Meeting, hereby appoints each of the Sub-Trusts or segments thereof,David Craig, Greg Lyons, Mary Beth Rhoden 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 of 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. B-2 (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. (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 B-3 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 B-4 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. 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. Costs, 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; B-5 O. Trustees' fees and expenses to Trustees who are not officers, employees, or stockholders of FRIMCoMark Swanson, or any of its affiliates; P. The Trust's pro rata portionthem, as Proxies 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 connectionundersigned with litigation, proceedings, other claims, and the legal obligations of the Trustpower to indemnify its Trustees, officers, employees, Shareholders, distributors, and agents with respect thereto. 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 B-6 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. 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 interestedperson 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, B-7 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;others 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 B-8 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 /s/ Gregory J. Lyons By: /s/ Lynn L. Anderson _________________________________ _________________________ Gregory J. Lyons, Assistant Lynn L. Anderson, Secretary President
FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY /s/ Gregory J. Lyons By: /s/ Eric A. Russell _________________________________ _________________________ Gregory J. Lyons, Assistant Eric A. Russell, Secretary 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 /s/ J. David Griswold By: /s/ Michael J. A. Phillips _________________________________ _________________________ J. David Griswold, Assistant Michael J. A. Phillips, Secretary President B-9 RUSSELL INSURANCE FUNDS PROXY SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 19, 1998 FUND NAME PRINTS HERE 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 shareson behalf of the above- referenced fund (the "Fund")undersigned as indicated on this proxy card all of the shares in the funds of RIF which the undersigned is entitled to vote at the Fund's Special Meeting in Lieu of Annual Meeting of Shareholders ("Special Meeting") to be heldand at the offices of Russell Insurance Funds (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 or postponement thereof, upon such business as may properlyfully as the undersigned would be brought before the Special Meeting. TO AVOID THE EXPENSE OF MULTIPLE MAILINGS TO THE SAME SHAREHOLDER, WE HAVE, WHEVEVER POSSIBLE, INCLUDED PROXY CARDS FOR ALL YOUR ACCOUNTS IN THE FUNDS INVOLVED IN THIS PROXY IN ONE ENVELOPE. Pleaseentitled to vote by filling in the boxes below.
WITHHOLD FOR all authority Nominees to vote except as for all marked nominees --------- ------- NO. 1 To elect the following six nominees as Trustees: Lynn L. Anderson, Paul E. Anderson, Paul Anton, PhD, William E. Baxter, Lee C. Gingrich, and Eleanor W. Palmer. (Instructions: To withhold authority to vote for any individual nominee(s), write the name of the nominee(s) below.) _____________________________________________ FOR AGAINST ABSTAIN --- ------- ------- 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 FRIMCo to take effect upon the acquisition of Frank Russell Company by The Northwestern Mutual Life Insurance Company. NO. 4 To approve a change to the 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.if personally present. THIS PROXY IS SOLICITED ON BEHALF OF THERIF'S BOARD OF TRUSTEES. IT WILLShares will be voted as you specify. The Board of Trustees of RIF recommends that you vote FOR --- each proposal. IF THIS PROXY CARD IS SIGNED, DATED AND RETURNED WITH NO CHOICE INDICATED AS TO ONE OR MORE PROPOSALS ON WHICH SHARES REPRESENTED BY THIS PROXY CARD ARE ENTITLED TO BE VOTED, AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXYSUCH SHARES 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 A FUNDAMENTAL RESTRICTION. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING ABOUT WHICH THE PROXY HOLDERS ARE NOT AWARE AT THIS TIME, THE PROXY HOLDERS MAYFOR EACH SUCH --- PROPOSAL. The Proxies are authorized in their discretion to transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. If you vote via facsimile, do not return this proxy card by mail. VOTE IN ACCORDANCE WITH THE VIEWS OF THE TRUSTEES THEREON. MANAGEMENT IS NOT AWARE OF ANY SUCH MATTERS. Dated:___________________________ _________________________________________ Signature _________________________________________ SignatureVIA FACSIMILE: 1-888-796-9932 Note: Please sign exactly as your name appears on the proxy.this Proxy card and date. If signing for estates, trusts or corporations, title or capacity should be stated. If shares are held jointly, each holder should sign. _______________________________________ Signature _______________________________________ Signature (if held jointly) _______________________________________ Date RIF_13381 FUND FUND FUND - ---- ---- ---- Aggressive Equity Fund Core Bond Fund Multi-Style Equity Fund Non-U.S. Fund Real Estate Securities Fund Please vote by filling in the appropriate box below. If you do not mark one or more proposals your Proxy will be voted FOR each such proposal. --- PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE: [X] - --------------------------------------------------------------------------- [_] To vote FOR ALL Funds on ALL Proposals mark this box. (No other vote is --- necessary.) - --------------------------------------------------------------------------- 1. Elect three members of the Board of Trustees of RIF: FOR WITHHOLD FOR ALL ALL ALL EXCEPT Nominee: 01. Michael J.A. Phillips [_] [_] [_] 02. Daniel P. Connealy 03. Julie W. Weston
Instruction: To withhold authority to vote for any individual nominee, mark the "For All Except" box and write the number and name of any such nominee on the line immediately below. ______________________________________ 2. Approve a change to the fundamental investment objective: FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN Aggressive Equity Fund [_] [_] [_] Core Bond Fund [_] [_] [_] Multi-Style Fund [_] [_] [_] Non-U.S. Fund [_] [_] [_] Real Estate Securities Fund [_] [_] [_]
3. Approve the reclassification of the investment objective from "fundamental" to "non-fundamental": FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN Aggressive Equity Fund [_] [_] [_] Core Bond Fund [_] [_] [_] Multi-Style Fund [_] [_] [_] Non-U.S. Fund [_] [_] [_] Real Estate Securities Fund [_] [_] [_]
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TODAY! VOTING INSTRUCTION CARD RUSSELL INVESTMENT FUNDS VOTING INSTRUCTION CARD SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 3, 2003 [NAME OF INSURANCE COMPANY] The undersigned, revoking all voting instructions heretofore given with respect to shares to be voted at the Special Meeting of Shareholders of Russell Investment Funds ("RIF") to be held on October 3, 2003 at 9:30 a.m., Pacific Time, at the offices of RIF located at 909 A Street, Tacoma, Washington, hereby instructs all shares of RIF deemed attributable to the undersigned's contract or policy with the issuing insurance company named above be voted as indicated on the Voting Instruction Card at the Special Meeting and at any adjournment or postponement thereof. The issuing insurance company named above and any proxies appointed by it are authorized in their discretion to transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. VOTING INSTRUCTIONS ARE SOLICITED BY THE ISSUING INSURANCE COMPANY NAMED ABOVE ON BEHALF OF RIF'S BOARD OF TRUSTEES. Shares will be voted as you specify. The Board of Trustees of RIF recommends that you vote FOR each proposal. IF THIS --- VOTING INSTRUCTION CARD IS SIGNED, DATED AND RETURNED WITH NO CHOICE INDICATED AS TO ONE OR MORE PROPOSALS ON WHICH SHARES REPRESENTED BY THE UNDERSIGNED'S CONTRACT OR POLICY ARE ENTITLED TO BE VOTED, SUCH SHARES SHALL BE VOTED FOR EACH --- SUCH PROPOSAL. If you vote via telephone, facsimile or the Internet, do not return this Voting Instruction Card by mail. VOTE VIA FACSIMILE: 1-888-796-9932 VOTE VIA TELEPHONE: 1-866-235-4258 VOTE VIA THE INTERNET: https://vote.proxy-direct.com ---------------------------------------------------- CONTROL NUMBER: 999 9999 9999 999 ---------------------------------------------------- Note: Please sign exactly as your name appears on this Voting Instruction Card and date. If signing for estates, trusts or corporations, title or capacity should be stated. If shares are held jointly, each holder should sign. ____________________________________________________ Signature ____________________________________________________ Signature (if held jointly) ____________________________________________________ Date RIF_13381 FUND FUND FUND - ---- ---- ---- Aggressive Equity Fund Core Bond Fund Multi-Style Equity Fund Non-U.S. Fund Real Estate Securities Fund Please provide voting instructions by filling in the appropriate box below. If you do not mark one or more proposals, the shares attributable to your contract or policy will be voted FOR each such proposal. --- PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE: [X] - --------------------------------------------------------------------------- [_] To vote FOR ALL Funds on ALL Proposals mark this box. (No other vote is --- necessary.) - --------------------------------------------------------------------------- 1. Elect three members of the Board of Trustees of RIF: FOR WITHHOLD FOR ALL ALL ALL EXCEPT Nominee: 01 Michael J.A. Phillips 02 Daniel P. Connealy [_] [_] [_] 03 Julie W. Weston
Instruction: To withhold authority to vote for any individual nominee, mark "For All Except" and write the number and name of any such nominee on the line immediately below. _______________________________________ 2. Approve a change to the fundamental investment objective: FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN Aggressive Equity Fund [_] [_] [_] Core Bond Fund [_] [_] [_] Multi-Style Fund [_] [_] [_] Non-U.S. Fund [_] [_] [_] Real Estate Securities Fund [_] [_] [_]
3. Approve the reclassification of the investment objective from "fundamental" to "non-fundamental": FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN Aggressive Equity Fund [_] [_] [_] Core Bond Fund [_] [_] [_] Multi-Style Fund [_] [_] [_] Non-U.S. Fund [_] [_] [_] Real Estate Securities Fund [_] [_] [_]
YOUR VOTING INSTRUCTIONS ARE IMPORTANT! PLEASE SIGN, DATE AND RETURN YOUR VOTING INSTRUCTION CARD TODAY. July 2003 TO: CONTRACT OWNERS, POLICY OWNERS AND PAYEES INVESTED IN RUSSELL INVESTMENT FUNDS A Special Meeting of the Shareholders of Russell Investment Funds ("RIF") will be held on Friday, October 3, 2003, at 9:30 a.m., Pacific Time, at the offices of RIF, 909 A Street, Tacoma, Washington 98402. Although you are not a shareholder of RIF, all or part of the value of your Northwestern Mutual variable annuity contract or variable life insurance policy is invested in shares of RIF through NML Variable Annuity Account B or Northwestern Mutual Variable Life Account, respectively. Your variable annuity contract or variable life policy provides that you have the right to instruct Northwestern Mutual how the shares attributable to your contract or policy should be voted at the Special Meeting. We have enclosed a booklet from RIF containing a Letter to Shareholders, Notice of Special Meeting and a Proxy Statement. Also enclosed is a Voting Instruction Card for each such contract or policy you have invested in RIF. This material describes in detail the matters to be considered at the Special Meeting, which include the election of three trustees, changes to RIF's fundamental investment objectives, and reclassification of RIF's investment objectives from fundamental to non-fundamental, and contains a phone number you can call if you have questions regarding the Special Meeting. After reviewing the material, please complete and sign each Voting Instruction Card and return it in the self-addressed, postage-paid envelope provided or transmit your voting instructions via facsimile, telephone or the Internet as described in the Voting Instruction Card. Shares of RIF attributable to your variable annuity contract or variable life policy will be voted by Northwestern Mutual in accordance with your instructions. Your voting instructions must sign.be received by 4:00 p.m., Eastern Time, on September 30, 2003. Shares of each fund of RIF held through NML Variable Annuity Account B or Northwestern Mutual Variable Life Account as to which no timely voting instructions are received will be voted by Northwestern Mutual in proportion to the instructions received from those contract owners, policy owners and payees who furnish timely instructions with respect to shares of that fund held in the respective Account. We recommend that you instruct Northwestern Mutual to vote FOR the election of the three trustees and FOR each of the other proposals presented in the Proxy Statement. The Northwestern Mutual Life Insurance Company Mason G. Ross, Executive Vice President and Chief Investment Officer