UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box: | ||
¨ | Preliminary Information Statement | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) | |
x | Definitive Information Statement |
Russell Investment Funds
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box): | ||||
x | No fee required | |||
¨ | Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11 | |||
(1) | Title of each class of securities to which transaction applies:
| |||
| ||||
(2) | Aggregate number of securities to which transaction applies:
| |||
| ||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| ||||
(4) | Proposed maximum aggregate value of transaction:
| |||
| ||||
(5) | Total fee paid: | |||
| ||||
¨ | Fee paid previously with preliminary materials. | |||
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid:
| |||
| ||||
(2) | Form, Schedule or Registration Statement No.:
| |||
| ||||
(3) | Filing Party:
| |||
| ||||
(4) | Date Filed:
| |||
|
RUSSELL INVESTMENT FUNDS
1301 Second Avenue
18th Floor
Seattle, WA 98101
July 24, 2014
GLOBAL REAL ESTATE SECURITIES FUND
IMPORTANT NOTICE OF INTERNET AVAILABILITY OF INFORMATION STATEMENT
REGARDING A RECENT MONEY MANAGER CHANGE
An Information Statement regarding a recent money manager change related to the Global Real Estate Securities Fund (the “Fund”), a series of Russell Investment Funds (“RIF”), is available for your review. This Notice presents only an overview of the more complete Information Statement that is available to you on the internet or by mail.
The Fund is not soliciting proxy or consent authority, but is furnishing an Information Statement pursuant to Rule 14a-16 and 14c-2 under the Securities Exchange Act of 1934, as amended.
Although you are not a shareholder in the Fund, your purchase payments and the earnings thereon under your variable annuity or variable life insurance contracts issued by your insurance company are invested in a sub-account of a separate account established by your insurance company. This sub-account invests in shares of the Fund. We encourage you to access and review all of the important information contained in the Information Statement.
The Information Statement details a recent money manager change related to the Fund. Specifically, the Board of Trustees of RIF (the “Board”) has approved the selection of Morgan Stanley Investment Management, Inc., Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company to serve as new money managers to the Fund. At the same time, the Board approved the termination of AEW Capital Management, L.P. as a money manager to the Fund. These changes became effective on May 27, 2014 and May 20, 2014, respectively.
RIF’s investment adviser is Russell Investment Management Company (“RIMCo”). The Information Statement is being provided to you in lieu of a proxy statement pursuant to the terms of an exemptive order granted to RIMCo and RIF by the Securities and Exchange Commission. The order permits RIMCo to hire a money manager at any time, subject to the approval of the Fund’s Board, without a shareholder vote. Shareholders of the Fund must be provided with specified information within 90 days of the hiring of any new money manager. The order allows the Fund, in lieu of physical delivery of the Information Statement, to make the Information Statement available online.
The full Information Statement will be available on RIF’s website at http://hosted.rightprospectus.com/RIF/ until at least 90 days after this notice was sent to you. A paper or email copy of the full Information Statement may be obtained, without charge, by calling1-800-290-2604 or emailing RussellProspectuses@RRD.com. For other Fund related information, please call 1-800-787-7354.
If you want to receive more information regarding this recent money manager change, you may
request a paper or email copy of the Information Statement per the instructions above. You must
request a paper copy of the Information Statement by the 90th day after this notice was sent to you in
order to receive timely delivery.
There is no charge to you for requesting a copy.
RUSSELL INVESTMENT FUNDS
1301 Second Avenue
Seattle, Washington 98101
July 24, 2014
To Shareholders of the Global Real Estate Securities Fund (the “Fund”):
Enclosed is an Information Statement of Russell Investment Funds (“RIF”) that details a recent money manager change related to the Fund. Specifically, the Board of Trustees of RIF (the “Board”) has approved the selection of Morgan Stanley Investment Management, Inc., Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company (collectively, “Morgan Stanley”) to serve as new money managers to the Fund. At the same time, the Board approved the termination of AEW Capital Management, L.P. as a money manager to the Fund. These changes became effective on May 27, 2014 and May 20, 2014, respectively.
The attached Information Statement provides information about Morgan Stanley, the new agreements with and in respect of Morgan Stanley and the Board’s considerations in approving the new agreements.
Please note that the Fund is not required to obtain shareholder approval for this money manager change. We are not asking you for a proxy and you are requested not to send us a proxy.
If you have any questions regarding the Information Statement, please call 1-800-787-7354. A paper or email copy of the attached Information Statement may be obtained, without charge, by calling 1-800-290-2604.
Sincerely,
Jessica Gates
Assistant Secretary
Russell Investment Company
RUSSELL INVESTMENT FUNDS
1301 Second Avenue
Seattle, Washington 98101
INFORMATION STATEMENT
GLOBAL REAL ESTATE SECURITIES FUND
Under the terms of an exemptive order (the “Order”) issued by the Securities and Exchange Commission (“SEC”), this document is an Information Statement and is being furnished to shareholders of the Global Real Estate Securities Fund (the “Fund”), a series of Russell Investment Funds (“RIF”). Russell Investment Management Company (“RIMCo”) serves as the investment adviser of the Fund.
The Fund allocates most of its assets among multiple money managers unaffiliated with RIMCo. Assets not allocated to money managers are managed by RIMCo. RIMCo, as the Fund’s adviser, may change the allocation of the Fund’s assets among money managers at any time. The Order permits RIMCo to hire a money manager at any time, subject to the approval of the Board of Trustees of RIF (the “Board”), without a shareholder vote. Pursuant to the terms of the Order, the Fund is required to notify its shareholders within 90 days of when a new money manager is hired for the Fund.
Change of Money Manager
On May 20, 2014, the Board authorized the signing of a portfolio management contract to engage Morgan Stanley Investment Management, Inc. to manage the investment and reinvestment of a portion of the assets of the Fund assigned to them by RIMCo. Morgan Stanley delegates a portion of its investment advisory services to the Fund to its SEC-registered non-U.S. affiliates, Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company (together with Morgan Stanley Investment Management, Inc., “Morgan Stanley”), in accordance with the terms of Delegation Agreements between Morgan Stanley Investment Management, Inc. and each such affiliate. These Delegation Agreements were approved by the Board on that same date (the Delegation Agreements, together with the portfolio management contract, the “Agreements”). On that same date, the Board also authorized the termination of a similar portfolio management contract with AEW Capital Management, L.P. (“AEW”). On May 20, 2014, the portfolio management contract with AEW was terminated.
Portfolio Management Contract
Effective May 20, 2014, RIMCo, as fiduciary for RIF, entered into a new portfolio management contract with Morgan Stanley Investment Management, Inc. and, effective May 27, 2014, Morgan Stanley Investment Management, Inc. entered into the Delegation Agreements with its affiliates. The Agreements will continue until August 31, 2015. Thereafter, the Agreements will continue in effect for successive annual periods if their continuance has been specifically approved at least annually by RIF’s Board, including the affirmative vote of a majority of the Trustees who are not parties to the contract, or “interested persons” (as defined in the Investment Company Act of 1940) of any such party, cast in person at a meeting called for the purpose of considering such approval. The Agreements are automatically terminated if assigned. The Agreements may be terminated without payment of any penalty by RIMCo or RIF immediately upon written notice to Morgan Stanley and by Morgan Stanley upon 30 or 60 days’ written notice to the applicable party.
Board Approval of Portfolio Management Contract
In evaluating the Agreements, the Board considered that the Fund, in employing a manager-of-managers method of investment, operates in a manner that is distinctly different from most other investment companies. In the case of most other investment companies, an advisory fee is paid by the investment company to its adviser which in turn, employs and compensates individual portfolio managers to make specific securities selections consistent with the adviser’s style and investment philosophy. In the case of the Fund, an advisory fee is paid by the Fund to RIMCo which in turn compensates the money manager firms hired to make specific securities selections.
The Board considered that RIMCo (rather than any money manager) is responsible under the investment advisory agreement for determining, implementing and maintaining the investment program for the Fund. Assets of the Fund generally have been allocated among the multiple money managers.
RIMCo is responsible for selecting, subject to Board approval, money managers for the Fund and for actively managing allocations and reallocations of assets among the money managers. The Board has been advised that RIMCo’s goal is to construct and manage diversified portfolios in a risk aware manner. Each money manager for the Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities for the portion of the Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Fund’s applicable investment objective, policies and restrictions, any constraints placed by RIMCo upon its selection of portfolio securities and the money manager’s specified role in the Fund. RIMCo is responsible for communicating performance expectations to each money manager; supervising compliance by each money manager with the Fund’s investment objective and policies; authorizing money managers to engage in certain investment strategies for the Fund; and recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board the additions of new money managers or terminations or replacements of existing money managers at any time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific investment constraints from time to time for each money manager intended to capitalize on the strengths of that money manager or to coordinate the investment activities of money managers for the Fund in a complementary manner. Therefore, RIMCo’s selection of money managers is made not only on the basis of performance considerations but also on anticipated compatibility with other money managers in the Fund. In light of the foregoing, the overall performance of the Fund over appropriate periods reflects, in great part, the performance of RIMCo in designing the Fund’s investment program, structuring the Fund, selecting an effective money manager with a particular investment style or sub-style for a segment that is complementary to the styles of the money managers of other Fund segments, and allocating assets among the money managers in a manner designed to achieve the objectives of the Fund.
The Board considered that the prospectus for the Fund and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for the Fund, rather than the investment selection role of the Fund’s money managers, and describe the manner in which the Fund operates so that investors may take that information into account when deciding to purchase shares of the Fund.
At a meeting held on May 20, 2014, the Board received a proposal from RIMCo to approve the Agreements. The Trustees approved the terms of the Agreements based upon RIMCo’s recommendation to hire the money manager at the proposed fee rate; information as to reason for the proposed change; information as to the money manager’s role in the management of the Fund’s investment portfolio (including the amount of Fund assets to be allocated to the money manager) and RIMCo’s evaluation of the anticipated quality of the investment advisory services to be provided by the money manager; information as to any significant business relationships between the money manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; the Fund’s Chief Compliance Officer’s evaluation of the money manager’s compliance program, policies and procedures and certification that they were consistent with applicable legal standards; RIMCo’s explanation as to the lack of relevance of money manager profitability to the evaluation of portfolio management contracts with money managers because the willingness of the money manager to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo’s awareness of the fees charged by the money manager to other clients; RIMCo’s belief that the proposed investment advisory fees would be reasonable in light of the anticipated quality of investment advisory services to be rendered; and the expected costs of transitioning Fund assets to the money manager. The Trustees considered information provided by RIMCo that, based on Fund assets of approximately $658 million (as of December 2013), the proposed changes would decrease by approximately $87,000 per annum the aggregate money manager fees to be paid by RIMCo from its investment advisory fee as a result of the engagement of the money manager. The Trustees also considered their findings at their May 19-20, 2014 meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager changes because the money manager’s investment advisory fees are paid by RIMCo. A more extensive discussion of the Board’s findings at their May 19-20, 2014 meeting will be available in the Fund’s semi-annual report for the fiscal period ended June 30, 2014, a copy of which will be available free of charge by calling 1-800-787-7354.
Compensation
Under its advisory agreement with RIF, RIMCo receives an advisory fee from the Fund for its services. From its advisory fee, RIMCo, as agent for RIF, pays all Fund money managers for their investment selection services. The remainder of the fee is retained by RIMCo as compensation for its services and to pay expenses. Quarterly, each Fund money manager, including Morgan Stanley, is paid a pro rata portion of its annual fee, based on the monthly average of all the assets allocated to it. The annual rate of the advisory fees payable to RIMCo as a percentage of the average daily net assets of the Fund is 0.80% (estimated to be $5,194,702 based on an assumed average asset level of $649,337,767 for the twelve months ended December 31, 2013, RIF’s fiscal year end). Prior to the changes described herein, the aggregate annual rate of the advisory fees payable to the Fund’s money managers was approximately 0.26% (estimated to be $1,688,278 based on the same asset level). Giving effect to the changes described in this notice including any changes to the target allocation of Fund assets among the Fund’s money managers and RIMCo, as applicable, the aggregate annual advisory fee payable to the Fund’s money managers would have been approximately 0.24% (estimated to have been $1,558,411 based on the same asset level).
For the most recently completed fiscal year, the Fund paid no aggregate commissions to brokers affiliated with Morgan Stanley.
The money managers may use brokerage commissions to pay for soft dollar research services. Any such use will be in accordance with Section 28(e) of the Securities Exchange Act of 1934.
Similar Investment Advisory Relationships
Morgan Stanley Investment Management Inc. acts as an investment adviser to other registered U.S. investment companies with investment objectives similar to those of the Fund.
Name | Assets as of May 31, 2014 | |||
AZL Morgan Stanley Global Real Estate Fund | $ | 195,450,594 | ||
Morgan Stanley Global Real Estate Fund | $ | 305,401,232 | ||
Universal Institutional Funds, Inc. – Global Real Estate Portfolio | $ | 104,074,299 | ||
Morgan Stanley Institutional Fund, Inc. – Global Real Estate Portfolio | $ | 2,321,195,851 | ||
Russell Investments Company Russell Global Real Estate Securities Fund | $ | 1,925,700,000 |
Morgan Stanley Investment Management Limited does not act as an investment adviser to other registered U.S. investment companies with investment objectives similar to those of the Fund.
Morgan Stanley Investment Management Company does not act as an investment adviser to other registered U.S. investment companies with investment objectives similar to those of the Fund.
Additional Information About Morgan Stanley
Morgan Stanley Investment Management Inc., 522 Fifth Avenue, New York, NY 10036, Morgan Stanley Investment Management Limited, 25 Cabot Square, Canary Wharf, London E144QA, England, and Morgan Stanley Investment Management Company, 23 Church Street, #16-01 Capital Square, Singapore 049481, are each wholly owned subsidiaries of Morgan Stanley, 1585 Broadway, New York, NY 10036, a publically traded company. Morgan Stanley’s CUSIP and ticker are 556902DL5 and MS, respectively.
The names and principal occupations of the principal executive officers and each director or general partner of Morgan Stanley Investment Management Inc., all located at 522 Fifth Avenue, New York, NY 10036, are listed below.
Name | Principal Occupation/Title | |
Gregory J. Fleming | Managing Director and President | |
Christopher O’Dell | Managing Director and Secretary | |
Stefanie Chang Yu | Managing Director and Chief Compliance Officer | |
Jeffrey Gelfand | Managing Director and Chief Financial Officer | |
Mary Alice Dunne | Managing Director and Director | |
Arthur Lev | Managing Director and Director | |
James Janover | Managing Director and Director | |
Kevin Klingert | Managing Director and Director | |
Karen Cassidy | Managing Director and Treasurer | |
John Chiota | Executive Director and ChiefAnti-Money Laundering Officer |
The names and principal occupations of the principal executive officers and each director or general partner of Morgan Stanley Investment Management Limited, all located at 25 Cabot Square, Canary Wharf, London E144QA, England, are listed below.
Name | Principal Occupation/Title | |
Judith Elizabeth Eden | Managing Director, Director and Chief Administrative Officer | |
Jonathan James Bonner Ingmire | Managing Director and Chief Compliance Officer | |
Andrew Clive Onslow | Managing Director and Director | |
Dominic Paul Price | Managing Director and Director | |
Lodewijk Dirk Van Setten | Managing Director | |
Christopher Leroy O’Dell | Chief Legal Officer |
The names and principal occupations of the principal executive officers and each director or general partner of Morgan Stanley Investment Management Company, all located at 23 Church Street, #16-01 Capital Square, Singapore 049481, are listed below.
Name | Principal Occupation/Title | |
Tammy Kuan | Executive Director and Financial Controller | |
Ronald Ong | Managing Director and Director | |
Chetan Jain | Executive Director and Chief Operations Officer | |
Kapil Trikha | Managing Director and Director | |
Peter Wright | Managing Director and Director | |
Tanja Listar | Executive Director and Legal Counsel | |
Samuel Gene Rhee | Managing Director, Director and Chief Executive Officer | |
Valerie Foo | Vice President and Chief Compliance Officer |
No officers or trustees of RIF are officers, employees, directors, general partners or shareholders of Morgan Stanley. In addition, since the beginning of RIF’s most recently completed fiscal year, no trustee of RIF has had, directly or indirectly, a material interest in any transaction or material proposed transaction to which Morgan Stanley, its parent entity or subsidiaries or any subsidiaries of the parent of any such entities, was or is to be a party. Since the beginning of RIF’s most recently completed fiscal year, none of the Trustees purchased or sold securities of Morgan Stanley or its parent or subsidiaries.
Related Information
Russell Investment Management Company, 1301 Second Avenue, 18th Floor, Seattle, WA 98101, provides or oversees the provision of all investment advisory and portfolio management services for the Fund.
Russell Financial Services, Inc., 1301 Second Avenue, 18th Floor, Seattle, WA 98101, a wholly-owned subsidiary of RIMCo, is the principal distributor of Fund shares.
Russell Fund Services Company, 1301 Second Avenue, 18th Floor, Seattle, WA 98101, a wholly-owned subsidiary of RIMCo, is the administrator of the Fund.
Additional Information
If possible, depending on contract owner registration and address information, and unless you have otherwise opted out, only one copy of this Information Statement is being delivered to contract owners residing at the same address. If you would like to receive an additional copy, please contact RIF by calling 1-800-787-7354 or writing to 1301 Second Avenue, 18th Floor, Seattle, WA 98101. RIF will then promptly deliver a separate copy of the Information Statements to any contract owner residing at an address to which only one copy was mailed. Contract owners wishing to receive separate copies of RIF’s Information Statements in the future, and contract owners sharing an address that wish to receive a single copy if they are receiving multiple copies should direct such inquiries to their Insurance Company.
If you have any questions about the changes described in this Information Statement or if you wish to obtain a copy of the Fund’s annual or semiannual reports to shareholders at no charge, please contact your Insurance Company or RIF, at 1301 Second Avenue, 18th Floor, Seattle, WA 98101 or 1-800-787-7354.